Preparing documents for a 409A valuation.
A 409A valuation sets the fair market value of common stock so you can price options. The provider will ask for the charter, cap table, latest financing terms, financial statements, projections and recent events. Collect them in one folder, update it each time, and keep every report with the board approval that relied on it.
409A valuation room
- 01 Charter documents
- 02 Cap table
- 03 Financing documents
- 04 Financials
- 05 Projections
- 06 Company overview
- 07 Recent events
How it works for a startup.
Under Section 409A of the Internal Revenue Code, options granted below fair market value can create tax penalties for the employee. A valuation by a qualified independent appraiser is presumed reasonable under the regulations if it is no more than 12 months old and nothing material has changed. Startups usually refresh it every year and after each priced round or any other material event.
Valuation providers work from a standard request list. They need to know the rights of each share class, recent transactions in the company's stock, the financial picture and the plan. The analysis usually allocates value across share classes using methods such as the option pricing model or a probability weighted approach, so preference terms matter as much as the numbers.
Diligence counsel and auditors will later match every option grant to a valuation that was current when the board approved it. Keeping each report, its effective date and the grants that used it in one place saves a lot of reconstruction later.
Top 10 data rooms for this job.
Our five measures, re-weighted for 409a valuation. Places 11 to 17 are listed below the cards.
- Setup speed 26%
- Investor experience 16%
- Access control 20%
- Diligence tools 13%
- Startup pricing 25%
- 1 9.4/10First-rate
- $149 monthly
- 14-day free trial
- 8/12 feature checks
- Investor Q&A
- NDA e-signing
- Dynamic watermarks
- View-only and download control
- SOC 2 (hosting)
- 2 8.3/10Strong pick
- $250 monthly
- Free trial offered
- 8/12 feature checks
- Investor Q&A
- NDA e-signing
- Dynamic watermarks
- View-only and download control
- SOC 2
- 3 8.2/10Strong pick
- Quote only
- Free trial offered
- 9/12 feature checks
- Investor Q&A
- Dynamic watermarks
- View-only and download control
- Viewer activity log
- SOC 2
- ISO 27001
- GDPR
- 4 8.1/10Strong pick
- Quote only
- Free trial offered
- 7/12 feature checks
- Investor Q&A
- Dynamic watermarks
- View-only and download control
- Viewer activity log
- SOC 2
- ISO 27001
- 5 8.1/10Strong pick
- $55 monthly
- Free trial offered
- 9/12 feature checks
- NDA e-signing
- Dynamic watermarks
- View-only and download control
- Viewer activity log
- SOC 2
- ISO 27001
- HIPAA
- 6 7.9/10Strong pick
- Quote only
- Free trial offered
- 8/12 feature checks
- Investor Q&A
- Dynamic watermarks
- View-only and download control
- Viewer activity log
- SOC 2
- ISO 27001
- 7 7.9/10Strong pick
- $299 monthly
- Free trial offered
- 7/12 feature checks
- Investor Q&A
- Dynamic watermarks
- View-only and download control
- Viewer activity log
- SOC 2
- 8 7.8/10Strong pick
- Quote only
- Demo, no trial
- 10/12 feature checks
- Investor Q&A
- Dynamic watermarks
- View-only and download control
- Viewer activity log
- SOC 2
- ISO 27001
- GDPR
- 9 7.6/10Good option
- $15 monthly
- Free trial offered
- 6/12 feature checks
- Dynamic watermarks
- Viewer activity log
- Bulk folder upload
- Mobile app
- SOC 2
- 10 7.5/10Good option
- Quote only
- Demo, no trial
- 8/12 feature checks
- Investor Q&A
- Dynamic watermarks
- View-only and download control
- Viewer activity log
- SOC 2
- ISO 27001
- GDPR
Show places 11 to 17
- DealRoom 7.5
- Digify 7.4
- Intralinks 7.4
- SmartRoom 7.3
- DocSend 7.2
- ShareVault 7.0
- Venue by DFIN 6.5
Folder index.
A starting structure for this room. Rename folders to fit your company and keep the numbers.
Current certificate of incorporation with preferred stock terms.
Fully diluted cap table, option pool, SAFEs and notes with their terms.
Term sheet and purchase agreement for the latest round, secondary sale terms if any.
Historical statements, current year to date, balance sheet.
Board-approved forecast or budget, key assumptions.
Deck, market and competitor notes, management questionnaire answers.
Offers, letters of intent, major contracts or setbacks since the last valuation.
Every 409A report with effective date, and the board consent that adopted it.
Need every file by stage? Use the startup data room checklist.
Must-have features.
| Provider | Bulk folder upload | Viewer activity log | Dynamic watermarks |
|---|---|---|---|
| Ellty | |||
| SecureDocs | |||
| iDeals | |||
| Firmex | |||
| Citrix ShareFile | |||
| Ansarada | |||
| CapLinked | |||
| Datasite | |||
| Onehub | |||
| Drooms |
- Bulk folder upload
- Drag a whole folder tree in at once and keep its numbering.
- Viewer activity log
- Shows which investor opened which file, for how long and when, and exports the record.
- Dynamic watermarks
- Stamps the viewer email and the time across every page, so a forwarded screenshot points back to its source.
Set up the room in 6 steps.
- 1
Know when you need one
Order a new valuation before the first option grants, at least every 12 months, and after a priced round or other material event.
- 2
Collect the standard set
Gather the charter, cap table, latest financing documents, financials and projections in one folder before the provider sends its list.
- 3
Answer the questionnaire
Providers send a management questionnaire about the business and recent events. Answer it in writing and file it with the report.
- 4
Give the provider limited access
Share only the 409A folder, view-only, and remove access when the report is delivered.
- 5
Adopt the report
Have the board adopt the valuation and approve grants after its effective date, and file the consent with the report.
- 6
Track the grants
Note which grants used which report. Auditors and diligence counsel will check this.
Common mistakes.
- Granting options after a priced round on the old valuation.
- Projections given to the provider that differ from the board-approved budget.
- Reports lost or not tied to the grants they supported.
- Leaving out recent offers or secondary sales the provider needed to know about.