Re:Valuation Shell Game: the 409A valuation
by snarf on Thursday March 09, 2017 @04:55AM
(#13828261)
The funny thing is that the author of this article is a former (longtime) investment banker. I found the line where he describes the lack of liquidity in private shares "falls especially hard on early investors who are not company employees, those so-called 'series A' or 'series B' venture-capital investors" especially amusing. As if we are supposed to feel more sorry for VCs who are diversified in many investments than employees who aren't.
Re:Valuation Shell Game: the 409A valuation
by jeronpaul on Thursday March 09, 2017 @12:42PM
(#13831060)
I completely agree with this. 1) I have never seen a startup pay anything close to that. 2) you are so right--you generally only need 1 every 12 months (at most!). There are some exceptions but they are rare. Some valuation providers sell 409As as if you need them monthly or something. That is absurd.
Thanks for calling out these major factual errors. I can confirm your corrections. What a terrible article!
(1) a $50,000 fee for a valuation is crazy- early stage companies pay less than 1/10th that.
(2) companies typically do not get a valuation done more than once per year. the article makes it sound like you get a new one every time you issue options, they actually have a shelf life of one-year, unless there is a new financing or other event that requires a new report to be obtained.
Not saying its a good system (it's not), just odd that the NYT would get some basic facts wrong.