Unlike listed companies, there is no daily market price to rely on. This means the value is not discovered through active buying and selling, but is usually decided during private funding rounds or negotiated deals.

In most cases, valuation is based on a mix of factors rather than a single method.

Investors look at revenue growth, even if the company is not profitable yet. A business showing steady growth may get a higher valuation, while inconsistent numbers can raise concerns.

Comparisons also play a role. Companies are often valued against similar businesses that are already listed. If peers are trading at certain multiples, those benchmarks are used as a reference point.

At the same time, expectations about the future carry significant weight. Projections around expansion, market size, and profitability can influence how the company is priced. This is where things can become less clear, as assumptions may not always match actual outcomes.

Another layer comes from investor sentiment. If demand for a particular company is strong, valuations can move higher even without major changes in fundamentals. On the other hand, weak interest can keep valuations in check.

The structure of the deal also matters. Different investors may enter at different prices depending on the stage of funding, rights attached to shares, or the level of risk they are taking.

Because of these factors, valuation in private markets is not always precise. It is more of a range built on available data, expectations, and negotiation.

This also explains why valuations can change significantly by the time a company reaches its IPO. Public markets bring more transparency, stricter disclosures, and wider participation, which can lead to a different price discovery.

In that sense, pre-IPO valuation is more of an estimate than a fixed number.

What’s your view—do private market valuations reflect real business strength, or are they more driven by expectations and investor demand?