A 409A valuation is needed for those who offer or plant to offer equity. You should get this one before you issue your first common stock options, after raising a round of venture financing, once every 12 months or after a material event, and if you are approaching an IPO, merger, or acquisition.
There are a few ways to get a 409A valuation for your company. These include doing it by yourself, using a software valuation, as well as hiring experts from a valuation service provider. Among the options, the best one is the latter. By using the third option, you will not have to prove the validation of your company when the IRS comes to make a visit to audit your company.
There are a lot of experts from valuation service providers to choose from. One of the most recommended is called Carta. Carta tops the list of the best 409A valuation providers in the United States. This one has been used by more than 18,000 companies. It teams up with the customer to find a price, plan, and solution that fits them.
How much does a 409A valuation cost at Carta? According to the official website of Carta, the 409A valuation is already included in its annual subscriptions. It means those who have subscribed to Carta will be able to get the 90A valuation without having to spend any. Aside from getting a 409A valuation, you will also be able to get cap table management. If you are interested in Carta and want to get a 409A valuation with it, you are recommended to get in touch with them to discuss plans and pricing.
If you are curious about the price of the 409A valuation of the other service providers, some of them offer standalone 409A valuations. Apart from them, there are also some others that offer bundled services. For the standalone valuations, the price varies from $1,000 to more than $10,000. Everything depends on a few things, including the stage of the company, the size of the company, complexity of share structure, company industry, the age of the company, possible pending court cases, intangible assets, and many more.
If you want to use get helped by the team of Carta to get the 409A valuation of your company, you will need to collect and share some information about your business, as follows:
- Company details: These include name of your CEO, name of your external audit firm (if applicable), name of your legal counsel, and your amended and restated articles of incorporation.
- Industry information: This includes your industry and a list of relevant and comparable public companies. Apparently, most 409A valuation relies on a few form of comparison to publicly traded companies.
- Fundraising and options: These include the most probable timing of a liquidity event, the number of options you expect to issue in the next 12 months, and your company presentation, business plan, or executive summary.
- Company financials: These include financial statements, forecasted revenue for the next 12 months, forecasted EBITDA for the next 12 months, cash burn and runway, and non-convertible debt amount.
- Additional details: These include any materially relevant events since your last 409A valuation. If it is the first time for you to get a 409A valuation, please share a complete history of relevant events instead.
The process of 409s valuation at Carta consists of some steps. For those who are curious how 409A valuation with Carta works, here is for you:
- Valuation request: You initiate and request a new 409A valuation through the Catra platform.
- Data validation and assignment: The request goes through data validation to ensure data accuracy. Then, Carta assigns an analyst to review your company details.
- Analyst discussion: If needed, your analyst schedules a discussion to get more information. Discussion points may include qualitative risks associated with your company, the business, the industry, assumptions made in your projections, or any additional details needed to conduct the analysis.
- Conduct analysis: The analyst conducts the analysis, leveraging proprietary software and the internal valuation policy of Carta to assign an initial value to your company and shares.
- Internal review: Carta conducts a review of the analysis to ensure it complies with its internal valuation policy and is audit defensible. Additionally, the software verifies all calculations and data.
- Delivery: Carta delivers an audit defensible 409A valuation on the Carta platform for your approval.
- Post delivery support: The dedicated analysts team from Carta is always available to answer questions related to your valuation.
Are there some things to expect from the Carta 409A process? Definitely! All of them are as follows:
- If you think your company is ready for a 409A valuation, Carta will make sure that your cap table on Carta is up to date and verified. Due to the fact that your cap tale includes a lot of details that are needed for a valuation, Carta makes it more efficient. Aside from that, several extra information are also imported by Carta, such as financial statements and projections, through its XeroTM and QuickbooksTM integrations.
- Then, your information and uploaded documents will be reviewed by the analyst.
- After collecting all the information needed, the analyst will do their job to put together their preliminary analysis. In this stage, the proprietary software of Carta will be used to assign an initial value to all share classes. According to the official website of Carta, this software includes a comprehensive set of checks in order to ensure that the data is accurate and decreases the chance for the mistakes that are based on data to happen. However, it is not the only step that they do to ensure accuracy.
- The analyst of Carta reviews the valuation analysis internally. Apart from that, they also check against the valuation policy of Carta that is set by its team of industry experts.
For more information about 409A valuation with Carta, you are recommended to visit the official website of Carta at https://www.carta.com. If you want to ask something, you can try to call 1-833-403-5468.