Funding and ownership
Pre-money valuation
What the company is agreed to be worth just before new money goes in. It decides what slice of the company the new money buys. At an £8 million pre-money valuation, a £2 million investment buys 20 per cent: two out of the ten million the company is worth afterwards. Everyone who already owned shares now shares the other 80 per cent.
A plain-English explanation, not financial or tax advice. Rules and rates change, so check your own situation. For free, impartial guidance, try MoneyHelper. Disclaimer.
You'll hear it as
They're offering two million at an eight million pre-money.
Why it matters to you.
The higher the pre-money, the smaller the slice given away for the same money, and the less your own share shrinks. If you held 1 per cent before that round, you hold 0.8 per cent after it.
Related terms.
Videos.
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