A priced round is typically a material event under IRC §409A. Carta: reliance on a prior 409A generally ends at that point; companies obtain an updated 409A before issuing new options. Freeze new grants at close until the refreshed report is in hand and the board adopts the new FMV. Then grant. Not legal, tax, or compensation advice.
What triggers a refresh
You need a current 409A before issuing options, after every new raise, after a material business event, and at least every 12 months (Kruze checklist, 17 September 2025). Carta: a third-party valuation is generally “good” for up to 12 months unless a material event, such as a new priced equity financing, makes the prior valuation stale.
Promise Legal (updated 29 September 2025) publishes this timing table:
| Event | Action | Timeline |
|---|---|---|
| First option grant | Initial 409A | Before granting |
| Priced equity round | New 409A | Within 30 days after closing |
| Significant milestone | New 409A | When material changes occur |
| 12 months elapsed | Refresh | Safe harbor expires after 12 months |
Promise’s “within 30 days” is one published target. The IRS does not publish a fixed day count on that page. The functional rule after a material event is: do not grant on a stale FMV (Carta). A down round is typically a material event as well; Carta notes the result is often (not always) a lower common FMV.
What a post-round 409A costs
Sources disagree, so this section shows each band as published instead of an average.
Kruze published fees (409A valuation cost):
| Stage | Kruze published | What others charge (Kruze) |
|---|---|---|
| Seed | $2,000 | $4,000+ |
| Series A | $2,500 | $5,000+ |
| Series B | $3,000 | $5,000+ |
| Series C | $3,500 | $5,000+ |
Kruze also states typical industry cost of $2,000 to $5,000+ depending on complexity, and that startups on cap-table software vendors spend over $3,000 annually, with many over $10,000.
Carta standalone range (hub cite, 409A valuation, 4 August 2026): roughly $1,000 to over $10,000 depending on size and complexity.
Promise Legal by stage (updated 29 September 2025):
| Stage | Typical cost | Timeline |
|---|---|---|
| Pre-seed / Idea | $2,000–$5,000 | 1–2 weeks |
| Post-SAFE/convertible | $3,000–$7,000 | 2–3 weeks |
| Post-Series Seed/A | $5,000–$12,000 | 2–4 weeks |
| Post-Series B+ | $10,000–$25,000+ | 3–6 weeks |
Promise’s Seed/A band ($5,000–$12,000) sits above Kruze’s published Seed/A fees ($2,000 / $2,500). Keep both. Pick a provider and a quote for your cap table, not a blended midpoint.
Timeline from close to grants again
Coordinate with the valuation provider ahead of the round so the updated 409A can complete soon after close (Carta, priced rounds, 8 May 2026).
| Step | What operators do | Published timing |
|---|---|---|
| Engage | Start the provider before or at close; assemble financials, cap table, funding docs, 12–24 month projections | Allow for document lead time (Kruze checklist) |
| Valuation | Provider runs the report | Kruze: can complete in 10 business days; checklist: set aside 2–4 weeks plus board and doc lead time |
| Board | Board adopts the new FMV | Same meeting or shortly after the signed report |
| Grants resume | Issue options at or above the adopted FMV | After adoption, not on the old strike |
Promise’s “within 30 days after closing” is a published target for obtaining the new 409A after a priced round. Until the board has adopted the refreshed FMV, treat new option grants as paused.
Why common is not the preferred share price
Preferred has rights common does not. Carta: the FMV of common is often meaningfully lower than the preferred share price even when the priced round is the primary 409A input. Appraisers typically backsolve from the arm’s-length preferred price and allocate value across the stack.
Kruze states two bands on the same cost page. Present both as written, not averaged:
- In the backsolve discussion: common is typically about 25% to 35% of the preferred price.
- In an earlier methodology paragraph: common is worth about 30% to 40% of preferred.
Do not set the option strike equal to the preferred price per share from the term sheet. That is a different instrument.
Hiring during the gap
Freeze new option grants from close until the signed refreshed 409A is in hand and the board adopts FMV. Carta: obtain an updated 409A before issuing new options. Some counsel start the freeze from the term sheet; treat that as counsel guidance for your deal, not a universal statute.
Conditional offers during the close are common operator practice: you can state a number of options in the offer letter and set the strike from the post-close 409A once the board adopts FMV. Frame that as how operators bridge the gap. Confirm the form of the offer with counsel. Do not grant at the old strike through the close.
Penalties for underpriced options hit the holder: ordinary income on the spread, plus a 20% excise tax, plus interest (Promise / IRS 409A framing). No invented dollar examples here.
Mistakes after the round
Granting through the close on the old FMV. Once the priced round counts as a material event, the prior valuation is stale (Carta).
Waiting months to refresh. Promise targets within 30 days after closing; Kruze recommends a new valuation after a raise. Open offers sit without a strike while you wait.
Treating preferred price as common strike. Preferred rights make common FMV lower (Carta; Kruze backsolve).
Skipping board adoption. The signed report does not set FMV on its own. The board adopts FMV, then you grant.
Letting the annual clock slip. Even without a raise, safe harbor is generally up to 12 months from the valuation date (Carta; Kruze; Promise).
Worked situation
Labeled hypothetical. Not a company. Series A closes Monday. The last 409A is four months old. Three offers are pending with option counts in the letters and no strike set.
Freeze grants Monday. Engage the valuation provider days 1–3 with financials, cap table, and funding docs already in the data room. Kruze’s faster path can land a report in about 10 business days; the checklist’s 2–4 week window is the planning number if docs or board time slip. Board adopts the new FMV the week the report lands. Then grant the three seats at the adopted strike. Do not issue those options on the four-month-old number.
Sources
- Carta, priced rounds — 8 May 2026. Priced round as material event; update before new options; 12-month “good” unless material event; common FMV often meaningfully below preferred; down round as material event.
- Carta, 409A valuation — 4 August 2026. Standalone cost roughly $1,000 to over $10,000.
- Kruze, 409A valuation cost — Published Seed–C fees; others’ Seed/A bands; industry $2,000–$5,000+; cap-table vendor spend; 10 business days; 12 months or material change; backsolve bands 25–35% and about 30–40%.
- Kruze, founder checklist and timeline — 17 September 2025. Triggers; 2–4 weeks plus board/docs; document list.
- Promise Legal, 409A valuations — Updated 29 September 2025. Timing table; stage cost/timeline table; holder penalties (ordinary income + 20% + interest).
Related
- Equity & cap table
- Size the option pool from a hiring plan
- Executive equity grants by stage
- Option pool shuffle calculator
- Executive equity calculator
After the round closes, the 409A gates your next hires. Founders who have sequenced the freeze, refresh, and first post-round grants will walk through your calendar in a FounderNexus session.