Cap table management Startup Carta has been facing a PR nightmare for the past couple of days. This isn’t Carta’s first public scandal, to be clear, but this news seemed to cause more of a stir because it directly affected its customers.
So what happened? The least of which is that a sales employee, according to Carta, used confidential data from one of the company’s clients to create a sales pitch for a secondary sale of stock. The act was a clear violation of Carta’s ethics and customer data privacy. The company first suspended secondary trading and then last night said it would shut down that business altogether.
The problem, according to Carta, is being addressed. But the company’s customers—investors and startups—may not love the fact that there has been a flagrant breach of ethics and breach of privacy at a provider that hosts some of their most sensitive data.
Before we dive into what this mess might portend for Carta, we need to understand the state of affairs at the company before this unfolds. Henry Ward, co-founder and CEO of Carta, said in one Medium suspension As of Monday night, Carta’s annual recurring revenue was $373 million, of which only $3 million was from those secondary sales. The company’s last seed round was raised in 2021 at a $7.4 billion valuation.
Although Carta has not raised a single round since that 2021-era transaction, according to secondary data from platforms such as Hiive Markets, Caplight and Notion, its current valuation is estimated to be about half of the last primary round.
Now, that’s not terrible when you compare this valuation haircut to current valuation trends for late-stage startups. My colleagues Alex Wilhelm and Anna Heim also wrote Tuesday morning that the company’s growth in recent years has been promising, even without the aftermarket activity.
