Material Transactions (409A)

Material Transactions for purposes of a Section 409A valuation include:

  • Signing a term sheet for or closing a material capital raise (equity, SAFE, debt, etc.);
  • Receiving a term sheet for an acquisition (unsolicited or solicited);
  • Launching a new product;
  • Executing a material contract;
  • Making material changes in a revenue forecast or other operational metrics (e.g., Daily Active Users);
  • Obtaining a major customer;
  • Completing secondary sale transactions, in some cases;
  • Closing a strategic transaction (e.g., acquisition, joint venture); or
  • Any other change to the assumptions on which the valuation firm relied in drafting the previous 409A report.

Note that even rejected offers or abandoned transactions can be material enough to move the needle to qualify as a material transaction.