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This might be true. However, getting a 409a valuation done costs only a few hundred these days. Just Google for it and you'll see a bunch of ads.

• grellas 17y ago
  A credible 409A valuation these days (i.e., one that will withstand auditor scrutiny) will still likely cost $7K to $10K. Companies can get them more cheaply but, unless done right, these can be potential landmines waiting to go off precisely at the times when the company is most succeeding and it needs to bring in outside auditors (e.g., at the time of acquisition). Be cautious about cutting corners here.
  • sachinag 17y ago
    Agreed on a better 409A post-funding. But for a pre-funding valuation number for employees 1-5, $7K is difficult, especially when the valuation of the company is likely to be south of $250K.
    • grellas 17y ago
      Agreed that an expensive 409A valuation is not needed prefunding but would add that, in most cases, companies simply skip it altogether in the prefunding stage. While 409A applies to companies at all stages, it is difficult for the IRS to second-guess prefunding valuations. More importantly, 409A applies to "deferred" compensation and, in practical terms for startups, this means options - options are not used nearly as much in the prefunding stage as is restricted stock or outright grants (neither of which vehicles are subject to the 409A requirements).