409A Valuation Report Example: An Annotated Sample [2026]

A 409A valuation report example is the fastest way to see what you are actually paying for when you hire an appraiser. A real report runs 40 to 80 pages, organized into discrete sections that each serve a specific purpose under AICPA guidance and IRC Section 409A Treasury Regulations. This annotated walkthrough shows what every section should contain, what to verify as you read your own report, and which sections carry the most weight if the report is ever scrutinized by the IRS, an auditor, or an M&A acquirer.

The 409A valuation report example described here is based on the standard structure used by reputable appraisal firms and AI-assisted platforms alike. Section titles may vary slightly between providers, but the content categories are consistent -- if your report is missing one of them, that is a signal worth investigating. For a more concise overview of what to look for, see our companion article on the 409A valuation report structure.

What a 409A Valuation Report Example Actually Contains

A defensible 409A valuation report example always contains eight core sections. Each has a specific role in supporting the concluded fair market value per common share and in creating the documentation the IRS expects when safe harbor is claimed under the independent appraisal method.

A 409A valuation report example that omits any of these eight sections is structurally weaker than one that includes all of them. The rest of this article walks through each section in order, explaining what to read, what to verify, and what would make a tax lawyer or IRS agent flag an issue.

Section 1: Executive Summary and Fair Market Value Conclusion

The first two to four pages of every 409A valuation report example contain the executive summary -- the part most readers actually open the document to find. This section states the scope of the engagement, the valuation date, the concluded fair market value per common share, and the context for the work (for example, “for the purposes of setting the exercise price of stock options granted on or after February 1, 2026”).

In a strong 409A valuation report example, the executive summary also summarizes the methodology applied, identifies the allocation model used, and notes the DLOM applied. Several specific items must appear in this section:

• The company's legal name and state of incorporation.
• The valuation date (the as-of date of the FMV conclusion).
• The report date (when the report was issued, which must be within 12 months of option grants relying on it).
• The concluded fair market value per common share.
• A statement that the valuation was prepared in accordance with IRC Section 409A and AICPA guidance.
• The appraiser's name and credential.

What to verify: the valuation date is the date options will be priced from, and the concluded FMV per share matches what appears in the body and the appendix. Discrepancies here are rare but material.

Section 2: Company Overview and Business Description

The company overview in a 409A valuation report example describes what the company does, how it makes money, who its customers are, and where it sits in its industry. This narrative is not filler -- it establishes the factual basis for every methodology choice later in the report. A business that sells recurring software subscriptions to enterprises is valued differently from a business that sells hardware with long sales cycles, and that difference needs to be grounded in an accurate description.

This section also contains the cap table snapshot as of the valuation date. A high-quality 409A valuation report example shows the number of shares in each class, the price per share for each preferred round, the liquidation preference (1x or multiple, participating or non-participating), anti-dilution terms, and any special rights (such as pay-to-play provisions or voting thresholds). The cap table in this section must tie exactly to the full schedule in the appendix. For more on how cap table structure drives the outputs, see our article on how your cap table affects your 409A valuation.

What to verify: the company description matches your reality (industry, product, customer type), and the cap table shares and preferences are correct. A single mis-stated liquidation preference can shift the common stock FMV materially.

Section 3: Industry and Economic Analysis

Every serious 409A valuation report example contains a section on industry and macroeconomic conditions as of the valuation date. This section typically covers the relevant sector's growth rate, recent M&A transactions, public market multiples for comparable companies, and the broader funding environment. In a down market, this section will cite declining public comparable multiples and a longer expected time to liquidity; in a hot market, the opposite.

The comparable company set established here -- usually 8 to 15 publicly traded companies in the same industry with similar business models -- feeds into two downstream calculations. First, it provides revenue and EBITDA multiples that support the guideline public company method (if used). Second, it provides the volatility input used in the OPM and DLOM. A 409A valuation report example that pulls volatility from a Russell 3000 average rather than a sector-specific comp set is using a weaker input -- and the methodology section should justify that choice.

