For example, how does this work for pre-revenue SaaS startups valued $1M-$5M during seed? Even if they've started generating revenue, much of their value comes from the long-term network effects and potential to create a market (right?)
If you're growing at 20% year-over-year, you're basically not investable. You're totally salable if the business generates a profit; if one were to throw out $100k per year for that profit (on an SDC basis as discussed in this post), expect the valuation to be $300k to $400k. This is much, much less sensitive to the current headlines on Wall Street.
There's a lot of daylight between $400k and $10 million, right? That's the premium the market places on growth. This is one of the reasons the G word comes up so much in pg's writing about startups. (See http://www.paulgraham.com/growth.html among many other examples.)
It's not the same as the VC/angel world where they are investing in unprofitable or pre-revenue SaaS businesses based on potential or estimated future cashflows. The multiples we discuss will not apply in these situations and it's really not our area of expertise.