Are early stage startup valuations determined at random?

To many, it seems like early stage startup valuations are determined at random. Given that these companies often fetch higher valuations vs. their counterparts in other industries — despite lack of significant revenue, hard assets, or even direct public companies to evaluate them against — this misconception is understandable.

But of course valuations are not generated at random, and there is some method to this madness. Below are four key factors that VCs take into account, both consciously and subconsciously, in determining a “fair” valuation for startups they are looking at.