Problems with 409a (and How to Fix Them)

A little over a month ago, Henry Ward (Founder and CEO of eShares) published a blog post about how cap tables are broken. Since then, nearly half my conversations with entrepreneurs have at some point meandered onto the issues he exposed (and his solution: eShares).  He hit a nerve; it’s a pain point that all Founders and investors have felt at some point (typically around financings), and (caveat: I’m an investor) eShares is a beautiful panacea. Fun fact: “Broken Cap Tables” was Henry’s first blog post.  Quite a start!

Henry just published his second post today, and it’s terrific: Fixing 409a.  He does a deep dive into the issues with 409a valuations, especially in seed stage startup companies.  Please give this post your time and consider his perspective.  409a compliance is a wasteful tax on early stage startup companies, and I’d really like to see this get remedied.