Don't say a dollar figure and don't say a percentage. I repeat, don't say a dollar figure and don't say a percentage.
..You'll probably get one of the following responses:
a) That's great to hear, because we're all about partnering; or
b) That's a load of crap, tell me the valuation you're really thinking.
Even if you get response b), I'd suggest reiterating your primary goal is finding the right partners to build your world-changing company. If you can't leave investors happy with that answer, then, and only then, reference other specific company comparables (not "my friend got X") and how your research uncovered a range of attractive X to acceptable Y values (reiterating that it's about partnership first).
...If you give yourself and your investors time to learn each other a couple things happen. First, you get a better feel for who you're partnering with, and great partners could lower valuation requirements that could have killed you earlier. Second, investors spend more cycles learning you and researching your business. You'd prefer valuation conversations to happen after investors have grown their excitement and vested their time/energy into you. That is the better time to discuss numbers that could work for all parties.
...Because valuation is a relationship and market concept, your biggest levers for affecting valuation are interpersonal and termsheets. Getting VCs to like you first or getting multiple termsheets will reap better results than demanding $20M valuation in the first meeting. If you can resist the temptation to blurt a number, you will be way ahead in building the strongest funding partnership for your company.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.