How do I choose a valuation date for my 409A?
Several factors play into selecting a valuation date for your 409A .
409A valuations are valid for a maximum of twelve months after the effective date, or until a material event, such as a new equity round of financing.
If you've recently (within the last 90 days) closed a round of financing, your valuation date should be the closing date of the round. If the round had multiple closings, choose the last closing date.
If you have not raised capital recently, you should choose a valuation date that is both:
- At the end of an accounting period, and
- As close as possible to the first set of grants you expect to issue
For example, if today is April 15, and the company plans to approve option grants at a board meeting on May 6, you might choose March 31 as your valuation date.
This date would give you ample time to:
- Close your books for March
- Provide financial statements for the 409A valuation process
Occasionally, companies will request a historical 409A valuation to cover hand shake option grants that should have been issued to early employees. Please consult your law firm before requesting this type of valuation or using it to approve option grants covering historical periods.