I don't know the answer, but doesn't that have to come out in the valuation employees are given? Since there are huge tax penalties both to the employer and the employee for giving in-the-money options, you (in theory) must be given options with a strike set by a 409a evaluation. I think it's best practice to have an arms-length evaluation, since if your cfo sets it and the irs disagrees, see tax penalties. Is this not the state of the world?
Yep. Everyone ponies up and pays the $10k/year for the 409a consultants -- in theory, their calculations to establish the option value takes into account all of the liquidation preferences of preferred shareholders but anyone that's been through it can tell you how arbitrary the 409a's really are.
