Carta’s valuation will be cut by billions in an upcoming secondary sale

Carda once-thriving Silicon Valley startup that famously exited considered one of its businesses earlier this yr is working on a secondary sale that might value the corporate at $2 billion, TechCrunch has learned.

Carta is working with investment bank Jeffries on the sale and initially expected demand for the offering to be $4 billion, but sources say as much as $2 billion could prove ambitious.

This is a large, if not entirely unexpected, drop in the valuation of Carta, which was originally focused on capitalization table management software but over time began to evolve right into a “private stock exchange for companies.” His goal was to leverage the network of firms and investors that used his platform and to which he had insight. The most significant idea was to turn into the transfer agent, broker and clearing house for all private stock transactions in the world.

As a part of this narrative, Carta launched an exchange to seek out buyers for shares using an auction system, and later used the identical system to reinforce its own value in the eyes of investors. Indeed, after big jumps in valuation, from $1.7 billion in 2019 to $3.1 billion in 2020, Carta announced in the summer of 2021 that it was value a whopping $7.4 billion after the primary sale of its shares at value $100 million at a price of $6.9 billion by itself stock exchange. own platform.

Roughly 15 months later, in late 2022, the corporate’s CEO, Henry Ward, he told Axios that Carta was value much more – $8.5 billion – after a separate secondary sale. (He didn’t disclose what number of shares were sold at that valuation or who bought them.)

These rising numbers were already astonishing to some industry insiders, who had long chuckled that Carta had simply combined a lot of different, moderately lucrative businesses in an try to position itself as the following largest platform company.

But its $8.5 billion valuation seemed doomed to say no much more after an uproar earlier this yr with a startup customer whose criticism concerning the company reverberated throughout the remainder of the startup world.

It all began in early January, when Finnish CEO Karri Saarinen filed a criticism very publicly that Carta used details about his company’s investor base in an try to sell his shares to outside buyers without the corporate’s knowledge or consent.

Ward initially blamed a rogue Carta worker, however the startup founders began comparing notes – and sharing similar experiences – and inside 72 hours of being accused of misusing customer information, Carta said it was exiting the business line that had gotten it in a lot trouble .

“Because we have data, if we trade in secondary markets, people will always worry that we are exploiting data, even if we are not” – Ward announced right now on Medium. “Therefore, we decided to prioritize trust and exit the secondary trading business.”

A public relations disaster for Carta. This wasn’t the primary time Carta was in the press for the improper reasons. The company has a protracted history be taken to court by and oppose former employees who alleged that the corporate had a toxic culture, including one which disadvantaged women.

Now Carta is outwardly returning to its roots – and an earlier valuation that arguably higher suits the business. While Carta’s tabletop business continues to grow – a source in the know said Carta generated $380 million in revenue last yr – it also lost $65 million in 2023 and “doesn’t have a lot of other places for it to grow.” – it said. person.

Another related challenge is that Carta has not found a approach to increase the profitability of its fund management business on a gross margin basis. Part of this will likely be attributable to the best way the corporate has valued the business, but it surely doesn’t help that a lot of Carta’s clients don’t return because they have not been capable of attract further latest enterprise funding. Meanwhile, Carta’s group of former customers is now so large that they’ve moved to larger banks like Morgan Stanley to make the most of the identical services they once received from Carta.

Carta didn’t immediately reply to TechCrunch’s request for comment.

Over the years, Carta has grown roughly $1.2 billion from investors – says startup tracker Tracxn. Venture capital firms leading rounds at the corporate include Union Square Ventures, Andreessen Horowitz, Spark Capital and Tribe Capital.