What Is a 409A Valuation? Startup Founder Guide With Tomas Milar, Founder and CEO of Eqvista

Tomas Milar is the Founder and CEO of Eqvista, an equity management and valuation platform for private companies. He heads the leadership team in steering the company as it provides services for cap table management, digital share issuance, transaction tracking, fundraising modeling, and real-time 409A valuations. Founded in 2018, Eqvista has served over 25,000 companies, covering approximately $4 trillion in company value, and is recognized as one of the fastest-growing fintech solutions for startup equity and valuation. Beyond Eqvista, Tomas has launched multiple successful ventures including the neobank Cheqly and Startupr, and is known for his expertise in building financial infrastructure that simplifies equity and compliance for startups.

Here’s a glimpse of what you’ll learn:

[03:40] Tomas Milar explains 409A valuation as an appraisal of the fair market value of a company’s common stock
[04:26] Why 409A valuations differ from investor-led preferred stock valuations
[05:13] The IRS compliance reason founders need 409A valuations
[06:04] How revenue growth affects common stock pricing and valuation timing
[07:05] The events that trigger a new 409A valuation during the year
[10:38] Why unrealistic or indefensible stock prices create compliance risk
[15:41] How quickly Eqvista can complete a 409A valuation, with typical turnaround in a couple of days or as fast as same-day
[19:10] Why founders want the lowest defensible common stock price for equity incentives

In this episode…

Startup equity can be one of the most powerful tools for attracting talent, rewarding early contributors, and building long-term company value. Yet many founders underestimate the compliance requirements behind issuing stock options, especially when common stock must be priced in a way that can withstand IRS scrutiny. How can founders use 409A valuations to protect their companies, employees, and future exits?

According to Tomas Milar, who leads equity management and valuation services for Eqvista, a 409A valuation gives private companies a defensible fair market value for common stock. He explains that founders need this valuation when issuing stock to founders or employees, creating employee stock option plans, raising new funding, or experiencing major liquidity or business events. Tomas also emphasizes that the goal is not to invent the lowest possible number, but to establish the lowest defensible price supported by a professional valuation report, ongoing documentation, and audit-ready reasoning.

On this episode of the Top Business Leaders Show, Dr. Jeremy Weisz welcomes Tomas Milar, Founder and CEO of Eqvista, to discuss 409A valuations and startup equity compliance. Tomas demystifies 409A valuation, why it differs from fundraising valuations, and how it impacts stock option issuance. He also discusses common founder misconceptions, the regulatory importance of accurate pricing, and how founders can protect their companies while building long-term equity value.

Resources mentioned in this episode:

Quotable Moments

“A 409A valuation is an appraisal of your common stock, giving founders a defensible fair market value.”
“Founders should care about 409A valuations because they do not want penalties from the IRS.”
“The goal is not the lowest possible number; the goal is a defensible number.”
“If you skip the valuation, due diligence can expose years of missing compliance work.”
“Equity may be the most important stake in your company and in your life.”

Action Steps

Get a 409A valuation before issuing stock options: Do not rely on guesses when pricing common stock for employees, founders, or option grants.
Refresh valuations after major company events: Update your 409A after fundraising, hiring, creating an option plan, issuing new options, or reaching a liquidity event.
Keep valuation documentation audit-ready: Maintain reports and reasoning that can support your stock price during due diligence, audits, or IRS review.
Separate common stock from preferred stock thinking: Understand that 409A valuations price common stock, while investors typically determine preferred stock pricing during financing rounds.
Aim for the lowest defensible price: Use professional support to set a fair, supportable common stock value that helps employees participate in future upside.

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Episode Transcript

Intro: 00:04

Welcome to the Top Business Leaders Show powered by Rise25 media. We feature top founders, executives, and business leaders from all over the world.

Dr. Jeremy Weisz: 00:20

Dr. Jeremy Weisz here, co-host of the Top Business Leaders Show, where we feature CEOs, entrepreneurs, and top leaders in the business world. This episode is brought to you by Rise25. We help B2B businesses reach their dream relationships and connect with more clients, referrals, and strategic partnerships and get ROI through done-for-you podcasts. If you have a B2B business and want to build great relationships, there is no better way than to profile the people and companies you admire on your podcast. To learn more, go to rise25.com or email us at support@rise25.com.

In this special edition of the show, I will discuss. 409A valuations and startup equity compliance with Tomas Milar. Tomas is founder and CEO of Eqvista, where he leads equity management and valuation services. Tomas has launched multiple successful ventures and is known for his expertise in building financial infrastructure that simplifies equity and compliance for startups.

