Founders and employees confused by the terminology — not asking about cost or timing, but what these two terms actually mean relative to each other.
409A Valuation vs. Fair Market Value: They're Not the Same Thing
One is a process. One is a number. Here's exactly how they relate to each other.
View your latest 409A-derived fair market value alongside your cap table.
These two terms get used interchangeably, which causes real confusion. They're related, but they're not the same thing.
The Method vs. The Output
A 409A valuation is the formal appraisal process — an independent analysis of your company using methods like market comparables, discounted cash flow, or option-pricing models. The fair market value (FMV) is the specific dollar-per-share number that process produces. You don't have "a fair market value" without first running a 409A (or equivalent) process to arrive at it.
Why the Distinction Actually Matters
Your FMV is a snapshot — it's only valid until the next triggering event resets it (a new round, 12 months passing, or a material change). Confusing the two leads people to assume last year's FMV is still accurate simply because "nothing official happened," when in fact the valuation process itself needs to be rerun.
- The 409A is the process; the FMV is the answer — don't conflate them
- An FMV expires the same way a 409A does — they move together
- Quoting an old FMV without a current 409A behind it isn't defensible to the IRS
Frequently Asked Questions
Is my fair market value the same as my 409A valuation?
Not exactly — your FMV is the dollar-per-share number that your 409A valuation process produced. They're tied together: your FMV is only valid as long as the underlying 409A is current, typically up to 12 months or until a triggering event.
- Always check the date the FMV was set, not just the number
- An expired 409A means the FMV attached to it is no longer usable
- Ask your provider for both the report and the specific FMV it produced
Why does my strike price use fair market value instead of the valuation report itself?
The valuation report is the supporting analysis; the strike price is legally required to equal the fair market value figure that report concludes. You use the number, not the full document, when pricing a grant — but you need the report on file to defend that number if challenged.
- Keep the full 409A report on file, not just the FMV figure
- The strike price must match FMV at the time of grant, exactly
- A mismatch between grant date and FMV date is a common compliance gap
The Lovie Advantage
Most cap table tools show you a strike price without making clear which 409A produced it or when that number expires. Internal Link: Lovie Cap Table Management surfaces your current FMV alongside the valuation date it came from, so you always know whether the number you're using is still valid.
Not sure when you're required to refresh this number? See Internal Link: What Is a 409A Valuation, and When Do You Need One for the specific trigger events. For background on valuation methodology, Cornell Law School's Wex legal dictionary is a useful plain-language reference.
See Your Current FMV in Lovie
View your latest 409A-derived fair market value alongside your cap table. Start Free with Lovie