Explaination: Determining the valuation of the Start-up is not an easy task. The biggest determinant of the start-up value is the market forces of the the industry and the sector in which it plays and which includes the balance between the demand and supply of money, the timelines and size of recent exits and the desperation of the entrepreneur looking for the money.
How it applies to Startup/Investor and its impact: Valuation is one thing that is very subjective. Generally the method opted for determining valuation of the Start-up is DCF method i.e. Discounted Cash Flow method.
Investors generally look for the profile of the entrepreneurs to determine the valuation besides the business idea, sector, competitors and the growth chart (amongst others). If the team is confident about the idea and ready to sail through uncertainities that might come in their way to back their product, there is a high chance that Investor would be willing to invest in that venture.