You're defining every early stage startup in the world here when you say "pre-revenue startup with a high potential and high-risk profile". Startup valuations are typically set by the market of investors and not by some methodology or spreadsheet. 

Hi, @Mike, I have a follow-up question to this: if there isn't a set methodology or "spreadsheet" that helps define startup valuation, how does either a startup founder or an investor know what a fair valuation is? And this may sound naïve, but how do we prevent the market of investors from bloating the valuations of certain startups? (Or, since I'm assuming that's already being done today, how do we prevent more of that from happening in the future?)

@Mike, follow-up question: Who decides to select startups (ideas) to invest in? Is it a mutual decision? or a chain of approvals?

Valuations are set by the market. If there is a lot of investor demand, the valuation is higher and vice versa.

@Siddarth - I don't understand your question. The fund manager typically makes the investment decisions.