What is 409A safe harbor, and does my valuation qualify?
Safe harbor is IRS protection for your valuation.
With it, the IRS has to prove your number is wrong. Without it, you have to prove it is right.
You get it when a qualified independent appraiser does the work.
Three ways to value your company
Using an independent appraiser is the only one that earns safe harbor.
Your board does it. Cheapest, and it is an internal assessment rather than an independent one. Most readings say it does not earn safe harbor.
The illiquid startup formula. For companies under ten years old with no publicly traded securities and no recent change of control. The conditions are tight and it rarely fits a company granting options at any scale.
An independent appraisal. This is the one. The appraiser qualifies on credentials (ASA, ABV or CFA) or on demonstrated valuation experience.
Does a Cake valuation qualify?
Yes. Valuations ordered through Cake are independent appraisals, so they carry safe harbor.
How long it holds
Twelve months, or until a material event. A new priced round, a signed term sheet, a big change in revenue, or approaching an IPO all end it early.