What term describes the valuation of a startup before receiving a new round of investment?

The term for a startup’s valuation before it receives a new investment round is pre-money valuation.

It represents the company’s agreed value immediately before fresh capital enters the business. Investors use it to calculate the ownership percentage they will receive. Once the investment is added, the resulting figure is the post-money valuation: pre-money valuation plus the new investment amount.

For example, if a company is valued at $50 million before a $10 million financing, its post-money valuation is $60 million. The new investor would own approximately 16.7% if no other adjustments apply. Valuations are generally calculated on a fully diluted basis, including items such as stock options and warrants.

A common mix-up is treating pre-money valuation as the same as market capitalization. Market cap applies to publicly traded companies and fluctuates with share prices, while pre-money valuation is negotiated in a private financing. Startups may have a separate pre-money and post-money valuation for every financing round.