Is There Such a Thing as a Free 409A Valuation?
Sometimes, with conditions attached. Here is what "free" actually means in this market, and when it is genuinely worth taking.
What "free" usually means
A free 409A is almost always bundled with something you pay for. That is not necessarily a bad deal, but it is worth knowing which arrangement you are in.
- Included in a cap-table platform subscription you pay for annually
- Offered by an accelerator or investor as a portfolio perk
- A promotional first valuation, with renewals at standard rates
- A self-service template or spreadsheet with no appraiser involved
When free is genuinely worth taking
If you already pay for the platform, or your accelerator covers the cost with a credentialed appraiser doing the work, take it. The valuation qualifies for safe harbor based on who performs it and how, not on what you paid. The questions to ask are whether an independent appraiser signs it, whether the methodology is documented, and what happens if an auditor challenges it.
Where free becomes expensive
A do-it-yourself spreadsheet is not a 409A valuation. Under Treas. Reg. §1.409A-1(b)(5)(iv)(B)(2)(i), a qualifying independent appraisal is presumed reasonable, so the IRS must show the valuation was grossly unreasonable to unwind it. Two narrower presumptions exist, a binding formula price and the illiquid start-up method for companies that have conducted a trade or business for less than 10 years, but neither is satisfied by a founder spreadsheet, and outside a presumption the burden of proving reasonableness sits with you. If the IRS successfully challenges the strike price, option holders face income recognition at vesting plus an additional 20% federal penalty tax.
Frequently asked questions
Can I do a 409A valuation myself?
You can produce an internal estimate, but it will not qualify for the independent appraisal safe harbor. Without that safe harbor, you carry the burden of demonstrating the valuation was reasonable if the IRS challenges it.
Are free valuations from cap-table platforms legitimate?
Generally yes, where a credentialed appraiser performs the work. The valuation is not really free, though: it is paid for through the platform subscription. Compare the all-in annual cost against a standalone report before assuming it is cheaper.
What is the cheapest legitimate option if nothing is bundled?
Standalone published pricing starts at $899 for companies with under $1M raised, with no subscription required.