Series B 409A Valuation

Series B 409A valuations use comprehensive Probability-Weighted Expected Return Method (PWERM) modeling across multiple exit scenarios — IPO, M&A, and continued private operation — to determine common stock FMV. The complexity of your cap table and the sophistication of the analysis increases significantly at this stage.

Published April 20, 2026

3 min read

Key Takeaways

PWERM models multiple exit scenarios including IPO, M&A, and secondary

Scenario probabilities are assigned based on market conditions and company trajectory

International benchmarking is used for companies with global operations

Big 4 audit packages include full PWERM workpapers and assumption documentation

Series B valuations often need to support secondary transactions and tender offers

A dedicated analyst is typically assigned to manage the engagement

Series B 409A: Full PWERM Analysis

By Series B, your company has meaningful ARR, a proven business model, and is typically 2–3 years away from a potential liquidity event. This trajectory makes the Probability-Weighted Expected Return Method (PWERM) the most appropriate valuation approach.

How PWERM Works

PWERM values your common stock by modeling multiple future scenarios and assigning probabilities to each:

IPO Scenario: Assumes the company goes public within 2–4 years. Value is based on projected public market valuation at IPO, discounted back to present value and allocated to common using OPM
Strategic M&A Scenario: Assumes acquisition at a revenue or EBITDA multiple. Value is determined by comparable M&A transactions and discounted back
Financial Sponsor (PE) Scenario: Models a private equity buyout or recap at relevant buyout multiples
Continued Private / Wind-Down: Assigns residual value if none of the above scenarios materializes

The probability-weighted average of common stock value across all scenarios produces the concluded FMV.

Secondary Transactions and Tender Offers

Many Series B companies facilitate secondary transactions where early employees or investors sell shares. These transactions have important implications for the 409A:

Secondary transaction prices can be evidence of FMV and may influence the 409A
If secondaries are occurring at prices significantly different from the 409A, auditors will scrutinize the disconnect
Tender offer prices set by the company must be defensible relative to the current 409A

International Operations

If your company has significant international operations or revenue, the Series B valuation should incorporate international benchmarking — comparable companies in your primary markets, adjusted for country risk premiums and local market conditions.