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Premoney vs Postmoney – Which is a Better Technique for Negotiating?
December 12, 2017 /
When negotiating your next fundraising round, should you talk valuation in premoney terms or postmoney terms? Premoney is the valuation before the investment, employee stock option pool (ESOP) expansion, debt-to-equity conversion and investment. Postmoney is the value of the business after all that.
As an investor, postmoney is simpler. Despite the improved simplicity, I don’t think the industry is going to move to postmoney anytime soon.
Why are postmoney conversations simpler? Because the valuation of the business is fixed. The value of the business doesn’t float from variables like pro-rata participation, ESOP expansion and debt-to-equity conversion.
TOMASZ TUNGUZ
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