You get the term sheet, we do the math: introducing scenario modeling

Author:

The Carta Team

|

Read time:

3 minutes

Published date:

5 February 2019

Private companies today have more financing and liquidity options than ever. With the option to stay private longer or go public on a growing number of exchanges, it can be hard for companies and their investors to figure out which exit or funding scenario is best for them. So, we built scenario modeling tools on Carta that show you the impact of future financing rounds or possible exits in seconds.

Finance teams at companies and investment firms traditionally spent hours of valuable time building pro forma cap tables or potential exit scenarios in spreadsheets. Building these models from scratch is time consuming and difficult. And if you’re running a small startup, you might not even have someone with the expertise to model financing or exit scenarios. We’ve solved this.

Carta's scenario modeling

Scenario modeling in Carta is a full suite of tools to help you plan for the future, whether that’s raising a round or preparing for an acquisition, or both.

Your company’s finance team can see the impact of a new financing round or exit scenario in a few clicks—since your equity data is already on Carta. Investors can also use the tool to understand how various scenarios impact your portfolio companies, saving hours.

Waterfall modeling tools

Here’s a breakdown of our waterfall functionality:

• Breakpoint analysis – view a table that helps you understand what exit valuation would need to be met for each share class to participate in payouts
• Sensitivity analysis – view a line graph of payouts by share classes and stakeholders across a range of exit values
• Payout modeling – view a table of proceeds and metrics by share classes for a specific exit scenario

Here’s a breakdown of our financing round modeling tools:

• Cap table versions – create pro forma cap tables to understand the impact of new financing rounds based on pre-money valuation, total investment, and your post-money option pool
• Dilution modeling – model fully diluted ownership, post-money valuation, and outstanding options for potential financing rounds in a few clicks

Our models can handle lots of complexity. You can build multiple scenarios on top of one another, planning several steps ahead. It’s easy to understand the impact financing or exit decisions will have on your capitalization structure and payout ratio.

Here are a few scenarios you may need to model:

Finance teams at private companies

• When you receive a term sheet from a potential acquiring company, see payouts for your team and investors in seconds.
• When you receive a term sheet from an investor, quickly understand the impact it would have to your cap table and payout structure.
• Make sure that key stakeholders, like your founder, are maintaining a meaningful ownership stake.

Investors

• If you’d like to invest in a portfolio company again, you can quickly understand the impact of different terms before giving them your term sheet.
• If you already have a preferred financial model template, use scenario modeling to get a quick sense of the answer before building your own model, or as a validation point to check your work at the end.
• When a portfolio company is raising a round, you can understand the impact to your firm, and other firms on your portfolio company’s cap table
• Carta’s ready-made visualizations look great on slides.

Why use Carta for scenario modeling?

• Independently tested by auditors – Breakpoint analysis results have been tested by two of the leading audit firms in a side by side comparison with their own models.
• Company beta tested – These models have been verified by Carta customers (thanks for your help).
• No need to create your own models from scratch – We’ve done the heavy lifting, so you can spend more time thinking about strategy.

See scenario modeling in action in this product demo.

How to get scenario modeling

For privately held companies, scenario modeling is part of Carta’s Growth and Enterprise plans. For investors, scenario modeling comes with our Portfolio Insights and Portfolio Valuations products. Reach out to our sales team to upgrade to one of these packages and start using scenario modeling on Carta.

More to come

We’re excited to learn how you’re using the new reports we’ve added to Carta. We hope to continue helping you make the best financial decisions for your business, investors, and employees.

Author: The Carta Team

Carta's best-in-class software, services, and resources are designed to promote clarity and connection in the private capital ecosystem. By combining industry experience with proprietary data and real customer stories, our content offers expert guidance and clear, actionable insights for companies and investors.