We all know that valuation for small tech-based companies is very difficult. Discounted cash flow doesn't work. Neither does P/E analysis. And any methods based on the balance sheet fall apart in early stage companies. You can also throw out those qualitative methods that start out by rating the management team, the state of the IP and the market size. We're not left with much in the tool box except to ask "how much would it cost for another company to replicate what we have?" That's the '100 Monkey's Valuation'. I'll disparage the tech team for a moment. "How many engineers would a company need to throw at my technology in order to replicate it?" The question of 'how long would it take' is secondary because to some extent, it's a derivative of the first. Bodies compress time and since money buys bodies, it also compresses time.
"But wait," you say. "I've got IP, a management team in place, distribution, brand..." Hogwash. Engineers get paid to develop new ways of doing things - in reality, to get around IP. Your team isn't special. Distribution is a numbers game. Competitors have brand too and aggressive pricing by competitors trumps brand - all things being equal.
So, back to the question. How many monkeys (engineers) does a competitor/acquirer need to throw at the market place problem in order to come up with a solution? Add a multiple for time -'I'll gladly pay you tomorrow for a hamburger today' (the time value of money) - and you have your valuation.