What is the appropriate discount rate for a startup DCF valuation?

Following a recent discussion with a local investment banker about the DCF valuation of a client where the topic of appropriate discount rate was a hot issue, I wondered what others were using and if there was a "right" rate.

For those that don't live and breathe financial jargon, a DCF (discounted cash flow analysis) is a method of calculating the present value of a future benefit and they are often used whenever someone needs to figure out a justifiable valuation for something that doesn't have a ready market value (and sometimes looking for valuation mistakes in things that do).

The most common reason I will use a DCF is for determining  pre/post money valuations for startups, since they by definition have little more than pro-forma financials.

In preparing a DCF for a startup I need to know the expected cash flows and the appropriate discount rate.  I can pull the expected cash flows from the proforma financial statements, but the discount rate is really mine to decide.  As a definition, the discount rate is:

the rate of return that could be earned on an investment in the financial markets with similar risk. Wikipedia

With that rate in mind, I have started to use 27% as my discount rate for startup companies.  Why 27%...because the Marion Kauffman Foundation published a report in November of 2007 based on their research that indicated a national average IRR (internal rate of return) of approximately 27% on angel investments.  I haven't seen anything since then that would purport to be a better number, so that is still what I use.

Of course a lot has changed in the economy since November 2007, so I wonder what others are using for a discount rate now or if that metric still holds true?