What to verify: the comparable companies are genuinely comparable in industry, size, and growth. A sample 409A valuation report that lists mega-cap tech names alongside a seed-stage startup as “comparables” is a red flag.

Section 4: Valuation Methodology and Approach Selection

This section of a 409A valuation report example states which of the three primary approaches -- market, income, or asset -- is used as the primary methodology and why. It also explains which allocation model (OPM, PWERM, current value method, or hybrid) is applied to allocate enterprise value across share classes. A rigorous report explicitly discusses why each approach was considered and what led the appraiser to select the primary method. Our deeper treatment of these choices is in the 409A valuation methodology guide.

Typical combinations in a 409A valuation report example:

• Seed or pre-seed company, no priced round: Asset approach or OPM with guideline public company multiples.
• Seed to Series B with a recent priced round: Market approach (backsolve method) as primary; OPM as allocation model.
• Series C or later, multiple potential exit scenarios: Hybrid method combining OPM (for near-term uncertainty) and PWERM (for specific IPO/M&A scenarios).
• Pre-IPO (S-1 filed or imminent): PWERM with explicit IPO scenario probability and pricing.

What to verify: the methodology matches your stage and circumstances. If your most recent round was 18 months ago, the backsolve method may not be the best primary -- income or market approach via guideline public companies may be stronger.

Section 5: Enterprise Value Calculation and Supporting Exhibits

This is the most numerically dense section of a 409A valuation report example. It contains the math that supports the total equity value used in the allocation model. For a backsolve method, this section shows the iterative process of solving for the enterprise value that produces the Series A (or most recent) preferred price per share. For a DCF, it shows the multi-year projections, terminal value, discount rate, and present value calculations. For a guideline public company method, it shows the selected multiples and the per-comparable calculations.

A well-constructed 409A valuation report example uses at least two methods here -- primary and corroborating -- so the reader can see whether the conclusions are consistent. A Series A backsolve that produces an $85 million enterprise value should not appear alongside a guideline public company analysis that implies a $40 million enterprise value without a written reconciliation explaining the difference.

What to verify: every input has a cited source. The risk-free rate is a specific Treasury yield on a specific date. The volatility is a median or mean of named comparables. The projections match the financial schedule the company provided. No number should appear without traceability.

Section 6: Allocation to Common Stock (OPM / PWERM)

After the enterprise value is established, the 409A valuation report example allocates that value across share classes. For most Series A through Series C companies, this is done via the Option Pricing Model (OPM). For later-stage companies with identifiable exit scenarios, a PWERM or hybrid OPM/PWERM is typically used. The allocation section is where the common stock actually gets valued -- and it is the section most frequently scrutinized in IRS audits and M&A due diligence.

A robust OPM allocation section of a 409A valuation report example includes:

• A complete list of breakpoints (the equity values at which payoffs to classes change), derived from the liquidation preferences and conversion rights in the cap table.
• The Black-Scholes inputs: volatility, time to liquidity, risk-free rate, and dividend yield, each with a documented source.
• The tranched option value at each breakpoint.
• The allocation of each tranche to each share class based on that class's claim between breakpoints.
• The summed per-share value for each class, pre-DLOM.

A PWERM section adds explicit future scenarios (IPO, M&A at various valuations, dissolution) with probabilities, exit values, and per-share distributions in each. For a walkthrough of how OPM works mechanically, see our article on the Option Pricing Model (OPM).

What to verify: breakpoints are complete (including pay-to-play and participation features), inputs are sourced, and the per-share output for the preferred class used in the backsolve matches the actual round price paid.

Section 7: Discount for Lack of Marketability (DLOM)

The DLOM section of a 409A valuation report example applies the illiquidity discount to the pre-DLOM common stock value. A strong DLOM section uses at least two quantitative methods -- typically protective put (Black-Scholes-based) and Finnerty average-strike option -- and reconciles them to a concluded discount. Restricted stock studies and IPO studies can be referenced as qualitative cross-checks but are rarely used as the primary basis for a 409A DLOM today.

