How to prepare for a 409A valuation

Preparing for a 409A valuation doesn't have to be complicated. The documents your appraiser needs are predictable, most of them are already in your cap table, and if your data is clean, you can have everything ready in under an hour. On Cake, that turnaround translates directly to a 3-business-day delivery. The longest part of most 409A processes isn't the appraisal: it's the data prep.

This guide covers what your appraiser actually needs, how to have it ready before the process starts, and what to expect from kickoff to receiving your report.

How to get a 409A valuation

Getting a 409A starts with choosing a provider: an independent specialist firm, an integrated cap table platform like Cake, or a Big 4 engagement for complex capital structures. Once you choose a 409A provider, they will typically send you a list of documents you need to prepare before they begin the process.

How long the process takes depends almost entirely on what you bring to step one. A complete, current submission moves straight to analysis. An incomplete one enters a clarification cycle that can add weeks before the appraiser has what they need to begin.

The rest of this guide covers step one in detail: what to have ready before you start. For help choosing a provider, see how to choose a 409A valuation provider.

How the process works

A 409A valuation is an independent appraisal of your company's common stock fair market value (FMV). The appraiser takes your company's financial and equity data, applies a recognised valuation methodology, and produces a report that sets the defensible strike price for any option grants you make.

As a founder, your job in this process is straightforward: provide accurate, complete data. The appraiser does the analysis. What slows things down (and what creates re-work) is incomplete information or a cap table that doesn't reconcile cleanly.

"The appraiser needs clean cap table data — the more organised your cap table, the faster and more accurate your 409A."
—Steve Allan, Founder of Allanytics

Put simply, the process follows this sequence: 

1. Prepare your documents (cap table, financials, round details)
2. Engage with your appraiser and submit documents
3. Receive and review your 409A valuation

The whole process can take 3 business days with Cake, or 2–4 weeks with a standalone firm. The difference almost always comes back to how complete your data was at submission.

What you need to prepare: the document checklist

Here is what your appraiser will ask for. Most of these are documents you already have: it's a matter of having them organised and current before you start.

1. Financial statements
2. Financial projections
3. Cap table and options — if you're on Cake, you can easily export this data
4. Articles of incorporation
5. Total expected options to be granted using this 409A valuation
6. Recent Term Sheet/Stock Purchase Agreement
7. Previous 409A Valuation
8. Recent pitch deck or list of key developments
9. Next major milestone, e.g. fundraising or product development phase.

Now, let's break this down:

Cap table: your most important document

Your cap table is the foundation of the valuation. It tells your appraiser the full equity structure: who holds what, the type of shares, and all outstanding options, warrants, and convertible instruments.

This is where Cake makes the process considerably faster. If your cap table is on Cake, you can export it directly in the format your appraiser needs with no manual formatting, no re-entry, and no version control risk. The export captures all share classes, option pool detail, and round history automatically.

A cap table that isn't current (missing a recent SAFE conversion, unissued options still showing as outstanding) is the most common cause of delays in the process.

Articles of incorporation / certificate of incorporation

Your founding documents confirm the legal structure of the company and the rights attached to each share class. Preferred stock protections, liquidation preferences, and anti-dilution provisions all affect how your appraiser values common vs. preferred stock. Have the most current version ready, including any amended and restated articles from subsequent funding rounds.

Most recent financial statements

Your appraiser needs to assess the financial condition and trajectory of the business. Provide:

• Balance sheet (most recent)
• Income statement / P&L (most recent period, ideally year-to-date)
• Financial projections if available, particularly for growth-stage companies

For very early-stage companies (pre-revenue, pre-seed), simple management accounts will suffice. What matters is accuracy, not complexity.

Any previous 409A reports

If this isn't your first 409A, your prior report is useful context. Appraisers look at how the business has changed since the last valuation and use the prior methodology as a reference point. Missing a prior report isn't a blocker, but having it speeds up the review.

