A 409A valuation is an independent appraisal of the fair market value of a private company’s common stock, required under U.S. Internal Revenue Code Section 409A to set a defensible option strike price. A valuation is typically refreshed annually or after each material event such as a new financing.
Pricing options at or above the 409A value provides safe-harbor protection from punitive tax on deferred compensation. Although a U.S. concept, it matters for Turkish startups that flip to a Delaware parent and grant options to U.S.-based team members.