409A, Option Grants and Cap Table Cleanup Before a US Fundraise

TL;DR

• Before fundraising, reconcile issued shares, SAFEs/notes, option grants and the current option pool against the legal record.
• Keep 409A valuation reports and equity-grant records organized where they are relevant to option pricing history.
• Fix unsigned grants, missing approvals and cap-table mismatches before institutional diligence starts.
• Use qualified tax and legal advisers for 409A and equity matters.

Why equity cleanup belongs in fundraising preparation

Institutional investors need confidence that the company knows who owns what and that equity was issued through a defensible process. Small recordkeeping problems become larger when a financing depends on an accurate fully diluted cap table.

Step-by-step workflow

1. Reconcile the cap table

Compare the cap-table system against executed stock, SAFE, note and option documents.

2. Review option grants

Confirm approvals, grant agreements, vesting terms and exercise prices are documented.

3. Organize 409A history

Keep valuation reports and the board actions tied to option-pricing decisions.

4. Review the option pool

Understand granted, vested, exercised, cancelled and remaining shares.

5. Model the new round

Show pre-money and post-money ownership under the expected financing.

6. Resolve discrepancies

Work with qualified counsel and tax advisers before the issue reaches investor diligence.

Documents and evidence to prepare

• Current fully diluted cap table.
• Executed stock purchase and financing documents.
• Option-plan documents and individual grant records.
• Board approvals for equity grants.
• 409A valuation reports where applicable.
• Scenario model for the new financing.

Related SendNow resource: investor readiness data room.

Common mistakes

• Using an outdated cap table during fundraising.
• Treating approved-but-unsigned grants as fully resolved.
• Losing the historical link between valuation, board approval and grant date.
• Trying to correct equity issues without professional advice.

External reference: IRS Section 409A overview. This article is educational, not legal or tax advice.

See the VDR and Microsite workflow

Frequently asked questions

What is a 409A valuation?

A 409A valuation is commonly used in the US to support fair-market-value decisions for private-company common stock in connection with certain compensation arrangements. Get qualified advice for your situation.

Why does it matter in fundraising?

Investors may review equity history, option grants and ownership records as part of diligence.

What should be reconciled before the round?

Issued shares, SAFEs/notes, option grants, cancellations, exercises, pool size and the legal documents supporting those records.

Keep the financing process organized

Use SendNow Microsites for the multi-file investor stage while qualified counsel handles the legal structure.