In this episode, Hall welcomes Martin Mulvihill of Safer Made, a VC firm specializing in early-stage companies that bring safer products and technologies to market and protect our health and the natural world. With a background in chemistry, Martin has brought his passion for sustainable, environment-friendly chemistry to investing.

For prospective investors in the health and wellness sector, Martin advises getting to know the leaders in the space. Martin also emphasizes the need to understand, at a high level, each of the product components. This might include branding, food packaging, formulated goods, and more. For founders, Martin talks about how they must have a clear idea about things like inventory management, channel approach, and supply chain. When looking at potential investments, Safer Made focuses on companies with a competitive advantage in terms of their product, and a consumer-targeted approach. Martin elaborates on their investment thesis and highlights how the challenges can vary widely depending on the specific product being made. Martin also highlights the packaging sector as a particularly robust area with room for growth.

As soon as your startup establishes a stock incentive plan and issues stock options to employees or other stakeholders, it’s time to work on a 409A valuation.

This is a valuation of your startup for assigning a cost basis to the stock options.

The U.S. tax code in section 409A requires private companies to show that their common stock options are issued at fair market value.

This is similar to the property tax on your house in which the government assigns a valuation to your house for tax purposes.

The 409A valuation does not mean your firm is actually worth that valuation. It’s only used to calculate your taxes.

The market value goes up and down based on the state of the market and what value you have built into the business which increases every day for some companies.

Employees, founders, and other investors are taxed on the value of the stock options they own and to avoid potential tax penalties, the startup must get a formal valuation opinion at least once every 12 months.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today!