Qualified Small Business Stock (QSBS)

What’s new

Companies using Carta for 409A will now be additionally assessed for qualified small business eligibility at no extra cost to the company.

Certificates issued by a qualified small business as determined by Carta will have a "QSBS" tag in the product to indicate that the shares represent Qualified Small Business Stock (QSBS). The goal of these tags is help stakeholders make more informed selling decisions.

The IRC’s definition of a qualified small business is restrictive yet vague and open for interpretation at the edges, so potential holders of QSBS should consult their tax advisor before making decisions to sell and claiming the QSBS tax benefit.

How it works

Based on company-provided information during the valuations process, Carta will assess the following criteria for qualified small business eligibility:

  • Company's gross assets are $50M USD or less
  • Company is an active business
  • Company is a C-corp
  • Company does not operate in excluded industries

If a company is identified as a qualified small business, a new badge will appear in the 409A dashboard:

If a stakeholder receives a certificate from a qualified small business but hasn't yet met the 5 year holding period for QSBS, they'll see a "QSBS eligible" tag in their portfolio:

Drilling into the security, the stakeholder will see some additional information about the QSBS status of the certificate:

Stakeholders who have held shares issued by a qualified small business for 5 years will see a "QSBS" tag in their portfolio instead:

Additional Resources

For detailed information about QSBS in Carta, please refer to our QSBS support article.

Who this affects

Companies using Carta for 409A and their stakeholders.

Timing

  • Available now to 50 randomly selected 409A customers
  • General availability for all 409A customers coming in two weeks

New Shareholder Experience Page

We are making it easier for companies to keep employees, investors, and other stakeholders informed about their holdings and company changes. 

Companies have historically been able to grant viewing permissions to their stakeholders via our Cap Table Sharing page and features. This experience, however, was burdensome for many company administrators who found themselves having to change sharing settings as new stakeholders were added to their cap table or existing stakeholders changed their relationship to the company, such as an employee leaving the company or an investor exiting their position.

With our new Shareholder Experience page, company administrators can designate what type of information they want to share with their different stakeholders and set rules based on these preferences. By setting permissions by rules instead of a stakeholder-by-stakeholder process, we make it easier for company administrators to get the right stakeholders the appropriate information and reflect their information sharing philosophy.

Companies can choose to enable a specific shareholder experience based on the relationship of the stakeholder to the company. For example, companies can choose what information founders, investors, employees, and former employees, and other stakeholders access on Carta. We’ve renamed, updated, and simplified our access levels to Restricted, Basic, Advanced, and Full Details. We include a “Recommended” level for different relationships (e.g. Investors = Advanced) to help guide founders and other company administrators on setting up their Shareholder Experience based on user feedback. 

We’ve also added a new rule where former stakeholders--those who no longer have an active investment or holding in the company--will automatically be downgraded to Restricted automatically. This means that as stakeholders enter and exit the cap table, their respective shareholder experience will update automatically.

New Shareholder Experience page: Group levels

We know that sometimes it’s important for company administrators to create experiences specific to a single stakeholder or user. The new Shareholder Experience feature allows companies to set overrides for specific stakeholders in the “Individual levels” tab. We also provide information on that stakeholder’s relationship and holdings information.

New Shareholder Experience page: Individual levels



To help ensure company administrators set access levels that best fit the needs of their stakeholders, our access level guide is clickable from either the Group Level or Individual Level views of the new Shareholder Experience.

Access level guide

We appreciate our users’ feedback on how to make this page clearer and easier to use. We hope these improvements save company administrators valuable time and help them mirror their company information sharing philosophy in our software.

Who is this available for?

The cap table sharing page is available currently via a limited release to select Carta companies. In the coming weeks, we will begin to allow additional companies to migrate to the new Shareholder Experience feature set. This new product is not limited by subscription tier.

Companies with the new Shareholder Experience features enabled can visit Stakeholders > Shareholder Experience. 

If you’d like to enable the new Shareholder Experience page for your company, you can also contact us.

Instant KYC for Non-Individual LPs Completing Subscription Documents

Non-individual Limited Partners who complete subscription documents on Carta can now be KYC’ed instantly.

What’s New

This release is a follow-up to our KYC for Individual LPs feature. If your fund leverages Carta’s KYC/AML service and you have non-individual Limited Partners (LPs) completing subscription documents in Carta, these LPs can now be instantly KYC’ed on the platform. Carta instantly KYCs the LP's control person and beneficial owner(s) in addition to the LP entity itself.

Carta’s instant KYC feature is made possible by Carta integrations with identity and verification databases like LexisNexis, Ekata, Socure, and more.


