3 ms·
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
by 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 agoAgreed 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).