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409A Valuation - Share Price Calculation

Brett Bennett, CPA's Profile

When receiving your first 409A valuation after your Series A round by an outside firm, what is the best way to determine if the calculated share price is reasonable (too high potentially) or not?

Answers

Topic Expert
Edward Abbati
Title: Vice President of Finance
Company: Location Labs
LinkedIn Profile
(Vice President of Finance, Location Labs) |

Brett, you need to review the assumptions related to the valuation. If you hired a qualified consultant, the report should have at least two or three methods for valuation. If you honestly believe the valuation is wrong then reach out to another consultant but first, understand what the assumptions are behind the valuation.

James Scott
Title: Consulting CFO
Company: Early Growth Financial Services
LinkedIn Profile
(Consulting CFO, Early Growth Financial Services) |

Usually there is a range of valuation you should be comfortable with finding a point within you can acceptably defend. After the Series A it is common for the valuation to be much higher than before, given the investment itself and better information on comparable fundings.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

As a contextual comment......It is easier to swallow a "potentially high" valuation than a down round.

Brett Bennett, CPA
Title: Head of Finance
Company: Bugcrowd Inc
(Head of Finance, Bugcrowd Inc) |

Thank you everyone

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