Carta, a once-promising Silicon Valley startup, is currently in the process of a secondary sale that would value the company at $2 billion, according to sources. This is a significant drop from the company’s previous valuation of $7.4 billion in 2021 and $8.5 billion in 2022. The decline in valuation can be attributed to a series of controversies and challenges that the company has faced.
Carta originally focused on cap table management software but expanded its services over time to become a “private stock market for companies.” The company aimed to become the transfer agent, brokerage, and clearinghouse for all private stock transactions. It launched an exchange that used an auction-style system to find buyers for shares, which helped boost its own value in the eyes of investors.
However, Carta’s reputation took a hit earlier this year when CEO Karri Saarinen publicly accused the company of using his company’s investor base information without consent to sell shares to outside buyers. This led to other startup founders sharing similar experiences and raised concerns about Carta’s handling of customer data. In response, Carta announced that it would exit the secondary trading business to prioritize trust.
This incident was not the first time Carta faced negative press. The company has a history of being sued by former employees who allege a toxic culture and discrimination against women. These controversies have raised doubts about Carta’s ability to position itself as a major platform company.
Additionally, Carta faces challenges in its fund administration business, which has not been profitable on a gross margin basis. Some customers have moved on to larger banks for similar services, and the company has struggled to find new areas for growth beyond its cap table business.
Despite these challenges, Carta’s cap table business is still growing, generating $380 million in revenue last year. The company has raised approximately $1.2 billion from investors, including Union Square Ventures, Andreessen Horowitz, Spark Capital, and Tribe Capital.
In light of the recent controversies and challenges, Carta’s current valuation of $2 billion reflects a more realistic assessment of its business. The company will need to address its reputation and find new avenues for growth to regain investor confidence and reach its full potential.