Which 409A valuation provider should I use?

Takeaway: As long as you are getting a 409A valuation from an experienced provider, the criterion for selection is usually cost. I typically recommend folks use Carta (especially if they’re already a subscriber) or Jim Timmins at Teknos Associates.

Choosing a 409A provider is an important decision for startups to make. A 409A valuation is used to determine the fair market value of a startup's stock options for tax purposes, and the accuracy of this valuation can have significant implications for the company and its employees. Here are some factors that startups should consider when choosing a 409A provider.

Experience

Startups should look for a 409A provider with experience in valuing early-stage companies. This can help ensure that the provider understands the unique challenges and opportunities that startups face and can accurately value their stock options.

Reputation

It's important to choose a 409A provider with a solid reputation in the industry. Startups should look for providers with a track record of producing accurate and defensible valuations.

Quality of analysis

The quality of the analysis provided by the 409A provider is critical. Startups should look for providers that conduct thorough analyses of the company's financials, market conditions, and other relevant factors to ensure that the valuation is accurate and defensible.

Cost

Cost is a significant factor for startups, and it's important to choose a 409A provider that offers fair pricing for their services. However, it's also important to remember that the quality of the analysis provided is more important than the cost.

Customer service

Finally, startups should look for 409A providers that offer excellent customer service. This can help ensure that the company's questions and concerns are addressed promptly and professionally.

Recommendation

My preferred 409A valuation firm is Teknos Associates - contact Jim Timmins (jtimmins@teknosassociates.com and (650) 330-8800). Note that if you are a Carta customer, their plans often include one 409A valuation per year so that can also be a good option.

Conclusion

Choosing a 409A provider is an important decision for startups to make. By considering factors such as experience, reputation, quality of analysis, cost, and customer service, startups can choose a provider that will produce accurate and defensible valuations of their stock options for tax purposes.