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Here at The Brenner Group, we often get comments from our friends in the venture capital and entrepreneurial communities about the burden of 409A compliance and the closely related 123R accounting rules for stock option expensing.

The comments range from expressions of pain and dismay to colorful language that is not suitable for reading at the family dinner table. (more…)

Ivan Gaviria, an attorney at Gunderson Dettmer’s Silicon Valley office, recently posted 5 classic (and costly) mistakes startups make with their people.

http://www.undertheradarblog.com/blog/5-classic-and-costly-mistakes-startups-make-with-their-people-5/

What made #5 on his list? Ignoring Internal Revenue Code 409A. (more…)

A news service for the valuation profession recently profiled a discussion of the “H Model” among valuation professionals (BV Wire Issue 83-1 published August 5, 2009 by Business Valuation Resources, LLP). Since we sometimes include the H Model in valuations of early stage technology companies performed at The Brenner Group, I thought I would add a few comments. (more…)

Discounts for Lack of Marketability (“DLOM”) often play an important role in the valuation of privately held companies. This is because we often develop an indication of the value of a company as if it were publicly traded, and then adjust the value to reflect the fact that its stock cannot be rapidly sold on a public exchange.

In light of the turmoil in the equity markets over the past eighteen months, some have conjectured that the difference in values between public and private companies has gotten wider. An intriguing set of studies conducted by Ronald M. Seaman shine some light on this issue. (more…)

One question we frequently get concerns the relationship between the post-money value of a company provided by a venture capitalist on an early stage financing and the fair market value or fair value of a company as estimated for 409A or 123R purposes, respectively.

In a nutshell, the numbers are developed for two different purposes and should not be expected to be the same or even similar. (more…)

In our high technology valuation practice in Silicon Valley, typically we develop estimates of the client’s value using two or more valuation methods. For instance, we might use a discounted cash flow method, and another method that uses valuation multiples derived from publicly traded companies; there are other methods as well. (more…)

As an early stage technology company grows and matures, the finance and accounting functions should be expected to grow and mature along with it. From the perspective of 409A and 123R compliance, this means that over time there should be improvement in the financial projections maintained by the company. (more…)

An essential ingredient of sound and accurate 409A valuations is a complete set of financial projections. 409A clients often ask what that means and The Brenner Group valuation Vice President Bill Denebeim provides answers to four common questions about solid financial projections.

(more…)