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:

• Dr. Jeremy Weisz on LinkedIn
• Rise25  
• Email the team at Rise25: support@rise25.com
• Tomas Milar on LinkedIn
• Eqvista 
• Eqvista Pricing 
• Eqvista 409A Valuation Services
• Eqvista 409A Report Example
• 409A tax code
• What Is a 409A Valuation? Startup Founder Guide With Tomas Milar
• “[SaaS Series] From Rejected Intern To Acquiring the Company With Tomas Milar” on the Inspired Insider Podcast

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

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

Sponsor for this episode…

At Rise25 we help B2B businesses give to and connect to your ‘Dream 200’ relationships and partnerships.

We help you cultivate amazing relationships in 2 ways.

#1 Podcasting

#2 Strategic Gifting

#1 Our Predictable Podcast ROI Program

At Rise25, we’re committed to helping you connect with your Dream 200 referral partners, clients, and strategic partners through our done-for-you podcast solution.

We’re a professional podcast production agency that makes creating a podcast effortless. Since 2009, our proven system has helped thousands of B2B businesses build strong relationships with referral partners, clients, and audiences without doing the hard work.

What do you need to start a podcast?

When you use our proven system, all you need is an idea and a voice. We handle the strategy, production, and distribution – you just need to show up and talk.

The Rise25 podcasting solution is designed to help you build a profitable podcast. This requires a specific strategy, and we’ve got that down pat. We focus on making sure you have a direct path to ROI, which is the most important component. Plus, our podcast production company takes any heavy lifting of production and distribution off your plate.

We make distribution easy.

We’ll distribute each episode across more than 11 unique channels, including iTunes, Spotify, and Amazon Podcasts. We’ll also create copy for each episode and promote your show across social media.

Cofounders Dr. Jeremy Weisz and John Corcoran credit podcasting as being the best thing they have ever done for their businesses. Podcasting connected them with the founders/CEOs of P90x, Atari, Einstein Bagels, Mattel, Rx Bars, YPO, EO, Lending Tree, FreshBooks, and many more.

The relationships you form through podcasting run deep. Jeremy and John became business partners through podcasting. They have even gone on family vacations and attended weddings of guests who have been on the podcast.

Podcast production has a lot of moving parts and is a big commitment on our end; we only want to work with people who are committed to their business and to cultivating amazing relationships.

Are you considering launching a podcast to acquire partnerships, clients, and referrals? Would you like to work with a podcast agency that wants you to win?

Rise25 Cofounders, Dr. Jeremy Weisz and John Corcoran, have been podcasting and advising about podcasting since 2008.

#2 Our Comprehensive Corporate Gifting Program

Elevate business relationships with customers, partners, staff, and prospects through gifting.

At Rise25, thoughtful and consistent gifting is a key component of staying top of mind and helps build lasting business relationships. Our corporate gift program is designed to simplify your process by delivering a full-service corporate gifting program — from sourcing and hand selecting the best gifts to expert packaging, custom branding, reliable shipping, and personalized messaging on your branded stationary.

Our done-for-you corporate gifting service ensures that your referral partners, prospects, and clients receive personalized touchpoints that enhance your business gifting efforts and provide a refined executive gifting experience. Whether you’re looking to impress key stakeholders or boost client loyalty, our comprehensive approach makes it easy and affordable.

Discover how Rise25’s personalized corporate gifting program can help you create lasting impressions. Get started today and experience the difference a strategic gifting approach can make.

Email us through our contact form.

You can learn more and watch a video on how it works here: https://rise25.com/giftprogram/

Contact us now at support@rise25.com or message us here https://rise25.com/contact/

Powered by Rise25 Podcast Production Company

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]