409A Valuation Calculator
Estimate a range for your common stock from the evidence you actually have: a priced round, capital raised, revenue, or profit. See exactly which factors drive the discount.
How a 409A valuation is actually calculated
1. Establish total equity value
The appraiser values the whole company using the market approach, the income approach, or the asset approach, depending on stage and data quality. The estimator mirrors this by blending whichever evidence you have: a round price, profit, revenue, or capital raised.
2. Allocate value across share classes
Equity value is split across preferred and common using an option pricing model (OPM), a probability-weighted expected return method (PWERM), or a hybrid. Liquidation preferences and participation rights reduce what flows to common.
3. Apply a marketability discount
Common stock in a private company cannot be freely sold, so a discount for lack of marketability (DLOM) is applied. The result is the fair market value per share used for option strike prices.
A Series A example, end to end
A company raises a $6,000,000 Series A at a $25,000,000 post-money valuation (so $19,000,000 pre-money) with 10,000,000 fully diluted shares. That puts the preferred price at $2.50 per share and buys the new investors 2,400,000 shares, or 24% of the company. The preferred holds a 1x non-participating liquidation preference, so that $6,000,000, the amount invested, is returned before common participates. Applying a typical Series A range of 25-40% puts indicative common equity value at roughly $6,250,000 to $10,000,000, or roughly $0.63 to $1.00 per share against a $2.50 preferred price.
Important
This estimator is not a valuation. It blends the market evidence you enter into a statistical range and does not model your actual cap table, liquidation preferences, or company-specific facts. It carries no IRS safe-harbor protection and must not be used to set option strike prices. Companies without a priced round can estimate from profit, revenue, or total capital raised instead.
Frequently asked questions
How is a 409A valuation actually calculated?
An appraiser first establishes total equity value using the market, income, or asset approach, then allocates that value across each share class using an option pricing model (OPM), a probability-weighted expected return method (PWERM), or a hybrid. A discount for lack of marketability is applied to the common stock result. The output is the fair market value per share of common stock.
Why is common stock worth less than the preferred price we just raised at?
Preferred shares carry liquidation preferences, and often participation and other rights, that pay out ahead of common stock. Common stock is also illiquid, which supports a discount for lack of marketability. Both effects mean common is normally valued well below the most recent preferred price.
Can I use this estimate for my option grants?
No. This estimator illustrates how the discount behaves. It is not an appraisal and carries no IRS safe-harbor protection. The safe harbor nearly every venture-backed company relies on is a qualifying independent appraisal that considers your actual cap table, rights and preferences, and company-specific facts.
What makes a 409A valuation defensible?
An independent and credentialed appraiser, a documented methodology appropriate to the company stage, inputs that tie to the actual cap table and financials, and a report an auditor or the IRS can follow from assumptions to conclusion. Under Treas. Reg. §1.409A-1(b)(5)(iv)(B), a qualifying independent appraisal shifts the burden of proof to the IRS.
How much does a real 409A valuation cost?
409.AI prices 409A valuations from $899, in published tiers based on capital raised. Independent valuation firms typically quote $3,000 or more, and cap-table platforms usually bundle a valuation into an annual subscription.
How often do I need a new 409A valuation?
At least every 12 months, and again after any material event, such as a new priced financing round, a significant acquisition or divestiture, a major change in forecast, or the start of exit discussions.
Can I estimate my 409A without a priced round?
Yes. If you have never raised a priced round, the estimator can work from profit, revenue, or total capital raised instead, treating each as rough evidence of scale rather than a market price. A SAFE cap is not a market price for your common stock. A real pre-seed appraisal typically leans on the asset approach and early traction evidence, which is exactly what an independent 409A report documents.