Many entrepreneurs want to put a value on their company before the ink on their incorporation documents is dry, but valuing an early stage company is as much art as science, and a bad valuation can be worse than no valuation at all. And, of course, there is the entrepreneur’s natural bias that inevitably sneaks into the valuation.

Simple, classical economic models would predict that although there might be multiple VCs interested in investing, at the end of the financing process the valuation will rise to the clearing price where the demand for the company’s stock equals the supply (amount being issued). Word gets around quickly that you are out raising money.