The Carta 409A valuation process


One of the most important aspects of the 409A process is trust. Many competitors obscure the process they use to determine 409A valuations. At Carta, we value transparency. Transparency makes auditor conversations easier, turnaround times more clear, and gives you a deeper understanding of why your business is valued the way it is.

To offer a higher level of transparency, we’ll explain exactly how our 409A valuation process works.

What to expect from the Carta 409A process

  1. When a company is ready for a 409A valuation, we make sure your your cap table information is on Carta. Because the cap table is accurate, structured, and includes many of the details needed for a valuation, we save lots of time on administrative tasks. Some additional information will be needed by the valuations team, like financial statements (which are easily imported through Xero and Quickbooks) and projections.

  2. Next, we assign at least two analysts to every valuation. This analyst team reviews your information and documents, and schedules a kick-off call.

  3. The kick-off call lasts about an hour, depending on the stage and complexity of your valuation. We talk about the qualitative risks associated with the business, the industry, comparable companies, and the assumptions made in the projections. We also explain valuation methodologies we plan to use, the software, and answer any questions you may have.

The call is a great way for our analysts to get to know you and your business, and serves as an effective way in establishing trust in the process. If your company is growing rapidly or has a need for more frequent valuations than the standard one-a-year 409A, these early conversations will set the foundation for future valuations.

Using the same provider for all of your 409A valuations saves you time and improves audit-defensibility. Since the valuation industry is undergoing rapid consolidation , we believe that most standalone valuation firms will be defunct by the end of 2018. Tracking down old valuations will be a challenge.

  1. After the call, our analysts put together their preliminary analysis and use the Carta proprietary modeling software to assign an initial value to all share classes. The software includes a comprehensive set of checks to ensure the accuracy of the client-provided data and quantitative data, all but eliminating the likelihood for data-based mistakes.

  2. For companies with larger enterprise values, we send the valuation analysis to an internal audit committee for a secondary review. This secondary review tests the underlying qualitative assumptions of the valuation analysis, just like an external auditor would. When the Carta audit committee signs off on the valuation, the report is shared with a valuation manager for final approval.

  3. If necessary, we’ll schedule a follow-up call to discuss the results. The report is then finalized and you have an audit-defensible 409A valuation that preserves your safe harbor for twelve months or until your next material event.

Our software has cut significant time from traditional 409A valuations, and allows Carta to pass those cost savings to you. But, analysts still play a key role in making sure your 409A valuation is accurate.

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eShares, Inc. DBA Carta, Inc. is a transfer agent registered with the U.S. Securities and Exchange Commission. The services and information described in this communication are provided to you “as is” and “as available” without warranties of any kind, expressed, implied or otherwise, including but not limited to all warranties of merchantability, fitness for a particular purpose, or non-infringement. Neither eShares, Inc. DBA Carta, Inc. nor any of its affiliates will be liable for any damages, including without limitation direct, indirect, special, punitive or consequential damages, caused in any way or arising from the use of the services or reliance upon the information provided in this communication or in connection with any failure of performance, error, omission, interruption, defect, delay in operation or transmission, computer virus or line or system failure. Transfer Agent services for DTC-eligible registered companies provided by Philadelphia Stock Transfer, a Carta affiliate. Carta Securities LLC is a broker-dealer and a member of FINRA and SIPC. Contact: eShares, Inc. DBA Carta, Inc., 195 Page Mill Road, Suite 101, Palo Alto, CA 94306.

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