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EduPristine>Blog>Pre money and Post money – Snapdeal

Pre money and Post money – Snapdeal

June 9, 2014

Pre-money and Post-money valuation is a jargon frequently used by VCs and entrepreneurs.

In layman’s terms, Pre-money refers to a company’s value before it receives outside financing or the latest round of financing, while post-money refers to its value after it gets outside funds or its latest capital injection. Pre-money valuation refers to the value of a company not including external funding or the latest round of funding. Post-money valuation includes outside financing or the latest injection. It is important to know which is being referred to, as they are critical concepts in valuation.

In this blog I will try to explain the concept of pre-money valuation and we will also do the post money valuation of snap deal.

Going forward, generally the discounted cash flow approach is used for calculating the pre-money valuation of a company.

Pre-money valuation is also calculated by multiplying these two:

i. The price per share in the company’s preferred stock

ii. The company’s fully diluted capital prior to financing

Example

Scenario before fund raising

Common stock outstanding – 400000

Option pool shares issuable pursuant to outstanding options + other shares reserved for issuance under company’s option plan(s) – 400000

Series A funding – 200000

Pre-financing fully diluted capital – 1000000

If the company is contemplating Series B funding at $1 per share as sale price

Pre-money valuation of the company = 1000000*$1 = $1000000

If the company sold 200000 shares of series B funding then money raised = 200000*$1 = $200000

Scenario after fund raising

Common stock outstanding – 400000

Option pool shares issuable pursuant to outstanding options + other shares reserved for issuance under company’s option plan(s) – 400000

Series A funding – 200000

Series B funding – 200000

Post financing fully diluted capital – 1200000

Post money valuation = 1200000*$1 = $1200000

Post money valuation is also calculated by adding the pre-money valuation to capital raised

Post money valuation = $1000000 + $200000 = $1200000

Snap deal Post money valuation

These are the various funding that snap deal has received till now

DateRound Funded ByAmount in $ million
Jan 20111Nexus VC and Indo-US12
Jan 20112Bessemer VC along with Nexus and Indo-US45
Jun 20133E bay50
Feb 20143E bay133
May 20145Blackrock, Temasek100

(Estimation by Wall street journal):

Post money valuation after round 5 funding = $1000 million

Investment in round 5 = $100 million

Pre-money valuation = $1000 million – $100 million = $900 million

Post money valuation of Snap deal after round 4 in Feb 2014 = $750 million

Valuation Jump in 3 months = $900 million – $750 million = $150 million = 20% jump.

And as per the CEO Kunal Bahl, Snapdeal has grown up by 500% in past 12 months and they are expected to hit 1 billion USD (Gross merchandise value) this year itself.(Source Trak.in)

Basic formulae

Post-money Valuation = New Investment*(Total post investment shares outstanding / shares issued for new investment)

Pre-money Valuation = Post-money Valuation – New Investment

About Author

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Trusted by Fortune 500 Companies and 10,000 Students from 40+ countries across the globe, it is one of the leading International Training providers for Finance Certifications like FRM®, CFA®, PRM®, Business Analytics, HR Analytics, Financial Modeling, and Operational Risk Modeling. EduPristine has conducted more than 500,000 man-hours of quality training in finance.

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