The DLOM magnitude in a 409A valuation report example is stage- and fact-dependent. Typical ranges:

A DLOM that falls outside the typical range for the stage should be explained in the report. An unusually low DLOM at Series A (say, 5%) could be a red flag in an IRS audit, because it understates the friction a common stockholder faces in selling private shares -- and produces a higher common stock FMV than the evidence supports.

What to verify: the DLOM method, inputs, and magnitude are disclosed and justified. A DLOM stated as a single number with no supporting calculation is the weakest possible version of this section.

Section 8: Appendices, Data Sources, and Appraiser Certification

The back of a 409A valuation report example contains the reference material that auditors and IRS agents actually scrutinize when they question the headline numbers. Standard appendices include:

• Full cap table detail. Share-by-share breakdown with holder-level grants collapsed into class totals.
• Financial statements or projections. Often three years of historicals and three to five years of projections.
• Guideline public company list. Each comparable with trading data, growth, and multiples as of the valuation date.
• Comparable transaction list. Recent M&A transactions used for corroboration.
• Data source citations. Bloomberg, Capital IQ, PitchBook, Treasury.gov, and similar cited for each market data point.
• Qualified appraiser certification. A signed statement identifying the appraiser, listing credentials (ASA, ABV, CVA, CEIV, or equivalent) and relevant experience, and certifying independence and compliance with applicable professional standards.

The appraiser certification is not optional. Under Treas. Reg. § 1.409A-1(b)(5)(iv)(B)(2), safe harbor under the independent appraisal method requires a qualified appraiser to have performed the valuation. For the underlying framework protecting the company and its employees from the 20% penalty tax, see our complete guide to the 409A safe harbor.

How to Read and Verify a 409A Valuation Report Example

Reading a 409A valuation report example with the right checklist in hand takes 20 to 40 minutes and surfaces almost every issue worth raising with your appraiser. Use this sequence the first time you receive a draft report:

1. Check the dates. The valuation date is the date from which safe harbor runs; the report date is when the report was issued. Neither can be more than 12 months before any option grant relying on the report.
2. Verify the cap table. Match share counts, preferred prices, and liquidation preferences against your company's stock ledger and most recent term sheet. Errors here cascade.
3. Read the methodology justification. The chosen approach and allocation model should explicitly match your company's stage, recent transaction history, and complexity.
4. Check the OPM inputs. Volatility, time to liquidity, and risk-free rate each need a source. Volatility should come from a sector comparable set, not a generic market index.
5. Reconcile the backsolve. If backsolve is used, the OPM per-share value for the most recent preferred class should tie exactly to the actual round price paid.
6. Read the DLOM section. The discount magnitude should sit in the typical range for your stage, and the calculation should be shown -- not just stated.
7. Confirm appraiser credentials. The certification section should name the appraiser, state their credentials, and certify their independence and compliance with applicable standards.
8. Sanity-check the final FMV. For a standard 1x non-participating preferred structure, common stock FMV should typically be 15-40% of preferred at Series A, and 25-60% at Series B-C. Numbers far outside these ranges should be explained.

A 409A valuation report example that survives this checklist is defensible under audit. One that fails multiple items should be escalated to the provider for revision before it is relied on for option grants.

Conclusion: Use the Report Example, Do Not Copy It

A 409A valuation report example is a reference document for understanding the structure and quality of what you pay for. It is not a template you can adapt to your company's situation, and it cannot create safe harbor protection. Under IRC Section 409A, the qualified appraiser's independent analysis of your actual facts is what produces the safe harbor -- the structure of the report is simply the evidence that the analysis was done.

Reading an annotated 409A valuation report example gives you the framework to evaluate your own provider's work. If every section is present, every input is sourced, every methodology choice is justified, and the appraiser's certification identifies a credentialed professional, you have a report that will defend your strike price under scrutiny. For the full founder-focused treatment of when the report matters and how it ties into your broader compliance picture, see our 409A valuation for startups guide.