If a company raises funding today and gets acquired tomorrow, who keeps all the cash they raised?

Normal startup valuation math is the pre-money valuation, plus the investment which equals the post-money valuation.

So the company is worth the post-money in VC terms, the fact there is a fat wad of moolah hanging around is irrelevant. VC terms are BS outside of startup land.

The real world has its own way of doing things.

Valuation in M&A is basically the same thing, but you would use the term enterprise value in the acquisition.

That definition is the company valuation, less cash and plus debt, adjusted for any legal or negotiated working capital amount. I did M&A for asset managers so the norm there was 3 months of working capital (who knows for other sectors). Any additional cash is a deduction from the valuation as it is either bought or distributed before the close of the transaction.

There is no logic for an acquirer to purchase cash, so excess cash is deducted in terms of the actual valuation.

In practice, a few things could happen. The acquirer buys the company and the cash (working capital requirements are another detail), or the cash is returned to all shareholders prior to sale. Either way, the valuation is effectively the same.

The investors would benefit from the unused cash on a pro-rata basis since they put in the money and took a risk. The irony that they had a holding period of a day just makes them look like a legend.

VCs bought 20% in preference shares and that will convert as an ‘as converted’ basis so they get their 20% plus any funky terms they also negotiated.

In short, that cash is either paid for or is dedicated from the acquisition price with a valuation of 1 to 1.