Frequently Asked Questions
Do I need a 409A valuation?
If your company is private and plans to issue compensation in the form of equity (most commonly, stock options), then a 409A valuation is the best and easiest way to receive safe harbor from the IRS scrutiny under IRC 409A. Additionally, there are numerous other, and perhaps more important, reasons to get a 409A valuation for your company.
How often is a 409A valuation needed and how long is it good for?
A 409A valuation is good for 12 months or until a material event occurs. When evaluating whether a material event has occurred, you should consider outside investments, recent rounds of financing, M&A activity, major changes in the management team, financial performance different than forecasts, changes to the business model, and similar events. We are happy to help you navigate this issue with a free consultation.
What kind of clients do you work with?
While we specialize in early-stage and high growth companies, our clients have ranged from pre-revenue startups to mature companies with over $1 billion revenue. Although we perform hundreds of valuations for life science, medical device, and early-stage tech companies, we have experience valuing a wide-array of industries from architecture to food manufacturing and distribution to vehicle leasing and much more.
What is your turn around time?
A basic 409A or business valuation generally takes 2 to 3 weeks to complete a draft report. More complex engagements, such as purchase price allocations, may take 4 to 6 weeks. We try to work with our clients to meet your needs and may be able to expedite our deliverables upon request.
What does the process and deliverable look like?
To start, we have a kick-off call to better understand your needs and your business. We provide a straightforward request list and incorporate as much of it into our model as possible. We may have follow-up questions or calls, but we keep the process as efficient as possible. The final deliverable is a robust, written report. You may ask us questions throughout the process and we value your feedback.
Do you defend your work from regulators and auditors?
The founders of Redwood have been around since IRC 409A came into existence and have built a loyal team that will be familiar with your business from year-to-year and defend your valuation at any point. Unlike venture-backed, online-based valuation providers that may run out of cash and large consulting firms that inevitably have high turnover, we are guaranteed to be around in 5 years and will have our core team in tact. Additionally, we will defend your valuation without unreasonable fees.
Is there a rule of thumb regarding common as a percent of preferred?
No rules of thumb exist regarding common as a percent of preferred. The value of common is impacted by the rights and privileges of the various share classes. However, in our experience management often has a good sense of what the final value should be. Our valuation conclusions are considered to be very reasonable by both management and regulators.