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My understanding is that in most early-stage startups the 409a includes the cash in the bank and very little else (and is completely detached from the last fund
by bpodgursky 5y ago
My understanding is that in most early-stage startups the 409a includes the cash in the bank and very little else (and is completely detached from the last fundraising round valuation, where investors are including the growth potential of the company).
- sokoloff 5y ago409a is a fair market valuation effort, not a book value process. If an arms-length investor invests at a $1M valuation, it’d be hard to argue that the FMV of the company is vastly different from that.
- molsongolden 5y agoBut the 409a is a valuation of the common stock and that preferred stock investor might have liquidation preferences or other terms that de-risk their investment compared to common stock.
- lmeyerov 5y agoYep. 409a assigns common shares (your options are last money out) as 20-30% of investor's preferred shares (first money out) in seed-stage co's. Given today's giant series a/b that far outstripe their revenue, probably still high for most flashy co's. Am curious if/when they typically meet. By the time a co switches to RSUs, sure, but when before then - enough fit for funding growth w/ < 2yr payback period?