Does a 409A valuation equate to the overall company valuation?
No, a 409A valuation, which reflects the value of the common stock, is distinct from the overall company valuation typically negotiated during a funding round and which takes into account projected business value and investor rights such as a preferred payout in an acquisition. The negotiated company valuation may influence the 409A valuation, but not vice versa. It is important to note that a lower 409A valuation can be beneficial, as it reduces the cost for service providers to acquire equity in the company and thereby increases the potential upside for the recipient.