409a Valuation Calculator for Series-b Technical Founder

What Is a 409A Valuation?

A 409A valuation determines the fair market value of your company's common stock for the purpose of granting stock options. Getting this right is essential for tax compliance and protecting your employees.

When You Need a 409A

You need a new 409A valuation before granting options, after a material event like a funding round, or at least once every 12 months. Our calculator helps you estimate your 409A value based on key inputs.

How to Use the 409a Valuation Calculator

1. Enter your most recent funding round details
2. Adjust for preferred stock rights and liquidation preferences
3. Review the estimated common stock value
4. Understand the discount factors applied

When to Use This Calculator

• You are about to grant stock options and need to set the exercise price at or above fair market value
• You just closed a funding round and need to estimate your new 409A before the formal appraisal
• You want to understand why your common stock is worth less than your preferred stock price
• You are budgeting for a formal 409A appraisal and want to preview the likely result

Key Metrics and Formulas

The 409A value of common stock is typically 25%-35% of the preferred stock price for early-stage companies. This discount reflects the lack of liquidation preferences, participation rights, and anti-dilution protections that preferred stockholders enjoy. The calculation uses methods like the Option Pricing Model (OPM) or Probability-Weighted Expected Return Method (PWERM). Key inputs include most recent preferred price, time to liquidity event, volatility (typically 60%-80% for startups), and the rights differential between preferred and common. Our calculator provides a range estimate based on these inputs.

Common Mistakes to Avoid

• Granting options without a current 409A: If the IRS determines options were granted below FMV, employees face a 20% penalty tax plus interest
• Using a stale 409A after a material event: A new funding round, acquisition offer, or major revenue milestone invalidates your existing 409A
• Setting the exercise price above the 409A to be safe: This reduces the option value for employees without providing additional tax benefit
• Not budgeting for regular 409A updates: Plan for annual updates at $2K-$10K each, depending on provider