Limitations

  • For this release, only US-based LPs are supported for instant KYC. Future releases will extend support to non-US LPs


How it Works

  1. As an LP completes their subscription documents, non-individual LPs (for funds that avail of Carta’s KYC/AML service) will see a dedicated Know Your Customer section. Upon landing here, LPs will first be asked if their control person and beneficial owner(s) are all US persons - 





  2. If the control person and beneficial owner(s) are all US persons, then the LP will be shown forms to enter KYC information for these individual(s) -






  3. Finally, the LP is also able to upload any entity formation documents and photo IDs here:



  4. Once subscription documents are signed by the LP, the following are instantly KYC'ed: the LP entity, control person, and beneficial owner(s). If all pass KYC, this is immediately reflected in the Carta UI and General Partners are notified to countersign -


    Timing: Rolled out to all on Aug 31, 2021

    Audience: US-based Limited Partners, General Partners


VC Firm Access Update

What’s new

We're updating firm permissions to be more granular for larger firms, while keeping them easy to manage for emerging managers.

Fund Admin clients on Carta will now have the ability to grant users on their accounts access to only the information they need: Investments, Limited Partner information, Fund Admin, and Fund performance data.


How it works

Admins on a VC firm account have the ability to add users and update their permissions. Permissions are controlled under Settings on a firm account. Non-admins can go to the Settings page to see who the admin on their account is.

Basic VC firm accounts on Carta will be able to grant users Admin or Investments access.

Firms that use Carta for additional services have the ability to grant users additional permissions for each fund in the firm.

Permission

Grants access to

Admin

  • Add, update, or remove other users on the firm
  • Accept securities on behalf of the funds in the firm
  • Update payment information for the funds in the firm
  • Complete tender offers on behalf of funds in the firm
  • Use the portfolio merge tool

Investments

  • Company information for companies that fund has invested in
  • Schedule of investments

Partners

  • Access to partner information, including contact information, commitment amount, and parter documents
  • Access to fundraising and closings tools

Fund Admin

  • Access to fund administration information, including capital calls, distributions, and quarterly reports
  • Ability to communicate with fund admin team through Carta
  • Ability to request and approve fund admin updates

Fund Performance

  • Access to fund performance data

Audit

  • View only access to investments, partners, fund admin, and fund performance data
  • Users with audit access cannot have other access to the fund

Defaults

For each user, an Admin can grant them “default” access to the firm. Defaults will automatically give users these permissions for new funds that are added to the account.


Additional Resources


Who this affects

This update affects all VC firm users on Carta. Users will not see a difference to their existing access with this change, but going forward Admins can update permissions.


Timing

We are rolling this out to a small number of firms starting on August 30 and plan to roll out to all firms within a few weeks.

Carta Total Comp Updates: Scorecard Export, Next Twelve Months Vesting and More

Check out the exciting new updates we’ve made to Bands, Scorecard and Admin pages 

Next Twelve Months (NTM) Equity Ratio

Equity Ratio is now being calculated using Next Twelve Months (NTM) equity rather than Total Equity granted to the employee. The new formula for Equity Ratio is as follows: 

An employee’s next twelve months (NTM) equity divided by the target annual equity for a new hire today.

Why did we make this change? 

The Carta Total Comp Scorecard is designed to provide a clear view of the compensation health of your business. In order to build a score that better highlights attrition risk, we’ve changed the calculation for equity ratio to be based on unvested equity that will vest in the next twelve months. 

Employees compensated below market rate are at risk of attrition, as they would be paid more in a new role than if they were to stay in their current position. 

Vested equity does not incentivize employees, because it is already earned, and therefore does not help drive retention; put another way, vested equity is already “in the bank.” Calculating a health score that includes vested equity could lead to overlooking employees who are mostly vested and therefore at risk of going to work elsewhere. 

The additional benefit of NTM is that it allows you to compare equity compensation on the same annualized timeframe as salary. 

Additional Details

While Equity Ratio will be calculated by using NTM going forward, we will continue to show Total Equity on the company and employee Scorecard. 

Scorecard Export

You can now easily download a CSV of the entire scorecard by clicking on the “Export” button. The CSV will contain all of the available columns, regardless of whether they are enabled in the column selector.    

Admin Page

Review and modify employee details from the new Admin Settings page. This page has a complete view of all employees synced from the HRIS and cap table. 

What’s changing?

