Advice from Fred Wilson that is too sound to ignore:
When you are doing an important financial transaction that brings a new influential owner into the company, price matters but is not the most important issue. The most important issue is the chemistry between the existing owners and the new investor/owner and the reputation of the new investor/owner. You want to use the market to surface the right valuation band and you should do the transaction in that band. But once you have done that, you should optimize for chemistry and fit. And let price fall somewhere in the “market band.”
That said, though, don’t overpay for reputation, if the reputation is inflated. Do your diligence on your financier, just as your financier does diligence on you.