Valuation

Valuation is the negotiated price of a company at the time of a financing transaction. Pre-money valuation is the agreed value before new capital; post-money valuation includes the new investment. At early stages (pre-revenue), valuation is primarily driven by team quality, market opportunity, comparable deals, and investor demand. At later stages, revenue multiples (ARR multiples for SaaS, EBITDA multiples for profitable businesses) anchor valuation. VC valuations don't reflect a 'true' intrinsic value — they reflect the negotiated price between a willing buyer and seller in a private, illiquid market. Paper valuations (used for LP reporting between rounds) are based on the most recent round price, not on any ongoing market mechanism. The disconnect between private valuations and public market valuations became painfully clear in 2022-2023.