A:  Attaching a value to a company that's not yet operating is very tricky. Your projections, even if they are based on solid comparisons and thorough research, are really just educated guesses. Whether your new company succeeds or not depends on the strength of your product, your market potential, and perhaps most important, the experience and dedication of your management team. The risk associated with financing your new company also is a factor in calculating the company's "pre-money" valuation, the amount it's worth before a venture capitalist or angel investor takes a stake.

There are no hard-and-fast rules for valuing a startup. "There are some Internet startups going into the funding process with valuations of $2 million, or even $6 million or $8 million," says Peter Cowen, an investment banker and president of Peter Cowen & Associates, based in Westwood, Calif., "but they have strong management teams in place, proof of concept, and a very compelling composition with a great upside." Strategic alliances that give a company early outlets for its products or a marketing advantage, as well as a strong management team with relevant industry experience, also plump up an early business valuation, he says.

CANNED NUMBERS. Stuart Skorman, founder and CEO of San Francisco-based HungryMinds.com and founder of REEL.com, says that earnings projections are nearly meaningless unless you already have a strong track record in your industry. "Venture capitalists that you present your idea to are the best, most qualified people to objectively set the value of the company, based on the criteria of what they think is the potential of the overall business," Skorman says. You can hire a professional business-valuation firm to crunch some numbers for you, but unless the consultants have extraordinary cachet, professional investors will likely ignore their estimates. "The venture capitalists that are looking at new companies all day, every day, are usually familiar with comparable businesses, and they are the best qualified to put a value on your startup," he says.