Carta has delivered over 17,000 valuations since entering the 409A market in 2016, and our valuations team has grown to over 50 individuals with a combined valuation experience of over 100 years at major firms including Deloitte, KPMG, EY, Moss Adams, Grant Thornton, and Andersen Tax.
We entered the 409A market believing it was fragmented and burdensome, and over time we identified problems and modernized the process with software. More recently our team has been building an improved and streamlined process for our late-stage clients. Our goal is to ease the burden of annual, semi-annual, or quarterly 409As for late-stage CFOs and VPs of Finance.
Right now, roughly 100 of Carta’s current 409A clients will have access to the improved workflow. A third of those companies are subscribed to semi-annual or quarterly 409As with an expected exit within the next 12 to 24 months. Over half are audited by the Big Four and nearly half have earned “unicorn” status.
Here’s what you can expect with our improved process:
Improved data collection
To begin the 409A engagement, you can log into your Carta account and complete the online request form. We’re currently redesigning the request form for our late-stage clients. This will allow you to be proactive when selecting a valuation date.
The updated request form will ask a short list of questions and require the minimum amount of documentation necessary for our team to prepare for a call. Some information we’ll need:
- Point of contact
- Audit and law firm information
- Historical and forecasted financial statements
- Other important qualitative factors (e.g. LOIs, details about a secondary transaction, etc.)
We won’t require any burdensome details that can be discussed during a call, and your capitalization table and other documents are already tracked on Carta, which allows us to auto-validate that information when you submit your request.
Improved data collection assistance
Completing the request form should be as easy as placing a coffee order; but if you need help, you’ll have a dedicated representative to guide you through the process, and our 409A support team is just an email or phone call away. We will also remind you when it’s time to update your 409A by sending reminders before the 409A is about to expire.
After you submit the request form, we’ll email the 409A point of contact with a link to schedule a call with a dedicated Carta team. This team will work with you throughout the entire Carta 409A process and will stay on the assignment for each valuation moving forward. This will help us streamline the process whenever you need a new Carta 409A.
The initial call with the Carta team will take place as early as one day following submission of the request form. By the day of the call, our team will have reviewed your submission in detail.
The purpose of this call is for you to meet the team, for Carta to receive an update on the business, and for Carta to contextualize the documentation submitted with the request. We’ll discuss your company’s IPO plans, inbound LOIs, performance relative to expectations, financial statements and assumptions in your company’s projections, risks and changes to the business, recent or imminent funding rounds, and secondary transactions. We’ll also use this call to set expectations for the deliverable.
The goal of the request form paired with a review call is to minimize multiple calls and/or emails during data collection and verification. Again, we want to make the Carta 409A process as easy as possible for late-stage CFOs and VPs of Finance. The call should take less than an hour, and we recommend including any individual at the company necessary to address the topics outlined above.
Carta will finish the analysis after the initial call and deliver a draft report within 5-10 business days following the latter of (a) the valuation date, (b) the request form submission date, or (c) the date of the initial call. Our team will reach out to your company’s point of contact with questions and/or updates as we work through the analysis.
How can we deliver a report so quickly? We’ve significantly refined our proprietary valuation software since creating it in 2016, and we’ve integrated health checks, modules for conducting sensitivity analysis, and an easy-to-use report editor for company-specific customization. Also, with over 100 years of combined valuation experience, we’re very good at what we do.
Improved deliverable and review
Once complete, you can download the PDF draft report through your Carta account. Your dedicated Carta team will be available to answer questions, discuss key inputs and assumptions, and receive suggestions for revision.
For late-stage companies, we provide a differentiated report that includes additional qualitative and quantitative information to support the analysis through board review and audit.
Improved audit process
Once you’ve approved the valuation report, we’ll support you throughout the 409A audit process. Over half of our late-stage clients are audited by the Big Four, and we’re working on a number of features and processes to make the audit process more streamlined—stay tuned.
Improved analysis for IPO and acquisition
One third of our late-stage clients expect to exit via an IPO or acquisition within the next 12 to 24 months. Under those circumstances, our team will consider the Probability Weighted Expected Return Method (“PWERM”) for the company’s 409A. The PWERM places discrete weightings on one or several exit scenarios discussed in detail with management, and has been integrated into our software for enhanced turnaround time.
Carta will also consider all methodologies accepted by the AICPA Practice Aid, IRS, and SEC.
If your company is expecting a complex exit scenario or has a complex liquidation structure, we’ll work with all relevant parties to understand the bespoke nature of the agreement(s). Having delivered over 17,000 valuations, our team has become familiar with a multitude of situations.
Carta as a platform
Carta is a platform, which means a lot can be accomplished using our tools. The valuation report can be approved by your board using Carta’s board management software. You can also conduct stock-based compensation reporting, scenario modeling, and a multitude of other features without leaving the Carta platform. In the near-future, Carta will be launching CartaX, the first vertically integrated market ecosystem for private equity.
If you’re a current Carta customer not using Carta’s 409A, talk with your Customer Support Manager about getting started.