Protect your employees. Satisfy your auditors. Stay compliant.
A 409A valuation is an independent appraisal of the fair market value (FMV) of a private company's common stock, required by Section 409A of the Internal Revenue Code. This valuation establishes the minimum exercise price for stock options granted to employees.
Without a proper 409A valuation, your company and its employees face significant tax penalties—including a 20% federal tax penalty plus state penalties and interest on any options deemed to be "discounted."
The IRS doesn't accept internal valuations. You need an independent, qualified appraisal that documents your company's fair market value using accepted methodologies. That's where we come in.
Options granted below fair market value can result in:
The IRS requires a new 409A valuation within 12 months, or sooner if a "material event" occurs
Closing a priced round (Series Seed, A, B, etc.) typically increases your company's value and triggers a new 409A requirement.
409A valuations are valid for 12 months. Even without material changes, you need a fresh valuation annually to maintain safe harbor.
Before issuing any equity compensation, you need a 409A to establish the strike price and protect your team.
Significant changes—major customer wins/losses, key hires/departures, new products, M&A discussions—may require an update.
Generating meaningful revenue or turning profitable materially affects valuation and typically requires an updated 409A.
Preparing for an audit or IPO? Auditors will scrutinize your 409A history. We ensure your documentation is bulletproof.
Rigorous methodology. Defensible conclusions. Clear communication.
We collect your cap table, financials, projections, and any material information affecting value. Our streamlined process minimizes your time commitment.
We determine total enterprise value using industry-standard approaches: income approach (DCF), market approach (comparable companies and transactions), and asset approach where applicable.
For companies with complex capital structures, we use appropriate allocation methods—Option Pricing Model (OPM), Probability-Weighted Expected Return Method (PWERM), or Current Value Method—to determine common stock value.
We apply appropriate discounts for lack of marketability (DLOM) based on empirical studies and your specific circumstances, ensuring defensible conclusions.
You receive a comprehensive, audit-ready report documenting our analysis, methodologies, and conclusions. We walk you through the results and answer any questions.
Questions from auditors or investors? We're here. Your 409A engagement includes support throughout the valuation period.
Our founder built valuation practices at Carta, Ryan, and Scalar—firms that have collectively completed tens of thousands of 409As. We wrote the playbook.
No handoffs to junior analysts. You work directly with partners who have completed thousands of valuations and can answer questions on the spot.
We understand startup timelines. Standard delivery in 2-3 weeks; expedited available when you're closing a round or need to issue options quickly.
Reports built to withstand Big Four scrutiny. When your auditors have questions, we have answers—backed by bulletproof documentation.
"We've worked with multiple 409A providers over the years. IQ Valuations stands out for their responsiveness and the quality of their analysis. When our auditors had questions, they handled everything seamlessly."
Pricing depends on your company's complexity—capital structure, stage, available data. Most early-stage companies pay between $2,000-$5,000. Contact us for a custom quote within 24 hours.
Standard turnaround is 2-3 weeks from receiving complete information. Expedited delivery (1 week or less) is available for time-sensitive situations like financing rounds.
Cap table, recent financials, financial projections, details on recent transactions or material events, and background on your business. We provide a simple checklist to make gathering information easy.
Investors receive preferred stock with additional rights (liquidation preferences, anti-dilution, etc.). Common stock lacks these protections and is therefore worth less. The discount typically ranges from 20-60% depending on stage and capital structure.
Safe harbor means the IRS presumes your valuation is reasonable unless they can prove otherwise—shifting the burden of proof. To qualify, the valuation must be performed by a qualified appraiser within 12 months of the grant date.
Generally yes, if the valuation is less than 12 months old and no material events have occurred. However, issuing options right before a round close can raise questions. We can advise on your specific situation.
We apply the approaches accepted by the IRS and AICPA: discounted cash flow (DCF), comparable company analysis, comparable transaction analysis, and for equity allocation, Option Pricing Model (OPM) or Probability-Weighted Expected Return Method (PWERM).
Absolutely. Your engagement includes support throughout the valuation period. If auditors or the IRS have questions, we're here to explain and defend our work.
Get your 409A quote within 24 hours. No obligation, no pressure.