Making it an investment could be tripped up by whatever might trip up a merger. It’s also more difficult to value the investment. (How much equity should they give up? Same valuation as the implied purchase?)
As for valuation, same as valuations a purchase or how they get valued whenever there’s a round of investment (basically you do a sophisticated argument over value using comparables as a way to try to establish a baseline). The equity purchased would equal how much cash gets infused vs the valuation established by the deal.