Calculating Company Valuations

Post-Money Valuation

Definition

The valuation of a company immediately after the most recent round of financing. For example, a venture capitalist may invest $3.5 million in a company valued at $2 million "pre-money" (before the investment was made). As a result, the startup will have a post-money valuation of $5.5 million.

Methodology

To calculate Post-Money Valuation, we collect the issued shares for Common Stock, Preferred Stock, and Option Pool, then multiply by the Conversion Price Per Share of the most recent round of financing. Where we are unable to obtain a count of shares issued, we may estimate this number based on other available information (see below).

There are three types of post-money valuations we use at Preqin. These are:

• Post-money valuations from a press release or secondary source

These are post-money valuations that may have been disclosed by a company as part of a press release following a funding round, or that we may have picked up through our monitoring of a range of secondary sources. These are not based on our own research into company filings.

• Post-money valuations calculated from filings, using Issued Shares

These are calculated based on available company filings for a funding round, where those filings allow us to identify the Issued Shares, i.e., the actual number of shares issued to investors as part of a funding round. This is the most robust form of post-money valuation provided by Preqin.

• Post-money valuations estimated from filings, using Authorized Shares

These are our estimated valuations, calculated based on available company filings for a funding round, where we have used the Authorized Shares count, as we have not been able to obtain the Issued Shares. These valuations are still based on primary sourced regulatory filings, but we take the Authorized Shares count (i.e., the total number of shares that a company is allowed to issue in a given funding round). We then apply a discount to that Authorized Share count based on the percentage of the Authorized Shares that we would normally expect to be issued. That gives us an estimated Issued Shares count, that we then use to drive the estimated post-money valuation.

Pre-Money Valuation

Definition

The value of a company ignoring the funds raised, i.e., before the investment amount of the current round.

Methodology

To calculate Pre-Money Valuation, we take Post-Money Valuation and subtract the investment amount of the current funding round.