Definition
Pre-money valuation is a metric which determines whether someone would invest in a company before information about it is known and sources are available.
In the room
How the word shows up in a real conversation.
Pre-money valuation is the value of a company's equity before it has raised any capital. A pre-money valuation is also done before the company has received any investment from its investors or from debt financing. It is a notional value on paper that can be used to judge the potential worth of an enterprise with no risk or cost involved.
Common mistake
Using Pre-money valuation as a label instead of a fact. If you cannot point to the evidence — a number, a customer, or a written assumption — you are using the word as jargon.
See also
SAFE
A YC-style agreement to invest now and receive equity later, usually at a priced round.
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Convertible note
A short-term loan that converts into equity at a later priced round.
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Term sheet
A non-binding outline of the deal: price, ownership, and the rights that matter.
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Cap table
The ledger of who owns the company: shares, options, and what converts later.
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