CartaThe once high-flying Silicon Valley startup that violently pulled back from one of its businesses earlier this year is now working on a secondary sale that would value the company at $2 billion, TechCrunch has learned.
Carta is working with investment bank Jefferies on the sale and initially expected to raise money at a $4 billion valuation, but according to our sources, even $2 billion could prove ambitious.
This is a huge, if not entirely unexpected, drop in the valuation of Carta, which originally focused on cap table management software but over time began evolving into a “private stock marketplace for companies.” Its goal was to leverage the network of companies and investors that used its platform and had access to its information. The big idea was to become the transfer agent, brokerage, and clearinghouse for all private stock transactions in the world.
As part of that narrative, Carta launched an exchange that aimed to find buyers for shares using an auction-style system, and it later used The same system to increase its value in the eyes of investors. Indeed, after a big jump in valuation, $1.7 billion Following its valuation rising from $3.1 billion in 2019 to $3.1 billion in 2020, Carta announced in the summer of 2021 that it was worth $7.4 billion after previously selling $100 million worth of its shares at a valuation of $6.9 billion on its own platform.
About 15 months later, in late 2022, the company’s CEO, Henry Ward, told Axios Carta was valued at even more — $8.5 billion — after a separate secondary sale. (He did not say how many shares were sold at this valuation or who bought them.)
These soaring numbers were already surprising to some industry insiders, who had long scoffed that Carta had simply merged too many disparate, moderately profitable businesses in an effort to position itself as the next big platform company.
But that $8.5 billion valuation looked set to drop even further confusion Earlier this year, I had a conversation with a startup customer whose complaints about the company resonated throughout the rest of the startup world.
It all started in early January when Finnish CEO Karri Saarinen complained very publicly Carta was using information about his company’s investor base to attempt to sell its shares to outside buyers without the company’s knowledge or consent.
Ward at first blamed a rogue Carta employee, but the startup founders began comparing notes — and sharing similar experiences — and within 72 hours of being accused of misusing customer information, Carta said it was wrong. stepping out About the business line that got it into such trouble.
“Because we have the data, if we’re doing secondary trading, people will always worry that we’re using the data, even if we’re not,” Ward announced the on Medium at the time. “So we have decided to prioritize trust and exit the secondary trading business.”
A public relations disaster for Carta, this wasn’t the first time Carta has been in the press for all the wrong reasons. The company has a long history being sued Former employees have alleged the company has a toxic culture, including practices that are detrimental to women.
Now, Carta looks to be returning to its roots — and an earlier valuation that’s probably better for the business. While Carta’s cap table business is still growing — a source familiar said Carta generated $380 million in revenue last year — it also projects a $65 million loss in 2023, and “there’s not a lot of other room for it to grow,” this person said.
Another related challenge is that Carta hasn’t found a way to make its fund administration business profitable on a gross margin basis. Partly, this depends on how the company has priced that business, but it doesn’t help that a lot of Carta’s clients aren’t coming back because they have subsequently failed to raise new venture funds. Meanwhile, a group of Carta’s earlier clients has now grown so large that they have moved to bigger banks like Morgan Stanley for some of the same services they previously got from Carta.
Carta did not immediately respond to TechCrunch’s request for comment.
Carta has raised about $1.5 billion over the past few years. $1.2 billion According to startup tracker Tracxn, it has raised $1.5 billion from investors.
Some of the venture firms that led the investment round in the company include Union Square Ventures, Andreessen Horowitz, Spark Capital, and Tribe Capital.
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