As part of our effort to make this process as painless as possible we want to demystify the 409A process and arm founders, leadership, and boards of directors with as much information as possible.
When we get calls from companies their questions are typically:
- How does the process work?
- How long does the 409A process take?
- How much can I expect to pay?
With regard to the 409A process, the answer is a bit dependent on the situation of the individual company. I will do some subsequent posts where we can go into the specifics for certain situations but the summary is that once a valuation service provider is engaged that provider will need organizational, financial, and capital structure due diligence that most companies have fairly available without too much trouble. The most difficult asks are typically either a long-term forecast of financial results or for very early stage companies an analysis of the cost to recreate the IP the company has created.
For EP the answer to the second question is that we ask for ten business days to complete our work. The caveat to that request is that we can move faster if we are made aware of a specific date that needs to be hit. We care deeply about delivering a great client experience and we will work to meet our clients’ time constraints. If there is an extreme rush on the valuation we can typically hit whatever the deadline may be, but we do ask for a reasonable expedite fee.
The last question is also dependent on the individual company and can vary widely depending on the valuation service provider. There are absolutely valuation service providers out there that do not have our benefits of scale and technology. They also likely do not benefit from the excellent partners that we have. By working with outsourced CFO services, cap table management services, and other partners we are able to cut significant time out of the process that most providers have to spend in the gathering and structuring of data. So although the price may vary depending on the individual situation, almost certainly companies will get the best possible price/value combination by working with EP either through our partners or directly.
Look for both blog posts and video from us going forward to further educate as much as possible on the finer details of the 409A process.