Cartaan ambitious one The 12-year-old Silicon Valley outfit has gone through several iterations over time, first inviting investors, startups and employees to use its software to manage capital boards and later aspiring to evolve into a “private stock exchange for companies,” as founder Henry Ward once told TechCrunch. As he explained in 2019: “Now that you have this network of companies and investors all on one platform and the ability to transfer securities, you can create liquidity on top of that.”
The strategy has boosted Carta’s valuation in recent years. But a prominent client is now accusing Carta of misusing sensitive information that startups trust the company to pursue its own goals. The allegation raises broader questions about how Carta operates, even as Carta maintains the incident was isolated.
The controversy dates back to Friday, when Finnish CEO Karri Saarinen posted on LinkedIn that he had received surprising news about Linearthe project management software company he co-founded four years ago and it highlighted 35 million dollars in funding this fall. Linear is a Carta client, and according to Saarinen, earlier Friday, without his consent or knowledge, a Carta representative contacted an angel investor in Linear, telling the person that Carta had a “standing purchase order” by an interested party. at a certain price, though that buyer may be willing to “stoop higher,” the Carta official said in an email.
As it turns out, Linear is perfectly happy with its current shareholders, and this angel investor is related to Saarinen, so he immediately alerted him to the email communication. Feeling betrayed by Carta, Saarinen took to LinkedIn and took down the company.
“This may be the end of Carta as a trusted platform for startups,” he wrote. “As a founder, I am honored that Carta, whom I trust to manage our capital board, is now cold-calling our angel investors about selling Linear shares to their undisclosed buyers.” Saarinen continued, “They never contacted us (their client) about starting an order book for Linear stock. The investor they approached is a family member whose investment we have never published anywhere. We and they never opted for any kind of secondary sales. However, Carta Liquidity found their email and knew they owned Linear shares.”
After the post took on a life of its own — it has been liked thousands of times and garnered nearly 800 comments — Ward joined the conversation to apologize. Ward also said the email sent to Linear’s investor was not consented to by Carta. Ward wrote: “Hi Karri and everyone, I’m disappointed that this happened. We are still investigating, but it appears that on Friday morning an employee violated our internal procedures and went out of bounds by approaching customers they should not have. This affected Karri’s company and two other companies. We have contacted the other two companies and are continuing to investigate. If you have any other information, please contact me directly at henry.ward@carta.com to let me know as we continue our investigation.”
Ward did not respond to TechCrunch’s request for more information yesterday. But Saarinen was not reassured by Ward’s public apology. He went on to post on LinkedIn that the incident seemed far from isolated. “So far I have heard from 4 of our investors who were approached by the same email. All of them were the early investors before the seed. Also heard from 2 companies that had this happen to them. One of them is a prominent AI company.”
Saarinen too posted separately in X that, “I learned from several companies that this has been happening for months or even years, where investors or employees of private companies are being asked by Carta officials to put their shares up for sale. These people have not opted in and the companies have not authorized these sales.”
Back on LinkedIn last night, Saarinen wrote that he had finally spoken with Ward and that “nothing” Ward said to Saarinen “really changed” his position.
Saarinen told TechCrunch via email last night that he is “retiring from this race, it has already consumed too much of my time. . . My confidence in Carta has not been restored after the discussion with the CEO.” Added Saarinen, “I hope Carta takes action on these issues, but we will likely move on to another service as we no longer trust them.”
Meanwhile, TechCrunch reached out to several Carta board members to ask about how much flexibility Carta allows in its contracts with its customers. Venture investor Matt Murphy of Menlo Ventures, who is among the company’s directors, responded to TC’s request for comment this morning, repeating what Ward earlier told Saarinen on Linkedin. “Carta does not use customer cap table data,” Murphy wrote. “The capital board business and the CartaX (private equity liquidity) business are separate business units with separate teams and leadership. There was a violation of this protocol by an employee of the CartaX team, which was addressed and learned from.”
But startup founders are watching the conversation and comparing notes. As someone told TechCrunch this morning, “I’m a Carta customer. I just found out about all the weird stuff going on with them going behind companies backs to offer subs. I have not been affected by this, but I would be furious if I found out they were selling shares of my company without my knowledge. I’m definitely thinking about switching platforms.”
They may not have the protections they imagined. In a subscription agreement sent to TechCrunch by a startup, the language is noticeably vague about protecting customer data, stating only that “Carta will maintain appropriate administrative, physical and technical safeguards to protect the security, confidentiality and integrity of Customer Details, as described in the Documentation. These safeguards shall include, but shall not be limited to, measures designed to prevent unauthorized access to or disclosure of Customer Data (other than by Customer or Users).”
Companies typically have final approval for transactions related to secondary sales — even though they feel more pressure to allow them these days, given the mostly stagnant IPO market.
As Murphy noted in his email to TechCrunch, these days, “Almost every board meeting I go to, some employee is selling stock, and we have to allow that, exercise [right of first refusal] and sometimes we block if we can.”
Indeed, Murphy hinted that Carta’s process around such sales is usually both straightforward — and ethical. “With Carta, they have a bid product where they coordinate directly with the company to help a process they would run. Then, in the case of the CartaX purchase, we verify a buyer and confirm their demand and use public data sources like Crunchbase and Pitchbook to find a potential offer that matches the buyer.”
Given Saarinen’s vastly different experience, he doesn’t seem interested in what’s typical of Carta. “Carta states in its pdf faq that ‘most secondary transactions will be subject to corporate approval,'” he noted on LinkedIn. “But they still accept buy orders and spam our investors knowing they won’t be approved.”
For Carta, the unflattering attention is the latest in a stream of bad publicity. Has been so stable that in October, Ward even emailed customers, telling them that if they were concerned about “negative press” associated with the outfit, they should read a Medium suspension his. The move only seemed to draw more attention to the many reported problems plaguing the company.
For example, Carta started in 2023 by suing its former CTO and has been involved in several other lawsuits over the years. In 2020, the company’s former vice president of marketing sued Carta, accusing the outfit of gender discrimination, retaliation, wrongful termination and violating California’s Equal Pay Act. (TechCrunch featured that case here .) Soon after, four employees spoke on the record with The New York Times, telling the paper that when they raised concerns about how the company was run, they were they were sidelined, demoted or took pay cuts.
