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 their valuations; at Carta, we think transparency is key in everything we do. With transparency, auditor conversations are easier, turnaround times are clear, and clients have a deeper understanding of why their business is valued the way it is.

A great way to offer a higher level of transparency is to explain exactly how our 409A process unfolds. Below is both a visual and a text explanation of the Carta 409A workflow:

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The Carta 409A Process:

  1. When a new client is ready for a 409A, they request a valuation through the Carta website. With a client’s cap table information already formatted and live on Carta, the bulk of the ickier, administrative tasks have already been completed. But there will still be several items the valuations team needs on the front end: financial statements (which are easily imported through Xero and Quickbooks) and projections.

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

  3. We have a kick-off call that lasts between 45 minutes to 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 continuity for all your subsequent valuations. As a result, your administrative burdens will decrease, and audit-defensibility improves.

    (Continuity is key here. [The valuation industry is undergoing rapid consolidation] (https://blog.carta.com/carta-acquires-silicon-valley-bank-analytics/) and we believe that most standalone valuation firms will be defunct by the end of 2018. Tracking down old valuations and their respective data will be a nightmare.)

  4. 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.

  5. For companies with larger enterprise values, we send the valuation analysis to an internal audit committee for a secondary review. This secondary review was designed to test the underlying qualitative assumptions of the valuation analysis the same way an external auditor would. When the Carta audit committee signs off on the valuation, the report is forwarded to one of our valuation managers for final approval, and then is sent to the client.

  6. If necessary, we’ll schedule a follow-up call to discuss the results. Once all parties are comfortable with the value, the report is finalized and you have an audit-defensible 409A valuation that preserves your safe harbor for twelve months.

Our software has cut significant time from traditional 409A valuations, and has allowed Carta to pass those cost savings to customers. But software has also allowed us to leverage our analyst’s time in a way that instills greater confidence in how we price your common stock.

Clients can rest easy knowing that Carta’ layered 409A process blends the qualitative acumen of decades of valuation experience with the quantitative certainty of our software.



Steven Kakowski

Steven Kakowski

Steven has significant equity industry experience in a variety of roles. He likes to write in his spare time and lives in the still-bohemian enclave of North Beach in San Francisco.