Series B 409A Valuations
More share classes, more breakpoints, and often the first secondary transactions. Here is what a Series B valuation has to account for.
A deeper preference stack
By Series B you typically have three or more preferred classes, each with its own preference and possibly participation rights. Every distinct set of rights adds breakpoints to the waterfall, which is the main reason valuation work scales with capital raised.
Secondary sales become relevant
If employees or founders have sold shares, those transactions are evidence of value and must be considered. Whether a secondary is treated as an arm’s-length indication of common stock value depends on who transacted, at what volume, and under what conditions.
What it costs
Series B companies typically fall in the $1,749 to $2,999 tiers depending on total capital raised. Every report includes your first 2 hours of audit support, so if an auditor or the IRS asks how a number was derived, someone who worked on it answers.
Frequently asked questions
Does a tender offer or secondary sale trigger a new 409A?
It can. A meaningful secondary transaction in common stock is evidence of fair market value and is generally treated as a material event, especially where volume is significant or the buyer is a new institutional investor.
How are participating preferred rights handled?
Participating preferred receives its liquidation preference and then shares in the remaining proceeds, which adds breakpoints and reduces the residual flowing to common. The allocation model handles this explicitly rather than through an assumed ratio.
Our forecast changed significantly. Does that matter?
Yes. A material change in forecast, whether upward or downward, is a material event, because it changes the expected value the allocation model is built on.