Advice would be really appreciated on this.
We need to do a 409A valuation. Our lawyers, a large valley firm, said to not use eshares. Evidently, they changed the firm who was doing those outsourced valuations for them (it used to be preferred return and then greener equity) and couldn’t give a sufficient answer that they were independent. And this could present issues in DD from investors but also IRS down the road. In a worse case scenario, options strike prices will have to be re-done with tax implications.
Anyone have similar feedback or thoughts on this? Is it OK to use eshares prior to Series B and then switch over to something more robust? To make things more complicated, we need to do options and then a raise within a few months of each other so it would be nice to not waste a ton on this if we don't have to.
The question of audit defensibility is ultimately the only question that matters in a valuation. Our goal (as is the goal of other providers) is singular - to deliver a valuation that will withstand Big Four audit and that utilizes the most applicable valuation methodologies for the situation.
Here's how we at eShares specifically have approached that:
1) One of our first hires on the team joined from a Big Four firm as a former 409A auditor
2) We actually built our product to anticipate audit - we provide a full valuation report in addition to all of the financial models and valuation models (with formulas still intact) to make the inevitable audit a much smoother and transparent process. (We actually post our models and reports for the world to audit as well on our website: http://esharesinc.com/409a)
We took the black box out of valuations and replaced it with fully transparent valuations models that backs up every output that shows up in your valuation report. In our opinion, this makes a much stronger case.
As the largest provider of 409A valuations in the country at eShares, if we couldn't stand up to audit, we would have been out of business by now. We've worked with companies from pre-Seed stage to post Series E, pre-acquisition and pre-IPO.
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tl;dr
1) Our team includes former 409A Big Four auditors, we've been audited and have never failed, and we deliver an audit-friendly valuation package with intact models instead of just a report.
2) eShares does more valuations than any other firm in the country (~200 this month alone). At that volume, we simply must be correct every single time.
3) We've applied our engineering team and the power of software to financial valuations. The quality is the same if not better than any other provider, but our valuation and audit process is just much more efficient and less costly for you
Just as stock brokers still exist after eTrade came along, 409A valuations firms will exist after eShares. But for those that do their valuation with us, we think it's a better (and certainly less costly) product and experience.