Tomas Milar: 01:22

If you are a startup and you give stock options to your employees, or even you distribute stocks to founders, there’s a very good chance you legally need something called a 409A valuation. Most founders don’t really understand what it is because it’s a fancy, fancy word and not that very usual. But 409A valuation is mostly needed when you issue stocks to founders and employees. And we are here with Jeremy Weisz to interview so we can break down exactly what a 409A valuation is, why startups need it, how much it costs, and the biggest mistake founders make.

Dr. Jeremy Weisz: 02:10

You know, Tomas, first of all, thanks for having me. I know you get a lot of questions on what is a 409A valuation. And like you said, okay, let’s do a startup founder guide of this. Right? And so first off, Tomas, you’re the founder of Eqvista, and I know you power over 23,000 companies and $270 billion in equity.

And I’d love for you to tell people a little bit about Eqvista first before we get into everything and the kind of companies you help. And as you do that, Tomas, I’m going to share the website so people can check it out.

Tomas Milar: 02:47

Oh, yeah. Perfect. Absolutely. We help startups manage cap tables, equity and process or produce 409A valuations. So we work with multiple startups regardless of the company size. So we can serve small and medium enterprises. We have also a few unicorns. Our smallest valuation was a couple hundred thousand dollars all the way to $1,000,000,000, 23-24 billion dollar unicorns.

Dr. Jeremy Weisz: 03:21

Yeah. And people could check out we’re right here at Eqvista.com and there’s a lot of different products. But really, I know we’re going to dig deep on the 409A valuation. So just let’s start simple. And what exactly is a 409A valuation?

Tomas Milar: 03:40

Jeremy, absolutely. It’s actually an appraisal of your common stocks. So when you issue stocks to again employees or founders, you should have a 409A valuation. So it gives a price to common stocks. And it’s a fair market value. There’s actually a difference between the common stocks and the preferred stocks. The common stocks is again for common stocks the 409A is for common stocks and fair market value. Preferred stocks, it’s something about the investors setup.

Dr. Jeremy Weisz: 04:18

So this isn’t the same thing as a valuation for founders like after a fundraising round?

Tomas Milar: 04:26

Correct. It’s actually for the for again, it’s actually for common stocks and the appraisal of the preferred stocks. That’s something what usually the investors and the founders agree on. So that’s very important to understand that there is a big difference. 409A typically values the company stocks on the lower lower range. So we use a discounted cash flow for lack of marketability is one of the examples and the preferred stocks, it can be any number practically anything with the investors is willing to pay.

Dr. Jeremy Weisz: 05:04

So why I mean this is the question, you know, founders I know ask you and they’re thinking about is why should foundries even actually care about this in the first place?

Tomas Milar: 05:13

You know, you don’t want to be penalized by the IRS, right?

Dr. Jeremy Weisz: 05:18

That’s a good reason.

Tomas Milar: 05:18

That’s the only reason why you need a 409A valuation. Actually, a 409A valuation is actually a tax code. IRS tax code. And there’s the reason why we have a 409A valuation name for it. So it’s a completely different valuation than you and the investor agree on. So IRS came up with a strategy and say, you know, guys, you know what, let’s not cheat on the stock’s price and give a proper stock price to the common stocks.

Dr. Jeremy Weisz: 05:53

So you know, obviously this directly, you know, impact stock options and compliance. And can you maybe give an example?

Tomas Milar: 06:04

Yeah sure. Of course. So you know, the example is very simple. So you have a revenue company, 300K – $500,000. It’s a significant increase from zero, right? So you should have a 409A valuation done at least once, once, once a year, or if there is any significant event, we can get to that later. But you don’t issue stocks based on a guess. You come to us, we give you the stock price again for a half million dollar revenue company, the stock price can be, let’s say $0.50, you will receive a certificate or a report which will actually tells you what the stock’s price is.

Dr. Jeremy Weisz: 06:58

So what usually triggers founders realizing they actually need one?

Tomas Milar: 07:05

Yeah. So we have multiple reasons why you need one or what are the usual cases. So one of them is at least you should do it once a year. Or if you just raised or raising new new funding, or you just hired new employees or you just created new employee stock option plans, or you are issuing new stock stock options, or you have a new, any, any type of liquidity event. So that’s the reason why you need a 409A valuation. So it’s not just once a year, but it can be even though multiple times during the year.

Dr. Jeremy Weisz: 07:48

Yeah, I’m on your page here, Tomas and we’re looking at here and I was scrolling down, I saw obviously people, if they want to check it out, they can go to Eqvista.com and then you can go to the 409A valuation where I’m at, but I do. There’s some good instructive items on here, but I could see like what you’re saying with these different events, right? So you can see there’s a startup pre-revenue. Do you want to talk through some of these that I’m looking at here?

