A 409A valuation sets the fair market value of your common stock. Option strike prices are set at or above it, which is what keeps employee grants on the right side of the tax rules.
When to refresh it
- At least once every twelve months
- After a priced round closes
- After any event that clearly changes the value of the company
What the valuation firm will ask for
Recent financial statements, a forecast, the current cap table and your latest financing documents. When the books are closed monthly, this takes a day to assemble instead of two weeks.
Grant options after the new report is in, not before. Ask your counsel to confirm timing for your situation.
