When it comes to private company 409A valuation it is helpful to first have some context in terms of how to think about it. First, 409A valuations are a tax compliance issue. They are not the value of your company upon an acquisition or the pre-money that you might go out and raise a round at. When we think about valuation we think in terms of a continuum, at one end is the exit that you are dreaming of and will make you rich. At the other end is possibly a liquidation value. What they assets of the company might go for if you had to shutdown. Could be as low as zero. At any one point in time a company can have a value spectrum depending on motivations, purpose of the valuation, information asymmetry, etc….
What we aim for in 409A is to try and get you the lowest possible answer that is still defensible against an audit. So it tends to be on the lower side of the continuum. If you are unsure if you need a 409a valuation then find out here.