Do you know the difference between the Pre-money value and the Post-money value of a biotech company?

This is investor talk but anyone seeking capital in the pharma-biotech world better knows the difference because investors routinely play with different figures and company data, thereby weakening the negotiation position of the seller who is often not fully aware of their meaning.

The value of a company depends on whether you’re talking about pre-money valuation or post-money valuation. Pre-money is the value before the investment is included, whereas post-money is the value including the new investment.

Thus: Pre-money value + Investment = Post-money value.

Indeed, the value of a company after the investment will increase with the cash flowing into the company. The so-called post-money valuation is used as a basis to calculate the equity participation of the investor. Example: pre-money valuation of 15mio € + investment of 5mio € = post-money value of 20mio €. In that case, the investor gets 25% of the equity (5/20).