Cartaa Silicon Valley startup that spun off one of its businesses earlier this year is working on a secondary sale that would value the company at $2 billion, according to TechCrunch.
Carta is working with investment bank Jeffries on the sale and originally hoped to find demand for the offering at a value of $4 billion, but according to our sources, even $2 billion may prove ambitious.
That’s a huge, if not entirely unexpected, drop in valuation for Carta, which initially focused on fund management software but began over time to evolve into a “private exchange for companies.” His goal was to take advantage of the network of companies and investors that use his platform and of which he has knowledge. The grand idea was to become the transfer agent, brokerage and clearinghouse for all private equity 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 later used the same system to boost 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 worth $7.4 billion after first selling $100 million worth of its shares with valuation of $6.9 billion. its own platform.
About 15 months later, in late 2022, the company’s CEO, Henry Ward, Axios said that Carta was worth even more – $8.5 billion – after a separate secondary sale. (He did not disclose how many shares were sold at that valuation or who bought them.)
Those increased numbers were already surprising to some industry insiders who have long scoffed that Carta has simply cobbled together several disparate, modestly profitable businesses in an effort to position itself as the next big platform company.
But that $8.5 billion valuation looked even more destined to fall after a tiff earlier this year with a startup client whose complaint about the company resonated with much of the rest of the startup world.
It all started in early January when Finnish CEO Karri Saarinen complained very public that Carta was using information about his company’s investor base to try to sell its shares to outside buyers without the company’s knowledge or consent.
Ward initially 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 getting out of business. that got her into so much trouble.
“Because we have the data, if we’re trading secondary, people will always be concerned that we’re using the data, even if we’re not,” Ward was announced then on Medium. “So we decided to prioritize trust and get out of the secondary business.”
A PR disaster for Carta, it was just the first time Carta landed in the press for all the wrong reasons. The company has a long history is being sued by former employees who alleged the company has a toxic culture, including one that disadvantages women.
Now, Carta is seemingly returning to its roots – and an earlier valuation that probably better suits the business. While Carta’s tabletop business is still growing — one source said Carta generated $380 million in revenue last year — it also lost $65 million in 2023 and “there aren’t many other places to grow,” he said. this. face.
Another related challenge is that Carta has not found a way to make its fund management business profitable on a gross margin basis. In part, it may be how the company has priced this business, but it doesn’t help that many of Carta’s customers don’t return as they fail to raise new venture capital later on. Meanwhile, a pool of former Carta clients is now so large that they have moved to larger banks like Morgan Stanley for some of the same services they once received from Carta.
Carta did not immediately respond to TechCrunch’s request for comment.
Over the years, Carta has grown approx 1.2 billion dollars by investors, according to startup tracker Tracxn.
Some of the venture firms leading the company’s rounds include Union Square Ventures, Andreessen Horowitz, Spark Capital and Tribe Capital.
