Guide
How Private Valuations Work
What a private valuation actually measures, why secondary marks diverge from it, how 409A differs from the preferred price, and what a down round does to your position.
A headline like "OpenAI at $852 billion" is doing less work than it appears to. It describes one negotiated transaction, on one date, for one class of shares, with rights that most holders do not have.
What a Valuation Actually Is
A private valuation is the output of a single negotiation. An investor agreed to pay a price per share for a specific number of newly issued shares; multiply that price by the fully diluted share count and you get the headline number.
It is a point, not a range.
Nothing marks the company between rounds. A valuation set in December is quoted in July as though it were current. It is not current; it is December's number, still being repeated.
It measures the preferred class, not yours.
Late-stage rounds buy preferred shares carrying liquidation preferences, anti-dilution ratchets, board seats, information rights, and sometimes guaranteed returns. Applying the preferred price to common shares overstates common value, sometimes dramatically.
It is not a market price.
A market price is what a liquid, continuous, two-sided market clears at. A private valuation is what one buyer paid one seller once. The gap between those two things is the entire subject of this page.
Why the Number Moves Without the Business Moving
Kraken raised $800 million in November 2025 at a $20 billion valuation. In April 2026, a Deutsche Börse secondary investment implied $13.3 billion — a 34 percent decline. [MAY-26] The business did not change by a third in five months. The negotiation did.
Valuations move for reasons unrelated to operating performance:
- Round structure. A round with heavy investor protections can support a higher headline number than a clean round at the same underlying value. The number went up; what you own did not.
- Deliberate resets. Kraken's reset to $13.3 billion was described as a pricing strategy intended to leave aftermarket upside ahead of a listing. Companies sometimes mark themselves down on purpose.
- Comparable compression. The February 2026 selloff erased roughly $800 billion in SaaS market capitalization. Private marks that referenced those comparables became stale instantly, but did not reprice until the next round.
- Who was buying. A strategic investor with a commercial reason to be on the cap table will pay more than a financial investor. Their price becomes the company's valuation anyway.
Secondary Marks vs. Primary Marks
Secondary marketplaces publish indicative bid/ask ranges based on completed and attempted transactions. These are reference points reflecting thin volume — not quotes, and not a share price in the sense a public ticker provides.
Below the primary mark (usually)
Secondary buyers get common stock without preferred protections, cannot force a liquidity event, and are paying for illiquidity. A 20 to 30 percent discount to the last primary round is typical and reasonable. Buyers paying at or above the primary mark are taking extra risk without extra return.
Above the primary mark (occasionally)
Anthropic's secondary activity on Forge Global has implied valuations approaching $1 trillion against a reported primary raise at roughly $900 billion. [MAY-26] When secondary trades above primary, it usually means the primary mark is stale and the market expects the next round higher.
Either way, thin volume means a handful of transactions can set the visible range. Treat indicative pricing as directional information, not as a valuation.
The 409A Valuation
There is a second number, and confusing it with the first is expensive.
A 409A valuation is an independent appraisal of a company's common stock, performed for tax purposes to set option strike prices.
It is generally substantially lower than the preferred price from the most recent round — often 20 to 50 percent lower — because it values common shares without preferred rights and applies discounts for illiquidity and lack of control.
Two mistakes follow from mixing them up:
1. Employees who think their equity is worth the preferred price. It usually isn't, and the 409A is closer to what a secondary buyer would actually pay.
2. Employees who think the 409A is the ceiling. It isn't, and accepting a tender or secondary offer at the 409A when the preferred mark is materially higher leaves money behind.
Down Rounds and What They Do to You
A down round is a new round priced below the previous one. The valuation falls, but the damage is rarely proportional.
Anti-dilution provisions
These protect earlier preferred holders by adjusting their conversion ratios, which means the dilution lands disproportionately on common holders and on any investor without those protections. Your percentage ownership can fall by more than the valuation did.
Liquidation preferences stack
Each round typically carries a preference entitling that investor to their money back before common holders receive anything. After several rounds, the preference stack can exceed a realistic exit value — in which case common shares are worth nothing at any exit price below the stack.
The public market version
This is the down-round IPO. Shein illustrates it: $100 billion peak in 2022, $66 billion in 2023, and current estimates of $30 to 50 billion for the Hong Kong listing. [MAY-26] Anyone who bought a secondary position at the 2022 mark is looking at a listing that prices well below their entry.
Plaid is a similar shape — a $6.1 billion target against a $13.4 billion 2021 peak, a 54 percent reset. [MAY-26]
How to Read a Valuation
Before you use a number, establish:
- When was it set? A mark older than twelve months is history, not information.
- Primary or secondary? They measure different things.
- What class? Preferred with protections, or common without?
- What was the round structure? Heavy protections inflate the headline.
- What is the preference stack? How much has to be paid out before common sees anything?
- What is the 409A, and when was it last set?