eShares has officially “purchased” SVB Analytics and wrote a surprising blogpost with several strange and potentially alarming comments about the acquisition. Here are our key reflections on eShares’ blog post:
- Arbitrary Deadlines – In the press release, eShares gives an arbitrary and very short deadline for previous SVB valuation clients to sign up with them – October 15, 2017. This is very unusual, and we assume they are inferring eShares will not support those clients if they do not sign up before October 15.
- Not Automated – We noticed that eShares’ “automated” solution takes 7 to 10 days to deliver, which means it can’t really be automated. However, “automation” may be a convenient excuse to not deliver quality customer service.
- 409A Valuation Extinction – eShares makes a claim that the “pure 409A” firm will be out of business by the end of 2018. eShares is somewhat right here, but only because there is no such thing as a “pure 409A” firm (or at least none worth mentioning) aside from SVB Analytics. Venture-backed 409A providers and most cheap valuation providers will likely go away in the near-future due to lack of quality, limited knowledge, and an unsustainable business model. Further, as discussed in a previous blog post, you should be very wary of venture-backed companies providing 409A valuation audit support given they may be long gone before your 409A valuation is audited.
- Subscription Model is Dead – One other trend we anticipate in the near future is a move away from 409A as a subscription service. The “409A-as-a-service” business model is not a business model that makes sense given that clients very seldom need multiple 409As in a given year. Clients may not even need a 409A for multiple years, and subscription models result in clients paying fees for 409As even when 409As aren’t needed. Regardless of what model you choose, you should demand price transparency with fees that don’t creep dramatically as you mature or increase suddenly due to unexpected “audit support” fees.
Redwood Valuation Partners is in a unique position to capitalize on the market shift caused by SVB Analytics’ absence given our wide range of valuation services for financial reporting, tax and transaction advisory purposes including: Purchase Price Allocations, Impairment Testing, Portfolio Company Valuations, IP Valuations, Entity Conversions, Gift and Estate, Common Stock Valuations for Option Grants (§409A), and more.
Diversification is part of our DNA, but our diversification allows us to employ a team with deeper technical knowledge of valuation than cheap providers and “automated” solutions so that we can meet your needs.
As always, at Redwood we value and respect our client base. We were surprised that SVB Analytics would leave clients to fend for themselves. To make it right, we are offering all current SVB clients audit support going forward when they sign up for a 409A with Redwood (no artificial deadlines). No need to deal with unnecessary cap table management, new teams, and low touch service from eShares. Send us an email to get your 409A started: firstname.lastname@example.org.
The following commentary was published on September 6th 2017, after SVB Analytics announced the acquisition on their website. It is archived below for any interested parties.
In September 2017, Silicon Valley Bank announced the sale of its valuation arm to eShares, Inc (SVB Analytics valuation to eShare). As we have discussed with countless clients in the last 10 years, the continuity of a firm’s team and business is critical when choosing a valuation firm. Now that eShares acquisition of SVB’s valuation business has been confirmed, many SVB clients may be left to their own devices to defend SVB’s previous valuation reports since eShares may not be willing or able to defend those reports.
In addition to its low touch service, eShares does not offer a transparent pricing structure and is venture backed, which adds a level of financing risk to eShares that is not ideal for valuation providers. If eShares goes out of business, both eShares’ and SVB Analytics’ clients could be left without audit support.
Founded in 2007, Redwood Valuation Partners has delivered over 3,000 valuation reports to more than 700 venture and private equity backed clients worth more than $200 billion in total assets. At Redwood Valuation Partners, we take a traditional approach by providing high levels of service and expertise to our clients. Our clients know that Redwood will be around for years to come, providing trusted advice that has become the hallmark of our practice.
If you were an SVB client before this transaction, we are currently offering discounted rates to transition you to Redwood, and we will also provide audit support for your previous valuations from SVB analytics.
Contact us at email@example.com or (650) 331-0291.