Valuation Method in Venture Capital

Venture capital (VC) is a form of private equity investment that typically focuses on funding early-stage companies with high growth potential. Investors in VC funds generally seek significant returns on their investments by acquiring equity stakes in these businesses. However, valuing venture capital investments poses unique challenges due to the lack of historical performance data and the high uncertainty associated with startup companies.

Which approach is most commonly used by venture capitalists to value early-stage startup companies?