Pinterest is the latest company to get a multi-billion dollar valuation. But how do investors and the startup founders decide what a company is worth in the first place?

We spoke with Sarah Frier of Bloomberg Business to find out.

“The founder will go out and take meetings with venture capitalists, sovereign wealth funds, institutional investors like the big banks who are trying to get in on these big deals and they’ll negotiate,” Frier says. 

Take Snapchat, for example. The company is valued at almost $15 billion — which might be proof that a messaging app is worth about as much as Campbell’s Soup, a company that actually makes food.

“What you don’t hear is the steps that it took to get there,” Frier says.

Companies are realizing how easy it is to get funded by venture capitalists. And investors are eager to provide that cash.

“It’s easy to go to investors who have fear of missing out on the next Google or Facebook. They want to get in your company early,” Frier says.