For a more formal treatment of using probabilities to estimate valuations read Douglas Hubbard's How to Measure Anything. It's an eye-opening approach to think

For a more formal treatment of using probabilities to estimate valuations read Douglas Hubbard's How to Measure Anything. It's an eye-opening approach to thinking about things that are hard to measure (like startup valuations). Hubbard uses elements of information theory to help structure measurement problems. His key insight is that it's worth paying to reduce uncertainty. Most people know this intuitively but resist actually putting numbers to the idea. Staged funding rounds are a way to reduce uncertainty.