What triggers a 409A valuation?

The first trigger is simple: you are about to grant stock options or another stock right that needs a fair-market-value exercise price. You need a defensible value as of the grant date.

After the initial report, two things trigger a refresh:

1. Time. A prior value cannot support safe harbor more than 12 months after its valuation date.
2. New material information. If something happens that could materially change the company's value, the old conclusion may stop being reasonable before the 12 months are up.

Common material events include a priced financing, a large secondary transaction, an acquisition offer, a major change in revenue or forecast, the launch or loss of an important product, a significant legal development, or the departure of a person whose exit changes the company's outlook. The label is less important than the economic question: would a reasonable appraiser need this information to value the common stock today?

Not every corporate event triggers a new report. Hiring one employee, signing an ordinary customer, or closing a small financing on terms already reflected in the analysis may not change the answer. Document the call instead of relying on a generic checklist.

The trigger is also not “we raised venture capital.” A bootstrapped company still needs support for FMV before granting options. Start with when a company needs a 409A valuation, then read what a 409A valuation actually measures. The timing section of the founder's guide puts both triggers on one timeline.