"Pre-money" and "Post-money"
"Pre-money" and
"post-money" are terms used to describe a company's valuation before
and after an investment, respectively.
Pre-money valuation refers to the
value of a company before any investment has been made. It includes all of the
company's assets, liabilities, and intellectual property. For example, if a
company is valued at INR10 million before an investment, that is its pre-money
valuation.
Post-money valuation, on the
other hand, refers to the value of the company after an investment has been
made. It includes the pre-money valuation plus the amount of the investment.
For example, if a company raises INR 2 million in investment and has a pre-money
valuation of INR10 million, its post-money valuation would be INR 12 million.
Here's an example to help illustrate
this concept:
Let's say a startup called XYZ is
seeking INR 1 million in funding to help grow their business. An investor offers
to invest INR 1 million in exchange for a 20% equity stake in the company.
Before the investment, XYZ is
valued at INR 4 million. This is their pre-money valuation.
After the investment, the value
of the company will be INR 5 million (INR 4 million pre-money + INR 1 million
investment). This is their post-money valuation.
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