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  • Add You - Pre-Money vs. Post-Money Valuation

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    “Before the money" or “pre-money” and "after the money" or “post-money” denote simple concept

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    When a company decides that it must raise capital, a key question that must be answered is how much the company is worth. For example, if the business needs $500,000 to get started and/or grow, how much of the equity in that company should $500,000 command? Once this question is answered, the company will go out and try to find investors. When doing so, a key question often arises as to whether the valuation is “pre-money” or “post-money.”

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    any is worth. For example, if the business needs $500,000 to get started and/or grow, how much of the equity in that company should $500,000 command? Once this question is answered, the company will go out and try to find investors. When doing so, a key question often arises as to whether the valuation is “pre-money” or “post-money.”

    “Before the money" or “pre-money” and "after the money" or “post-money” denote simple concept

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    in that company should $500,000 command? Once this question is answered, the company will go out and try to find investors. When doing so, a key question often arises as to whether the valuation is “pre-money” or “post-money.”

    “Before the money" or “pre-money” and "after the money" or “post-money” denote simple concept

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    ind investors. When doing so, a key question often arises as to whether the valuation is “pre-money” or “post-money.”

    “Before the money" or “pre-money” and "after the money" or “post-money” denote simple concept

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    -money.”

    “Before the money" or “pre-money” and "after the money" or “post-money” denote simple concepts. However, these simple concepts can even confuse even the most sophisticated analysts at times. If a company is valued at $1 million on Day 1, then 25 percent of the company is worth $250,000. However, there may be an ambiguity. Suppose the company and the investor agree on two terms: (1) a $1 million valuation, and (2) a $250,000 equity investment. In this case, the company may offer the investor 250 shares for $250,000. Immediat

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