What the company is agreed to be worth immediately BEFORE the new investment lands.
Example
A $4M pre-money with a $1M round.
Important
Always confirm which one a number refers to. '$5M valuation' means very different ownership depending on whether it is pre or post.
Related terms
Post-money valuation — Pre-money plus the new money. The value of the company immediately after the round closes.
Valuation — The agreed price of the whole company, used to work out what percentage an investment buys.
Dilution — When new shares are issued, existing shareholders own a smaller percentage of the company than before.
Lessons that explain it
Valuation, pre-money and post-money — The most confused pair of words in fundraising, and the arithmetic that decides what you own afterwards. (12 min)