Does My Startup Need a 409A Valuation for a SAFE?
Startup founders seeking their first infusion of non-”friends and family” capital will often seek out or entertain offers from investors in the form of a SAFE (“simple agreement for future equity”). Occasionally, I’m asked by startup founders considering a SAFE whether or not a “409” valuation is required before accepting such an investment. What is a 409A? No, we're not talking about your and my favorite tub and shower cleaner. The short version is a 409A valuation (so named after the specific section of the Internal Revenue Code) is an independent, usually third-party appraisal of your company that, in turn, will end up setting a value on its shares. Why would you want to do that? If your company is listed on a public stock exchange (e.g., NYSE, Nasdaq), the…