Describe the difference between pre-moeny and post-money valuation. In what settings are investors most likely to focus on pre-money valuation, and when on post-money valuation?
Pre money valuation is the value of the firm that the investors perceive before they invest money.
Post money valuation is the value that the firm holds after an investment is made.
Investors are likely to focus on the pre money valuation prior to investment i.e. the more the perceived value of the firm higher is likely the investment that the investor may make. Also, if the founders want to exit the business pre money valuation plays an important role.
Post money valuations are done if the investors want to exit the business, while issuing ESOP's, going public and to find the value of the shares post the investment is made.
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