Navigate to the Admins page from the Carta Total Comp top navigation bar. From there you can access the “Roles and permissions” tab along with the “Employees” tab

New Bands Version

You can now see the date of the most recent Benchmark version in the Plan and Bands page. With the Preview plan feature, you can review the impact that updated benchmarking data has on the Scorecard prior to applying the new Plan. 

Why did we make this change? 

When benchmarking data is current, it better enables you to be competitive in today's market with the offers you take to candidates and employees. 

Job Area Descriptions and Example Job Titles

Our Roles and Levels are now defined in-app. 

Why is this important?

Carta's leveling framework provides a foundation for your company to provide career pathing for employees and to review pay fairness for each job area and level. Without consistent leveling, companies can not accurately compare their employees to market rate data, limiting their ability to effectively hire and retain talent. 

To help our customers ensure accurate and consistent leveling, we are now providing further descriptions for each job area we support, so users can make more informed leveling decisions based on commonly used job titles.

What’s changing?

We have added a “Learn more” link in the "Example title" column in the "Bands" tab. This link will launch a modal where you can see sample job titles and descriptions for roles in each job area. 


Capital Calls on Mobile

General partners now have the ability to view and track capital calls from the Carta iOS app. Investment firms can now track the progress of on-going and completed calls along with investor details, on the go, straight from the Carta app.

Who this affects

  • Fund administration clients

Supported platforms

  • iOS (Android coming soon)

What's new

Fund Administration clients can now access their capital call details and investor information from the Carta app.

  • The home screen now provides a summary of active capital calls with the ability to view individual call details.
  • Navigating to a capital call allows you to view further call and investor details along with a full investor list which can be filtered by Paid and Unpaid calls.
  • The Fund Details page now also provides a capital summary and the ability to view a list of Active, Drafted, and Completed calls.


Instant KYC for LPs Completing Subscription Documents

Limited Partners completing subscription documents on Carta can now be KYC’ed instantly.


What’s New

If your fund leverages Carta’s KYC/AML service and you have Limited Partners (LPs) completing subscription documents in Carta, these LPs are now instantly KYC’ed on the platform. 

Carta’s new instant KYC feature is made possible by Carta integrations with identity and verification databases like LexisNexis, Ekata, Socure, and more.


Limitations

  • For this first release, only individual (as opposed to entity) LPs are KYC’ed. Future releases will support KYC for entity (non-individual) LPs as well. This includes KYC for the LP entity, LP control person, and LP beneficial owners
  • For this first release, only US-based LPs are supported. Future releases will extend support to non-US LPs


How it Works

  1. As an LP completes their subscription documents, individual LPs (for funds that avail of Carta’s KYC/AML service), will now see a dedicated Know Your Customer section. Here, LPs can input the additionally required information for KYC -


  2. Once subscription documents are signed by the LP, the LP is instantly KYC’ed. If the LP passes KYC, this is immediately reflected in Carta and General Partners are notified to countersign -


    Timing: Rolled out to Limited Partners on July 1, 2021


    Audience: Limited Partners, General Partners

Support Partially Realized Investments

This past week we released added granularity to the Investments, Overview and Firm Overview Tracking bars for investments. The in-app tracking bars will now show
  • Total investment count
  • Fully realized investment count
  • Partially realized investment count
  • Unrealized investment count


Timing: Rolled out to funds using our Fund Administration services on May 21, 2021.

Audience: General Partners, CFOs, Investment teams.

Preview and and manage compensation plans

With the new Plans page, you can now craft and manage your compensation plan to meet the needs of a changing workforce. With Plans you can:

  1. Review your active plan or create a new plan.
  2. Edit and preview draft plans.
  3. View your plan history.

Before making modifications to your plan, preview will allow you to see how a change in peer group, band ranges, or location strategy could impact your employees' compensation targets. 


Availability

  • If you are interested in learning more about Carta Total Comp, please reach out to your Carta Customer Success Manager or sign up here.
  • You must be a Carta cap table customer to sign up for Carta Total Comp.

Partners' capital status included in exports

This past week we've added partners' capital status to the partners export. We know keeping tracking this is important for funds and can be a pain to do manually. Our Partners' exports on Carta now included the following information: 
  • Called capital
  • Uncalled capital
  • Percent of capital called
  • Prepaid balance
  • Outstanding balance

These updates apply to both the fund level and 'All Partners' export. We've added the following columns to the partners export.

Where to find: Log in to Carta > Select a fund within your investment firm > Navigate to the Partners tab > Select 'Export partners'


Timing: Rolled out to funds using our Fund Administration services on April 30, 2021.

Audience: General Partners, CFOs, Investment teams.

Show Previous EntriesShow Previous Entries