Fundraising
409A Valuation
Quick definition
Independent valuation of common stock used to set option strike prices.
A 409A valuation is a third-party appraisal of your common stock's fair market value, required by IRS Section 409A. It sets the strike price for stock options. Must be refreshed after priced rounds and annually to maintain safe-harbor protection.
Related fundraising terms
SAFE (Simple Agreement for Future Equity)
Convertible instrument commonly used for early-stage rounds.
Cap Table
A record of all ownership interests in your company.
Pro Rata Right
An investor's right to maintain their ownership % in future rounds.
Pre-money SAFE
Original SAFE form (2013) that converts based on the company's valuation cap before the new round, diluting only existing holders.
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Insights and tools where 409A Valuation shows up.
Frequently asked questions
- What is 409A Valuation?
- A 409A valuation is a third-party appraisal of your common stock's fair market value, required by IRS Section 409A. It sets the strike price for stock options. Must be refreshed after priced rounds and annually to maintain safe-harbor protection.
- Why is 409A Valuation important for startups?
- 409A Valuation is a fundraising concept that matters for startup founders because it directly affects fundraising readiness, financial decision-making, or operational discipline at the stage where mistakes are expensive to undo. Founders who understand it have a meaningfully easier time in diligence, board meetings, and investor conversations.
- What category does 409A Valuation belong to?
- 409A Valuation is a Fundraising term in the StartupCFO finance glossary — alongside other fundraising concepts that founders, CFOs, and accountants use in daily startup operations and reporting.
- Where can I learn more about 409A Valuation?
- Beyond this definition, see the related fundraising terms below, or explore StartupCFO's insights and tools that put 409A Valuation in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
Service spotlight
Need a 409A valuation?
We coordinate independent 409A valuations for option grants, refresh them after material events, and handle the audit trail.
