Blogs

Quarterly Benchmark Refresh and Updated US and International Geographic Adjustments - Q2 2024

By Brent Devey posted 05-03-2024
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What’s new? We have updated salary, total cash compensation, and equity benchmarks for all job areas and specializations. Additionally, we have updated US geographic adjustments for all metro areas as well as international market adjustments and currency conversions. Benchmark Trends In aggregate, salary and total cash compensation benchmarks are slightly higher than our last release, increasing by 1%. Salaries increased slightly more for companies with valuations up to $100M. Across all roles, levels 7 and above tended to increase more than levels 6 and below. Similar to previous updates, specialization level data continues to change more than the broader ...
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What you need to know to prepare for onboarding

By Joseph Thompson posted 03-13-2024
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Here’s everything you need to know about preparing for the smoothest onboarding process with Carta. In this blog post we’ll share some tips and tricks to help you make your onboarding a breeze. Getting started Firstly, you need to start with a current cap table, a state stamped article of incorporation … and a knowledgeable Implementation Manager from Carta to help you on this equity journey. Sure, all of this can seem new and daunting, but don’t worry, we’re here to guide you through every step of the process. Below, you will find EXACTLY what we need within a cap table: Cap table (common and preferred share classes) ...
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Non-US Company Onboarding

By Pilar Picone posted 02-27-2024
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Although Carta supports International Companies, there are a few differences that might affect the onboarding process and general requirements. Most important being that Carta will NOT be a Transfer Agent*, meaning that certificates created for International Companies won't have legal value. ​​Carta will generate a visual representation of the shareholder’s certificates for both the company and its shareholders. However, Carta does not replace your local transfer agent or share register’s certificates. *Since Carta is not a registered transfer agent outside of the United States, this means that while we can track your equity, you cannot issue securities ...
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Introducing the Carta Compensation Community: Where HR Thrives Together!

By Brent Devey posted 02-06-2024
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We are delighted to introduce the Carta Compensation Community—a dedicated space tailored exclusively for HR and finance professionals passionate about compensation, benchmarking, and equity awards. Join us as we unveil the myriad of benefits and opportunities available within this dynamic community! Here are a few: A Hub of knowledge for professionals Immerse yourself in a wealth of expertise! The Carta Compensation Community serves as your centralized resource for seeking advice from seasoned professionals, sharing insights, and staying abreast of the latest trends in compensation management. Networking with a personal touch Join a community ...
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The power of participation: Carta Community's Engage & Earn program

By Brent Devey posted 01-16-2024
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In the world of online communities, participation and engagement are key to fostering a thriving ecosystem. Here in Carta Community we understand the significance of our members' contributions and have introduced the Engage & Earn program to recognize and reward your dedication. This program not only encourages community members to share their insights and experiences but also adds a gamified element through badges and tiered rankings. Engagement points and tiers: At the heart of Carta Community's Engage & Earn program are engagement points, which serve as a measure of a user's involvement. Members accumulate these points by actively ...
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Rising salaries in 2023 help raise the appeal of some smaller startup hubs

By Brent Devey posted 12-06-2023
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The map of venture capital funding in the U.S. is growing more diverse every year. You can of course still find robust startup ecosystems in major coastal hubs like the Bay Area, New York, Boston, and Seattle. But in 2023, you can also find them in places like Nashville, Houston, Pittsburgh, and Indianapolis. The geographic diversification of the venture economy is a welcome development for startups in emerging ecosystems. Yet operating in a smaller market still poses certain challenges. One of these is battling the big-city competition for talent: Startups in established coastal hubs are historically much closer to dense populations of tech ...
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Notifying Shareholders

By Brent Devey posted 09-12-2023
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Congratulations! You've successfully navigated the cap table verification process, ensuring accuracy and transparency in your equity records. But the journey doesn't end here—welcome to the phase where ownership acknowledgment takes center stage. In this blog post, we'll guide you through the pivotal steps that follow cap table verification, ensuring that your securities are acknowledged and accepted by shareholders with ease. Account Activation: Setting the Stage Once your cap table details are verified and ownership agreements are confirmed, your Implementation Manager takes the reins to activate your account. This pivotal step marks the ...
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Stock Compensation Expense & Forfeitures

By Calvin Cheng posted 09-04-2023
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When a stakeholder terminates service, vesting will cease and Carta’s SBC expense reports will stop recognizing any expense for vesting that occurs after the termination date. Any expense recognized for what has legally vested as of the termination date does not reverse because the stakeholder has legally earned the option/shares. Any previously recognized/accrued expense for what did not vest due to a termination will be reversed. Key terminology: Forfeited - Shares/options that are unvested at the time of a termination or cancellation. Expired - Options that vested but were not exercised within the post termination exercise ...
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The Power of Carta Community in Elevating Your Professional Role

By Brent Devey posted 08-28-2023
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The Power of Carta Community in Elevating Your Professional Role Welcome to the dynamic world of Carta Community—an ecosystem designed to empower you in your professional journey. In this blog post, we'll dive into the benefits that Carta Community brings to the table and how it can amplify your effectiveness in your role. From shared knowledge to networking opportunities, Carta Community is your gateway to professional excellence. Connecting Beyond Boundaries One of the most remarkable features of Carta Community is its ability to connect you with a diverse community of peers, experts, and professionals from various industries. Whether you're navigating ...
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What's the difference between FMV and FRV?

