Sounds complicated but it is not. It can be very simple and goes along the following lines :
1. The parties agree to the higher valuation.
2. The parties agree to the typically aggressive financial milestones that accompany (1).
3. If you miss the targets in 2, the VC is issued additional shares on a predetermined formula.
Pretty straightforward approach that has the Investee have to back its numbers in order for the high valuation to hold. In the milestones are missed then the VC benefits as more shares are issued for free, and the effective entry price of the VC lowers (as they now have more shares for the same amount of investment capital).
