Many start-ups are overvalued. But because they are also well stocked with cash, they have not yet had to raise new funding at a lower or flat valuation. Well new data van Carta discovered that cracks are beginning to appear.

Startup equity infrastructure platform Carta found that a record number of entry-level employee equity awards — which are stock option packages offered to individual employees — were repriced in the third quarter. The total of 18,629 repricings was 260% higher than the 7,165 repriced in the second quarter. The only earlier quarter that comes close is the second quarter of 2020, with 12,570, when the pandemic started to unfold.

What these revised share packages tell us is that startups are starting to lower their internal valuations, despite not raising another round. How? Because employee stock awards are tied to a company’s 409a valuation — a third-party assessment of a company’s fair market value.

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