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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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EduPristine is a member of Adtalem Global Education (NYSE: ATGE), a global education provider headquartered in the United States. Adtalem is a 3 billion dollars (20,000 crores) company that has about 9 institutions and companies with more than 16,000 employees spread across 145 locations. Adtalem takes pride in training 142,000 degree-seeking students all over the world.The organization's purpose is to empower students to achieve their goals, find success and make inspiring contributions to our global community. EduPristine is one of India's leading training providers in Analytics, Accounting, Finance, Healthcare, and Marketing. Founded in 2008, EduPristine has a strong online platform and network of classrooms across India and caters to self-paced learning and online learning, in addition to classroom learning

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