VC Term Sheets: "Price/Valuation
Valuation is a highly contested issue between entrepreneur and venture capitalist. It’s not something you have to figure out on your own. Simply put, the value of a company is what drives the price investors will pay for a piece of the action. The information used to determine valuation comes out of the due diligence process, and has to do with the strength of the management team, market potential, the sustainable advantage of the product/service, and potential financial returns. Another way to look at valuation is how much money it will take to make the company a success. In the end, the value of a company is the price at which a willing buyer and seller can complete a transaction"