A 409A valuation is an independent appraisal of a private company's common stock. Its job is narrow and important: to set the fair market value that becomes the strike price for employee stock options, in a way the IRS will accept.
The IRS does not want companies handing employees options priced below fair value, which would be untaxed compensation. Section 409A of the tax code requires that options be granted at or above fair market value, and a qualified independent 409A valuation gives the company a safe harbor: a presumption the price was reasonable, which protects employees from nasty tax penalties later.
A common point of confusion: the 409A value of common stock is usually well below the price investors just paid for preferred stock in a round. That is expected, not a mistake. Preferred stock carries rights, like liquidation preferences, that common stock lacks, so common is worth less. The gap between the two is normal and is part of what makes early options valuable.
A 409A is generally refreshed at least every twelve months, and also after a material event like a new financing round, because a stale valuation loses its safe harbor. Founders should treat it as routine maintenance, not a one-time task. This is general information, not tax or legal advice; work with a qualified provider and your advisors.
An independent price the IRS will accept.