[beambot]

I believe it depends on how they raised the seed round. If it's $2M in debt (with a $6M cap), then technically the value of the company has not been determined yet -- and won't be until there is a proper priced round. This affords them some flexibility... but they still need to determine the Fair Market Value of the options.

[throwaway1124]

Even if they raised a convertible note or pure debt (which is atypical of a First Round Capital led round), it is unlikely that their 409A led to an extremely low FMV. Even a company that raises $2M in debt at a $6M cap would likely have a common share valuation over $500K.

Source: I'm a previous founder of a startup that raised a $1.5M convertible note and have done a 409A valuation based on it.