How VCs use terms: pre-money & post-money to trick entrepreneurs to lower the value of their company
How can VCs use terminologies such as pre-money and post-money to trick entrepreneurs into lowering the value of their company?
VC games with valuation: When VCs say they will invest £10m at a £30m valuation it means on a post-money basis. i.e. VCs £10m will buy him 33.3% equity stake in the business. The entrepreneur might think the VC values the business at £30m pre-money and is topping up another £10m for a 25% equity stake. Entrepreneur should be presumptive and clarify by saying “I assume you mean £30m pre-money”
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