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Did I get in early enough to take advantage of a low 409A valuation?

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Editor’s note: A version of this question originally appeared on Reddit.

A startup I’m considering joining offered to grant me x number of stock options. The company raised their most recent round of funding in the spring, and plan to raise another round of funding soon.

So my question is, how will my stock options be valued? At the current 409A valuation based on the spring funding round, or the new 409A valuation that will come with the newest funding round (they’ve executed a term sheet, but they haven’t signed a formal agreement).

For obvious reasons, I’d like to see my stock options valued at the lower 409A valuation from earlier in the year. Any insights, thoughts or recommendations?

- Anonymous


Dear Anonymous,

Ah, the perennial question among startup employees earning stock options — did I get hired early enough to take advantage of a favorable 409A valuation (also known as fair market value)?

The short answer is to ask your recruiter if the startup is in a blackout period and unable to issue stock options immediately. In cases where someone joins a company during a fundraising event, they may find that they aren’t issued stock options or given a strike price until after the fundraising event is complete.

Here, it’s important to take a longer view — if you like the company, your team and your role, you should consider accepting the role, even if it means a higher 409A valuation. If the company is successful, there will be hundreds of people who get hired after you do, wishing they had been hired when you did.

- Vieje Piauwasdy, Director of Equity Strategy, Secfi

Do you have a question about your stock options? Email us at ask@secfi.com

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