A 409A valuation report isn’t just a compliance document, it’s the foundation for how your company’s equity is priced and how well that valuation stands up to investor or IRS scrutiny.
While a third-party provider prepares the report, your input as a founder is essential. Understanding what’s inside your 409A valuation and validating the assumptions behind it can make the difference between a defensible Safe Harbor valuation and one that falls apart under pressure.
Here’s how to approach your next 409A valuation report with clarity, confidence, and control.
Why You Should Review Your 409A Valuation Report
A 409A valuation establishes the fair market value (FMV) of your company’s common stock — the number used to price employee stock options and ensure tax compliance.
But even the best valuation provider isn’t inside your business every day. That’s where your perspective matters most.
Your valuation should generally reflect your current trajectory, not just your last funding round. A defensible 409A valuation typically combines quantitative data (like financials and comparables) with qualitative context (like new contracts, hiring milestones, or strategic partnerships). When those pieces align, your valuation is more prepared to withstand IRS and investor diligence.
>> Need a refresher on the basics? What Is a 409A Valuation and Why Does It Matter? covers how valuations are determined and why Safe Harbor protection matters.
The Draft Is Not the Final Word
When you receive your draft 409A valuation report, think of it as a conversation starter, not a done deal.
Even the most experienced providers make assumptions based on the data they have. Your job is to confirm that those assumptions actually reflect your company’s reality. Maybe you’ve signed a new enterprise contract, shifted your burn rate, or revised your fundraising plans — all of which can materially affect your FMV.
Reviewing your report isn’t about redoing the analysis; it’s about validating the story behind the numbers. A thoughtful founder review helps your provider capture the context algorithms often miss, like new milestones, evolving market dynamics, or shifts in your growth strategy. That extra layer of clarity not only improves accuracy but also helps build a paper trail of decisions and assumptions that can strengthen your 409A’s Safe Harbor defensibility when it’s time for audit or investor review.
Once you’ve validated the key inputs, it’s time to dig into the details that shape your valuation.
Five Questions Every Founder Should Ask
When you sit down with your valuation provider, consider bringing these questions. They’ll help you unpack the reasoning behind your FMV and can give you insight into how future changes might affect it.
1. What comparables have changed since the last valuation?
Market comparables are one of the biggest drivers of your company’s FMV. If the peer set has shifted, or if new companies better reflect your size, risk, or industry, that should be reflected in the analysis.
2. What discounts or cap table adjustments drove the change?
Discounts for lack of marketability, new option grants, or recent financing activity can move the number significantly. Understanding how these were applied helps you track valuation shifts year over year.
3. How did you treat vested vs. unvested options?
This detail can affect both your reported FMV and employee tax exposure. Consider clarifying how vested and unvested options were modeled and ensure they align with your current equity plan.
4. What assumptions about cash runway and fundraising were used?
Your expected runway and financing plans directly influence valuation. Confirm the assumptions align with your real growth plans and funding strategy, not outdated projections.
5. Which three sensitivity assumptions would most materially change the FMV?
Ask, “What would move the number?” Maybe it’s comps, revenue projections, or discount rates. Understanding which levers drive FMV helps you anticipate how market or internal chances could impact future valuations.
>> For more guidance, check out our 409A Material Event Checklist to know when you might need a new valuation altogether.
Fidelity Private Shares’ 409A Valuation Process
At Fidelity Private Shares, we help founders move fast without cutting corners. Our approach to help streamline the 409A valuation process balances the speed startups need with the defensibility auditors and investors expect.
Some platforms now offer “one-click” or algorithm-only valuations, promising to deliver a number in a few days. While that speed sounds appealing, these automated models often skip the qualitative context that can make a valuation defensible — things like your company’s market position, leadership team, and growth outlook.
The risk? A report that looks fine on paper but may not hold up during an audit or investor review. Founders who rely on these quick valuations often end up paying twice: once for the convenience, and again for a proper, audit-ready report when the first one gets rejected.
That’s where Fidelity Private Shares is different.
We connect you with independent, third-party valuation experts, not internal algorithms, while our platform streamlines the process. With Fidelity Private Shares, you can:
- Collaborate directly with your valuation provider and Fidelity’s team during the draft review.
- Receive an audit-ready report that qualifies for Safe Harbor protection.
- Have your valuation and board resolution securely stored on the platform, complete with automated reminders for your next compliance cycle.
And once your draft is in hand, a few practical steps can help make the process even smoother:
- Don’t assume your finance team will catch everything. Your insight as a founder matters most — you see what algorithms and spreadsheets can’t.
- Schedule a dedicated review session with your valuation provider to walk through assumptions together.
- Document every question and answer to create an audit trail and strengthen defensibility.
- Treat this process as part of good governance, not just a compliance checkbox. It’s how you protect your team, your investors, and your equity plan.
>> For more on how Fidelity Private Shares supports fast, audit-ready valuations, visit our 409A Valuations page.
A Defensible 409A Should Have Active Founder Involvement
A 409A valuation isn’t just a formality, it’s a reflection of your company’s growth story and future potential. When you take time to review the draft, ask thoughtful questions, and align assumptions with reality, you’re not just helping to ensure compliance, you’re shaping how your company’s story is told.
Treat the draft stage as your chance to own your valuation narrative, to make sure the report reflects the full picture of your progress, momentum, and market position. That context is what helps a 409A stand up to scrutiny and tells investors that you understand your business inside and out.
Active founder involvement turns your 409A report from a checkbox into a cornerstone of sound governance, and a reflection of the leadership behind the company.
Ready to simplify your next valuation? Download our latest guide So, someone told you to get a 409A valuation… to learn the right questions to ask, what factors impact FMV, and how to prepare for a smooth review.
Or connect with our team to see how we can help you complete a fast, transparent, and Safe Harbor–qualified 409A valuation.
409A valuations are conducted by a third party.
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