Calculating the pre-seed valuation of an established company is very easy. Calculating valuation of just starting company (a company which has atleast 6 months of revenue or growth data) is hard. But calculating valuation of a pre-seed or seed stage company is near impossible. There is no perfect method or model.
Still there are lots of VC, institutes, HNWI and incubators which invest or fund these startups. As a founder of a pre-seed company you also need funding to expand or work on realizing that prototype which got you and your co-founder all hyped up.
So this is how the valuation of a pre-seed or seed stage startup ks calculated:
Using method of Comparison
Method of comparison is used at places where getting concrete numbers is not possible. A startup can be at a stage where its just the idea. Or the MVP is still not ready. Or you just met your co-founder and he/she is as hyped as you are. This method uses technique of seeing the next most similar thing. For example, a home is up for sale in a neighborhood. It was never sold before. It never housed any tenants. It never had any commercial use. A family built it for themselves and now want to sell it after 20 years. So an agent can not go around calculating using some formula. What he/she does is look for a house that is closest to this property and was sold as recent as possible. By looking at that number as Comparable he/she can quote a figure for this house.
Same technique is used in startup world. The idea or MVP is compared to next most similar thing which was valued recently and put a dart at a figure.
Agreeing on an Arbitrary Number
This method uses the power of imagination for quoting a value and then asks all stakeholders involved to agree on it. The startup is imagined in years to come and at a stage where the revenue will start pouring in. Then this scenario is written on paper. The founder quotes a valuation based on the revenue the startup will generate. The investors agree on the stake and price they are willing to take. Both parties sign the paper and the valuation of the pre seed stage startup is set in words.
The founder can over promise the delivery, can hyper inflate the numbers to get more money for less stake. Investor on the other hand try to lower the numbers and get more stake for less price.
There are many factors involved which are effecting the valuation here. For example, the founder can be a seasoned entrepreneur. The startup can have lots of hype and press coverage. Some other similar startup in other part of the world succeeded at this model. All these factors change the numbers of valuation. The founder can have more funding for less letting go of less stake.
Using Future Equity model
Widely popular these days, future equity model does not take into account the valuation. Instead a fixed and somewhat hefty amount is put on the table. This amount is called as loan which can be converted into equity in future when there is a solid way to calculate valuation. Then that valuation is reverse engineered to gain somewhat solid number of pre-seed valuation. This method is a wager for founder as he/she can lose or gain equity depending on the performance of their startup.
Examples include SAFE fund of Y-Combinator. Calm Fund and other numerous accelerators.
Conclusion
There is no fixed method. All are throwing dart in the dark. Above mentioned methods are assumptions and provide no solid valuation.