Market demand determines the valuation. Valuation shifts with time, depending on the amount of capital chasing startups. Early-stage high-growth startups are often valued at $3 to $20 million for their first financing. Lifestyle businesses are valued at less. Companies that have raised several financing rounds and are further along are worth far more.

To understand if a valuation seems reasonable, look at who the Lead Investor is.  How experienced are they?  How much did they invest under the same terms?