Tomas Milar: 08:13

Yes, yes, definitely. So our pricing is very, very founder friendly. So we start at $990. That’s typically a pre-revenue company. You know, you don’t really have much money at the start. So we came up with a package $990. Then we moved to a little funding, little revenue. So we have friends and families, angels and obviously seed round. Then we have a series A and series B, we give a cap table for free with the packages. And the reason is that, you know, capital will become a commodity. So we focus on pricing discovery. So that’s the reason why our pricing is actually so reasonable.

Dr. Jeremy Weisz: 09:05

Yeah, I consider all of them actually pretty reasonable. They don’t step up that much with the different funding rounds. I do want to talk about common mistakes people make. So what are some of the biggest mistakes you see founders making with this?

[Continue to Page 2]

Tomas Milar: 09:20

You know, they just forget about doing 409A valuation in general. So, you know, we have cases where founders came back horrified saying like, hey, we haven’t really done any 409A valuation. What can we do? So we would have to go retrospectively three, 4 or 5 years back. And we redone the pricing discovery of the common stocks. And that’s actually quite bad, you know, for multiple reasons. One of them is that if you undergo any due diligence, it doesn’t look good that, you know, you haven’t done one of the most important compliant, I think, or item on your checklist. And obviously, again, IRS, they can come in and ask you, hey guys, you know, how did you land on that particular number? What was the reason behind the stock price? The common stock price? You have just put on your stock certificate. So that’s why you need to have an audit, defensible audit, defensible valuation.

Dr. Jeremy Weisz: 10:27

So one is just not doing it. Yes.

Tomas Milar: 10:31

Yes, yes. That’s negligence.

Dr. Jeremy Weisz: 10:32

And another one you were saying before we hit record about, talk about unrealistic numbers.

Tomas Milar: 10:38

Yes, yes. So those are multiple multiple cases where founders or actually back then it was Enron case they gave to management stocks for free. Practically the value was, the face value was zero. So that’s how they were actually cheating the system. But you know, the jobs act came back. It was 2010 and they fixed that with the 409A tax code.

Dr. Jeremy Weisz: 11:17

Yeah. So it’s really not, you know, the lowest possible valuation. It’s basically what the lowest it’s got to be defensible with the IRS guidelines essentially.

Tomas Milar: 11:29

Yeah. So you know, so the goal is always to be defensible, right? So if the IRS comes back and have a question, right. Not necessarily during the lifetime of the company, but what can happen is that employees will at some point pay taxes on the stocks, right on the income, capital gain. And the IRS would like to know what was the cost, the purchase price of this stock.

So the 409A valuation, going back to your question, Jeremy, has to be defensible, not just for in front of the IRS, but also before companies, you know, PricewaterhouseCoopers, they can also come back and say like, hey, guys, you know, like this doesn’t really match redo the 409A.

Dr. Jeremy Weisz: 12:21

You know, you mentioned about penalty penalties, right? Can you talk about what happens if founders skip this altogether? What are some of the issues that could come about? You talked about employees for a second.

Tomas Milar: 12:35

Yeah. So again, it’s, it’s, it is just really the, the penalties, you know, what you’re gonna get by the, you know, 20, 30, 40% penalties, whatever the IRS comes up with must be paid. So the way how you prevent from getting fined is the 409A valuation, getting the stock price set properly by the professional firms and somebody who can always defend the valuation. Part of our product or services are the product defensibility in our case, 409A defensibility and ongoing support in case you have auditors or IRS knocking on your door. We are always there to open the door. And that particular company or government body through the reasoning why the price was set up that way.

Dr. Jeremy Weisz: 13:37

It sounds like though, Tomas, the founders could get penalties, but the employees could get penalties too?

Tomas Milar: 13:44

Yes, obviously. Yes, yes, yes, of course, the employees actually are the one who at the end will be fined for misconduct.

Dr. Jeremy Weisz: 13:53

I imagine that would not be good for morale for a company.

Tomas Milar: 12:56

No for morale.

Dr. Jeremy Weisz: 12:57

If it comes back to the employees.

Tomas Milar: 13:59

Yes, obviously the morale and obviously the name of the company. That’s something you would like to definitely defend in case something like this happened. But you can prevent it from getting fined, simply hiring a 409A valuation firm, Eqvista. And we will take care of the process.

Dr. Jeremy Weisz: 14:23

You talked a little bit about the pricing. It seems very reasonable. And this is like at the time we’re recording this. So obviously if you want what it is, you can go to Eqvista.com and go to the 409A valuation. But what’s what’s typical in the industry? Obviously you have packages that seem reasonable, but compared to what. Right.

