What does pre-money valuation mean?

Pre-money valuation is a term that refers to the value of the stock of the company before the company receives outside investment. It is a term that is mostly used by venture capitalists.

Valuing a company before it undergoes a round of investment or goes public is a challenging task. Founders and investors would negotiate the pre-money valuation and work to estimate the value of the company, as no value has been set by outside investors. This pre-money valuation would set the value of the share price of the company.

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