Valuation is the analytical process of determining the economic worth of a business or asset at a given point in time. In private markets, valuations are set at each funding round and determine the price at which new and existing investors buy and sell equity. Pre-money valuation refers to the value of the company before new investment is added; post-money valuation equals pre-money valuation plus the new capital raised.
Common valuation methodologies include discounted cash flow (DCF) analysis, comparable company multiples (EV/Revenue, EV/EBITDA), precedent transaction analysis, and venture-specific approaches such as the Berkus method or scorecard method for early-stage companies. Private company valuations carry inherent uncertainty and are subject to significant negotiation between founders and investors. Valuation is a key input to dilution calculations and the economic terms in a cap table.