Guide
When do you need a new 409A valuation?
Updated
Most startups over-think the price of a 409A and under-think the calendar. The refresh schedule is set by the regulation, not by your provider's renewal email.
Trigger one: twelve months
The independent appraisal presumption applies where the appraisal is dated "no more than 12 months before the relevant transaction to which the valuation is applied (for example, the date of grant of a stock option)". Separately, the general standard treats a previously calculated value as unreasonable where it was calculated for a date more than 12 months earlier than the date it is being used for. Grant options on a 13-month-old report and you are outside the presumption and arguing on the general standard instead (Treas. Reg. 1.409A-1(b)(5)(iv)(B)).
Trigger two: material information
The regulation is explicit that using a previously calculated value is not reasonable "if such calculation fails to reflect information available after the date of the calculation that may materially affect the value of the corporation", and it gives two examples in the text itself: the resolution of material litigation, and the issuance of a patent.
- A priced financing round. The clearest possible arm's length evidence of value, and the most common trigger.
- A signed term sheet or acquisition offer that a buyer is seriously pursuing.
- Resolution of material litigation, named in the regulation as an example.
- Grant of a patent, also named in the regulation as an example.
- A step change in the financials, up or down: a transformative contract, the loss of a dominant customer, a large layoff or a pivot.
- A secondary sale of common stock at a price that itself constitutes an arm's length transaction in the stock.
Two dates the start-up presumption cares about
The illiquid start-up presumption does not apply where the company or the service provider may reasonably anticipate, at the time the valuation is applied, a change in control event within the following 90 days or a public offering of securities within the following 180 days. If either is on the horizon, that presumption is not the route to rely on.
How this changes your budget
It is why the count in our calculator is years plus events rather than years alone: a company that raises twice in three years is buying five reports on this logic, not three. It is also why "unlimited refreshes" in a platform plan is a materially different product from a per-report fee, and why comparing headline prices between the two tells you very little.
Slightly conservative by design: a valuation performed after a material event also restarts the 12-month window, so the real count can be lower. Take the schedule from counsel and the price from a written quote.