By Shevaun Cash posted 08-17-2023
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What’s the difference between Fair Market Value (FMV) and Financial Reporting Value (FRV) ? If you use Financial Reporting, then you’ve probably noticed a change: FMVs are no longer called FMVs in your 718 dashboard. In fact, there is no FMV in the dashboard; now, there is FRV. What does that mean, anyway, and why did this happen? Though the terms “fair market value” and “financial reporting value” are related, they have distinct meanings in different contexts : Financial Reporting Value (FRV): The value of common stock for Financial Reporting purposes within Carta, and the output of the ASC 718 Memo. This FRV will ...
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ASC 718 - Grant Date

By Calvin Cheng posted 08-15-2023
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An equity award's fair value is measured on the award's grant date. The grant date is typically the start of the service period in which the company begins recognizing stock compensation expenses. Accounting principles that determine the grant date: The grants are authorized by the board of directors The recipient has begun performing services required to earn the grant The company and the recipient has agreed upon the terms and the conditions The company is legally obligated to issue shares/options when vesting conditions are met The recipient begins to benefit from, or be adversely affected by, changes ...
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ISO / NSO Stock Compensation Expense

By Calvin Cheng posted 07-02-2023
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In most cases, the expense a company recognizes for stock compensation differs from the tax deduction they are entitled to, in both timing and amount. For example, expense of the fair value for non-qualified stock options is recognized over the service period but the company does not qualify for a tax deduction of the spread or intrinsic value until the option is exercised. Companies that wish to record a deferred tax asset (DTA) may want to know how much expense has been recognized for certain award types. The ‘tranches’ tab within Carta’s SBC Expense Report lists the ISO and NSO quantity for each vesting increment of each award. ...
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Stock Compensation Expense Report (a simplified overview)

By Calvin Cheng posted 07-02-2023
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One of the reports in Carta’s Financial Reporting suite is the SBC Expense report. This report provides companies with a journal entry that debits the stock compensation expense account and credits the additional paid in capital account. Overtime, companies have requested this report to include more data. As a result there currently is a lot of things happening within this report. However, we only have to look at several columns to understand what is happening in the report. This walkthrough is intended to provide a simplified overview on how expense is determined for standard time-based vesting options and restricted stock. I will not talk ...
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Black Scholes Option Pricing Model

By Calvin Cheng posted 07-02-2023
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Black Scholes is perhaps the most well known of all option-pricing models. Developed by Fisher Black, Myron Scholes, and Robert Merton, the model received the Nobel Prize in 1997 for developing a way to estimate the price of European-style options that were publicly traded on option trading markets. Prior to this, options were traded without a way to measure the risk of the option nor its expected return. The formula provided mathematical legitimacy to option markets and created a boom to option trading in financial markets all around the world. The value of an option comprises two values, the intrinsic value and time value . The intrinsic ...
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Expense Attribution - FIN28

By Calvin Cheng posted 07-02-2023
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FIN28 is one of two attribution methods for expense scenarios under the GAAP standard, the other being the graded straight line approach. It was first introduced in FASB Interpretation No. 28 and is sometimes referred to as the accelerated manner, 'front loading' the expense, or the graded attribution. Under the IFRS accounting standard, expense for service based equity grants should be recognized using FIN28. Each vesting increment is treated as its separate award each with its own service period that all begins on the grant date and is amortized concurrently . The theory that the stakeholder is providing service to earn each vesting tranche within ...
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Graded Straight Line & Traditional Straight Line

By Calvin Cheng posted 07-02-2023
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The graded straight line attribution recognizes the same amount of expense throughout the service period of each respective vesting tranche , as if each vesting increment is its own award. The traditional straight line (sometimes called true straight line) attribution recognizes the same amount of expense throughout the entire service period of the entire award. A traditional straight line approach may result in recognizing too little expense, especially when there are multiple vesting tranches and more shares vest earlier within the service period. Accounting principles for straight line attribution: Expense should be recognized throughout ...
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Expense Attribution Methods

By Calvin Cheng posted 07-02-2023
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After the expense for an option or award is determined, the expense is recognized over the service period of the award. Carta's reports can amortize stock compensation expense on a graded straight-line basis where the expense for each vesting tranche is recognized sequentially or under the FIN28 approach where expense for each vesting event is recognized concurrently . Accounting principles when amortizing expense: Expense is recognized throughout the service period of the award The total expense recognized to date must be at least the fair value of what has legally vested (sometimes referred to as the 'floor' concept) ...
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Modification Accounting - Repricings

By Calvin Cheng posted 05-30-2023
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When there is a decline to a company’s stock price, outstanding stock options with a high strike price may become ‘underwater’ and worthless. Since stock options are intended to serve as compensation, some companies may choose to reduce the strike price of underwater stock options. Lowering the strike price of an option is a Type I modification and is viewed as a cancellation of the original option with the original strike price and a grant of a replacement option with a new strike price. In most cases, lowering the strike price will result in an increase of compensation expense. The following accounting principles ...
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Award Modifications

By Calvin Cheng posted 05-30-2023
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A modification of an award happens when any of the following happen: The fair value of the award before the modification is different from the fair value after the modification. The conditions for vesting are modified. The accounting treatment changes from equity to liability or from liability to equity. Under the IFRS standard, all modifications are treated as a Type I modification. Under GAAP, there are four types of modifications along with multiple accounting treatments: Type I (Probable-to-Probable) Vesting is probable before and after the modification. Common modifications include: Reduction ...
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How can a VC/Seed investor's "right to conduct activities" be beneficial for a tech startup?

By Peter Szymanski posted 05-10-2023
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@ Silicon Valley Counsel : How is a legal provision acknowledging that an investor is an investment professional/organization, and as such reviews the business plans and related proprietary information of many enterprises, some of which may compete directly or indirectly with the tech startup's business (i.e., a "Right to Conduct Activities" clause), beneficial for the tech startup? Often, the tech startup even agrees that investor will not be liable even if investor invests in any entity competitive with the startup, or action taken by investor to assist any competitive company, whether or not such action has a detrimental effect on the startup. While ...
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