On September 1st we acquired Silicon Valley Bank’s valuation business and team (Silicon Valley Bank Analytics or SVBA). This impacts both the former SVBA employees and the 1,300 customers that came with the acquisition.
Let me address how we got here, why we bought SVBA, and what this means for customers.
How we got here
Three years ago, we entered the 409A market with the thesis that traditional valuation firms would be uncompetitive against software companies. At the time, people were incredulous. Now, the thesis is obvious. Manually entering cap table data and hand-building Excel financial models is error-prone and expensive. Today, calculating 409A valuations without software sounds absurd.
We collapsed the 409A valuations market into the cap table software market. Valuation firms can’t compete without offering cap table software. And cap table software companies can’t compete without offering 409A valuations. More valuations firms will be acquired or close shop. And more cap table software companies will enter the 409A market.
My guess is the pure 409A valuation firm will be extinct by the end of 2018. The cap table software companies will compete to fill the vacuum.
Why we bought SVBA
We want to do two things with the business. First, convert SVBA’s project-based 409A valuations into subscription-based valuations on our platform. This drives down the cost of 409A valuation and allows us to perform valuations within 7-10 days.
Second, provide a safe landing for SVBA customers. When valuation firms shut down, customers are left unprotected because no one is available to defend future audits. SVBA acted responsibly by selling us both their assets (the customers and employees) and their liabilities (obligations to defend 409A valuations).
What this means for customers
If you’re a former SVBA customer, it is likely that we have already contacted you. Here are our two requests:
First, allow us to continue being your 409A valuations provider. We will honor SVBA’s commitments to you and defend all of your historical valuations. We will also honor your existing pricing as long as you transition by October 15th. And we will put you on our software platform to perform all of your future valuations.
Second, once you are on our platform, learn about everything we do. Real-time cap table management, ASC 718 expense accounting, employee liquidity programs, investor relations, board meeting management, waterfall modeling, employee self-exercising, Form 3921 tax reporting, 83(b) filing, and, of course, our mobile apps (iPhone & Android).
I look forward to the opportunity of working with you.