The Pre-Money Valuation For Startups Is A Little Different From What You See On Shark Tank

The show makes the PMV look like a simple calculation. In reality, it’s anything but

This article first appeared on the GoingVC Blog

There’s a good chance you’ve probably seen the hit television show Shark Tank, where early-stage companies pitch wealthy investors like Mark Cuban for a chance to raise funding on the spot.

The first part of any contestant’s pitch to the sharks involves how much money they are seeking and how much equity they are willing to cede in return, a lot of which is based on an important keyword in the investing process: The Pre-Money Valuation.

The pre-money valuation is the price of a company prior to an investment or round of financing. This valuation is extremely important because it determines how much equity an entrepreneur must give away in exchange for financing.

I wanted to highlight Shark Tank because, while it is a terrific show, it also gives the average viewer the wrong idea about valuations. Principally, the show makes the pre-money valuation look like a simple calculation. In reality, it’s anything but.

Let’s take a look below: