Your valuation is whatever someone is willing to pay you for your company. Instagram was bought for ~$1Bn, therefore, it was worth ~$1Bn, whatever anyone else says.

As others have said, your investors define your valuation, and anyone looking to acquire you, even more so. A lot of companies look at revenue, users, and technology IP, but with more companies starved for talent, you should also take your human capital into consideration. An acqui-hire ain't always a bad way to go.