October 14, 2026
Your startup stock has two values. Fair market value comes from the company’s 409A valuation, and it’s what matters for taxes and option pricing. Venture value is the last round’s price per share times your shares. Venture value is the number people quote, but it’s based on preferred stock. Your common stock usually isn’t worth that much until there’s an exit.
Key takeaways
It’s the value of the company’s common stock for tax purposes. At formation, the board sets it in good faith, usually at par value ($0.00001 per share). After that, it comes from the most recent 409A valuation, refreshed at least every 12 months and after a priced round. See 409A Valuation.
Multiply the last round’s price per share by your shares, or take the post-money valuation times your fully diluted ownership.
Example: Gregarious Games Inc. closes a Series A at a $65 million post-money valuation. The founder, James, holds 2,000,000 of 11,000,000 fully diluted shares (18.2%). His venture value is $65,000,000 × 2/11 = $11.8 million, or about $5.91 per share. He bought his shares at formation for $0.00001 each, $20 in total.
Investors bought preferred stock, which gets paid first in a sale (the liquidation preference) and has other rights. Common stock ranks behind it and can’t easily be sold, so 409A appraisers and secondary buyers value common below the preferred price, often at less than half of it at the seed and Series A stages. James’s common shares are worth less than $5.91 each until there’s an exit. See Liquidation Preference.
Generally, no. The two numbers answer different questions. Investors set the price of preferred stock by negotiating over the company’s prospects and the terms of the deal. The 409A appraiser values common stock for tax purposes and usually applies discounts because a holder of common can’t control the company (a minority interest discount) and can’t easily sell the shares (a lack of marketability discount). Investors rarely look at the 409A when they price a round. A low 409A is good news for your team, because it means lower exercise prices on new options.
Only when someone pays it: a sale of the company, an IPO, or a secondary sale the company approves. Until then it’s a number on paper.
Each round dilutes your percentage. If the valuation rises enough, your stake is still worth more. See Equity Dilution.
The rules depend on the type of equity and the moment (grant, vesting, exercise and sale). Talk to a tax advisor. See 83(b) Election and NSO vs ISO.
See our Cap Table Cleanup service.