Details of recent funding rounds

Any priced rounds, SAFEs, or convertible notes completed since your last valuation need to be documented. Your appraiser needs:

• Round size and date
• Pre-money and post-money valuation (for priced rounds)
• Number of shares issued and to whom
• SAFE or convertible note terms, including cap, discount, and maturity date (if applicable)

This information should be in your cap table already, but having the term sheets and closing documents accessible is useful in case the appraiser has follow-up questions.

SAFE and convertible note terms (if applicable)

If you've raised on SAFEs or convertible notes, the specific terms matter for the valuation, particularly the valuation cap and any most-favoured-nation provisions. These instruments affect your post-money cap structure and how your appraiser models the equity stack.

See our guide to SAFE notes and convertible notes for how these instruments work and what changes at conversion.

What the timeline looks like

Timeline depends almost entirely on two things: the completeness of your data submission, and whether you're using an integrated platform or a standalone firm.

The 2–4 week window for standalone firms isn't because the valuation itself takes longer: it's usually because the back-and-forth over data collection and clarification adds up. An incomplete submission on day one can add a week to the process before the appraiser has what they need to begin.

The practical implication: if you're approaching a grant cycle or have a target issuance date, don't start the process the week before.

For Cake customers, a week of lead time is comfortable. For standalone firms, build in a month.

The walkthrough call: what to expect and why it matters

Once the appraisal is complete, your provider should offer a walkthrough call to walk through the report with you. This isn't optional: it's one of the most important parts of the process.

"You should have a valuation provider that's willing to hop on the phone and walk you through the valuation. Because again, it's your valuation. They're the service provider. You really need to understand what it is you're signing up for."
— Steve Allan, Founder of Allanytics

A provider who won't do a walkthrough call is a red flag. The 409A report has your name on it. If it's ever challenged by auditors or the IRS, you need to be able to explain the methodology and stand behind the conclusions. That starts with understanding what's in the report.

What your appraiser will typically cover:

• The valuation approach and key assumptions
• How your common stock value was derived from the preferred price
• The common-to-preferred ratio and what's driving it
• Any inputs that meaningfully affected the outcome (e.g., a significant change in revenue projections, the impact of a recent SAFE conversion)

If anything in the report feels off (a ratio that seems too low or too high for your stage, assumptions that don't match your business), the walkthrough call is the moment to ask. A qualified appraiser will give you direct answers to your questions.

What's in a 409A valuation report

Once you have the completed 409A report, three things need to happen before you issue any new grants.

A standard 409A valuation report includes: the valuation date and expiration, the methodology used (typically OPM backsolve at seed stage), the concluded fair market value per share of common stock, the appraiser's qualifications, and a summary of the inputs and assumptions.

The report is typically 20–40 pages for early-stage companies. Cake's integrated workflow makes the report available within 3 business days and stores it directly alongside your cap table.

What's next after receiving your 409A valuation

Once you have the completed 409A report, three things need to happen before you issue any new grants.

Store it properly

Your 409A report is a legal document. It needs to be retained with your corporate records for the life of the company, not just until the next valuation. Store it alongside your cap table, your financing documents, and your articles of incorporation. If you're on Cake, your report is accessible from your cap table dashboard.

Check the common-to-preferred ratio

Before issuing any grants, confirm that the common-to-preferred ratio looks right for your stage. Two red flags to know:

Below 10% at early stage: May be too aggressive. Auditors and the IRS have flags for ratios this low, and it suggests the methodology may not hold up to scrutiny.

Above 50% at early stage: May be over-conservative. If your appraisers are setting the ratio this high to reduce their own risk, the consequence falls on your employees: they end up with a higher strike price and less upside than the valuation actually warrants.

A 20–35% ratio at seed stage is typical. At Series A, expect 30–50%.

Set strike prices and issue grants

Once you've reviewed the report and you're satisfied it's accurate, you can set strike prices for any pending option grants. On Cake, this step is automatic: strike prices sync from your finalized 409A directly into the option issuance workflow, so there's no manual re-entry and no risk of a typo making your options non-compliant.

Remember: your 409A is valid for 12 months, or until a material event, whichever comes first. See our guide to 409A valuation triggers for the full list of events that reset the clock, and use the 409A Valuation Checklist to track when your next valuation is due.