Tomas Milar: 14:42

Yeah. Definitely. So our pricing is very reasonable. We are 80% less expensive than our competitors. Again, our pricing starts at $990, which is one of the lowest on the market and the only on the market with real time tracking. So if you stop right here, the graph actually explains to you how your stocks are priced. So with the 409A valuation, we add real time company valuation. So you can track the stock price at real time.

Dr. Jeremy Weisz: 15:30

That’s cool. I love that. The next piece really I know you probably get this question a lot is how long does a process usually take?

Tomas Milar: 15:41

We can really get the 409A valuation done in, you know, a couple of hours. So we have cases where a client came to us and asked us, hey guys, I need it today because, you know, that’s the last thing my due diligence was missing. Can you please get it done? So yes, we can do it the same day, but typically a couple of days. It really depends how the client is prepared. But same day can be done.

Dr. Jeremy Weisz: 16:18

And I guess, you know, people ask how Eqvista is different. Obviously, you mentioned the affordability, speed. Any other pieces that we should point out?

Tomas Milar: 16:31

Definitely. So myself, I’m a founder product-focused. So that’s one of the most important things in our company. So we are heavily focused on customer support. Very important. We answer within a few hours or few minutes if necessary. We integrate for 409A valuation with your cap table and we have the most experienced 409A valuation team on the market. So we process something between 5 to $10 billion in client assets every single month, which makes us the largest valuation provider on the market.

Dr. Jeremy Weisz: 17:21

I figured we would show an example, if that’s okay. I’m going to just pull up and maybe you know, talk through a couple of these aspects and why they’re included. Let me pull this up here. Can you talk through this is just a sample report. What are some of the elements that you wanted to make sure to include in this?

Tomas Milar: 17:46

You know, if you look at this report, it’s usually dozens of pages, but you only need this number four. That’s what really makes sense right here. So you can see. Yes, exactly. So it’s $0.08 per stock. So use this price for your common stocks. You can put it on your stock certificate. Or if you use Eqvista, we can help you to issue stocks to your employees and obviously founders. But yeah, that’s pretty much it. This is the 409A valuation report.

Dr. Jeremy Weisz: 18:32

And so this is basically what they will use for their company, their team. And also from like an IRS documentation standpoint?

Tomas Milar: 18:45

Yes. Yes. Exactly. Yes. Exactly. So this is mostly for your data room. But that’s typically what you need when you issue stocks to your companies.

Dr. Jeremy Weisz: 19:03

Tomas, why is it so important to have the lowest defensible amount?

Tomas Milar: 19:10

So the lowest that’s practically how much you or the employees pay. Right. So we obviously want to incentivize your employees to stay longer, to build the product, to believe in the company, because, you know, look at all these IPO companies, right? We have recently SpaceX, we have a multi $100 million net worth individuals, right? Where they purchased the stock exactly for a couple cents, you know, and now all of a sudden they have a nice exit.

Dr. Jeremy Weisz: 19:54

They created a lot of millionaires.

Tomas Milar: 19:56

They created centi-millionaires. Yes.

Dr. Jeremy Weisz: 19:59

Wow. Centi-millionaires. Even better. That’s amazing. You know, first of all, it’s always educational to listen to you. What’s some final advice you have for founders who are watching this?

Tomas Milar: 20:14

You know, I think equity is the most important stake in your life, not just in your company, but in your life in general. So pricing and to understand why your company’s worth is at a certain price, it’s extremely important. So, you know, at the end of the day, the exit, either its IPO or acquisition plays a big role in your net worth at the end of the day. So pricing the stock through 409A, it’s extremely important through the years. So you can actually explain to anybody how the company was growing.

So 409A compliance is extremely important. And when you exit, the difference between the stock price that was your cost and the exit value or the final stock price at exit, that’s practically your income. So the difference is the capital gain. So as low as possible for you. So you don’t get out of pocket as much liquidity or cash as you can. So that’s why you keep it low. And yeah, good luck with the exit. And remember, when you issue stocks either to employees or to your founders.

Dr. Jeremy Weisz: 21:45

If people want to learn more about, you know, 409A valuations, cap table management, or Eqvista in general, where should we point people towards?

Tomas Milar: 21:54

Eqvista.com. E-Q-V-I-S-T-A.com. Thank you. Yes.

Dr. Jeremy Weisz: 21:59

Yeah. Here it is. Eqvista. And then you have a lot of different products. Obviously the 409A valuation right here. So you know Tomas I just want to thank you for sharing this. It’s always great to hear your advice. And this is incredibly helpful, especially one for founders who hear about it constantly but rarely fully understand, you know, this process. So thanks again.

Tomas Milar: 22:28

Thank you so much, Jeremy.

Outro: 22:29

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