Modernizing 409A valuations for early-stage companies

Modernizing 409A valuations for early-stage companies

Author: Christine Ngo
Read time:  3 minutes
Published date:  10 December 2020
Updated date:  13 May 2024
Getting a 409A valuation should be as easy as buying stock online. Here's how our team is working to make that possible.

Technology has changed how we procure essential goods and services, from how we do our taxes to how we order lunch. Getting a 409A valuation to grant options to your employees should be as easy as buying stock online. At Carta, it’s been our mission to modernize the 409A valuation process since we launched our offering in 2016. 

The traditional valuation process can be long and arduous, requiring back and forth emails, hours on the phone, and sometimes haggling or negotiating over the fair market value (FMV) of your common stock. We believe there is a better way to do this so you can spend less time going through the 409A valuation process and more time running your business. 

Carta’s approach

Valuations of private companies can be complicated—especially for early-stage private companies, where continuous iteration on business models and product offerings are essential to survival and ultimately disruption. Carta has developed extensive valuation policies and robust models leveraging insights from thousands of companies to take small-business challenges into account. Our platform, coupled with a dedicated team with decades of combined experience, has enabled us to deliver comprehensive yet easy-to-understand results to thousands of clients in days, not weeks.

For most early-stage companies (typically these are companies that have raised up to a Series C fundraising round), our valuation process can broken down in three easy steps:

1. Upfront data collection

We ask for all relevant information regarding your valuation upfront via our 409A request form, saving you time and effort. During this step, you upload financial data as well as qualitative details of your company, such as financing considerations, business model, and product descriptions. We pull your cap table data and fundraising details directly from your Carta account, so you don’t have to provide this information. Our analyst team will reach out to you if we need any additional information to perform the valuation. 

2. Personalized data collection assistance

If you need help uploading your company’s information, our 409A support team is just an email or phone call away to guide you through the process. We will also remind you when it’s time to update your 409A by sending reminders before the 409A is about to expire.

3. Quick turnaround and on-call analyst support

Carta will finish the analysis after we review the data and deliver a draft report within one to three business days following the submission of a complete data set. If needed, our team will reach out to your company’s point of contact with questions and/or updates as we work through the analysis. After you receive your valuation report, you can reach out directly to our analyst team to answer any questions. 

We’re able to deliver reports quickly because our platform is supported by data from 20,000 valuations we’ve performed since 2016. We’ve significantly refined our proprietary valuation software by adding integrated health checks, modules for conducting sensitivity analysis, and an easy-to-use report editor for company-specific customization. In addition, having you submit your information upfront allows us to dedicate more time to answering your questions about the analysis and results so you can quickly and seamlessly issue your options. 

It should be noted that our valuation process becomes more involved as your company achieves certain milestones such as engaging an external auditor or increasing the frequency of your 409A valuations to semi-annual or quarterly. Learn more about our valuation process for late stage private companies.

Learn why we’re the leader in 409A valuations or request a demo today.

Christine Ngo leads operations for the Carta Valuations team. She has spent her career valuing venture-backed private companies and is passionate about democratizing valuations for founders.
DISCLOSURE: This communication is on behalf of eShares Inc., d/b/a Carta, Inc. (“Carta”). This communication is not to be construed as legal, financial, accounting or tax advice and is for informational purposes only. This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Carta does not assume any liability for reliance on the information provided herein.