409A valuation

An independent valuation of a company's common stock, used to set option strike prices in the US.

Example

A 409A after your seed sets the fair market value at $0.42/share.

Important

This is jurisdiction-specific and is a genuine 'talk to a professional' topic. Getting it wrong creates a tax liability for your employees, not for you.

Related terms

• Strike price — The fixed price at which an option holder can buy a share.
• Stock options — The right to buy shares later at a price fixed today (the strike price).
• Valuation — The agreed price of the whole company, used to work out what percentage an investment buys.

Lessons that explain it

• Compensation and employee equity — Salary, equity, and how to explain a grant honestly to someone who has never held one. (15 min)

All 176 terms in the Founder glossary