409A Valuation Estimator
Estimate common share fair market value from a preferred round valuation.
About 409A Valuation Estimator
Common shares are worth less than preferred because preferred carries liquidation preference and other protections. The resulting discount is typically 20 to 50 per cent at early stage and narrows as a company matures. Valuations older than twelve months or predating a material event lose safe harbour status, which creates tax exposure for option holders.
Formula
409A Valuation
Common value = adjusted enterprise value × (1 − preferred discount), divided by shares
- 409A valuation
- An independent appraisal setting the option strike price
- preferred discount
- Common shares are worth less because preferred holds liquidation preference
Worked example
With the default values below, 409A Valuation Estimator returns Estimated Common Share Value of $0.769090. Change any input above and every figure here is recalculated in your browser.
Inputs used
- Post-money valuationminimum 0.01
- 12,000,000
- Discount for common versus preferredaccepts 0–80 %
- 35 %
- Fully diluted sharesminimum 1
- 12,000,000
- Months since the roundaccepts 0–60 months
- 6 months
- Annual growth in enterprise valueaccepts -50–200 %
- 40 %
Results
- Estimated Common Share Value
- $0.769090
- Implied Common Equity Value
- $9,229,084.46
- Preferred Share Price
- $1.183216
- Valuation Adjusted for Time
- $14,198,591.48
- Strike Price Guidance
- Within the usual twelve month safe harbour period, absent a material event
Step by step
- 1Values used
- 2409A Valuation
- 3Estimated Common Share Value= 0.769090
- 4Implied Common Equity Value= 9,229,084.46
- 5Preferred Share Price= 1.183216
- 6Valuation Adjusted for Time= 14,198,591.48
- 7Strike Price Guidance= Within the usual twelve month safe harbour period, absent a material event
Assumptions and limits
- The result is derived only from the 5 inputs listed above. Anything not among them is not part of the calculation.
- In particular, this calculator does not take inflation, tax or fees or charges into account.
- Figures are rounded for display to 6 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
- This is an illustration and not a 409A valuation. Compliant valuations must be prepared by a qualified independent appraiser. Setting option strike prices below fair market value creates serious tax consequences. Obtain professional valuation and tax advice.
- This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.
How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.
This is an illustration and not a 409A valuation. Compliant valuations must be prepared by a qualified independent appraiser. Setting option strike prices below fair market value creates serious tax consequences. Obtain professional valuation and tax advice.
Frequently Asked Questions
How is 409A Valuation calculated?
Common value = adjusted enterprise value × (1 − preferred discount), divided by shares Common shares are worth less than preferred because preferred carries liquidation preference and other protections. The resulting discount is typically 20 to 50 per cent at early stage and narrows as a company matures.
Why does 409A Valuation matter?
Valuations older than twelve months or predating a material event lose safe harbour status, which creates tax exposure for option holders.
What values do I need to enter?
This calculator takes 5 inputs: Post-money valuation, Discount for common versus preferred, Fully diluted shares, Months since the round, Annual growth in enterprise value. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.