We live in a world where everything is owned by a person, or more commonly, a group of people. Everything has an owner including businesses, the offices those businesses occupy, the patents they produce, farmland, … But very few people own what they’re constructing.
Additionally, it is now simple to purchase shares of publicly traded firms thanks to websites like E-Trade and Schwab. But that’s not the case when investing in privately held businesses, whether they are century-old manufacturing conglomerates or hot Internet start-ups. Physical paperwork is still needed for that procedure, along with emails to connect willing investors with firms and lawyers to negotiate conditions.
One such essential corporate progression is the creation and efficient management of a capitalization table (cap table). Keeping track of these things in one place makes it easier to see who owns what parts of the company and what securities are still outstanding.
When it comes to how much founders need to own the cap table, think about it this way: Not every CFO must create financial statements from scratch. However, in order to spend their time using financial statements to make strategic decisions, every CFO needs to have a high level of confidence that their financial statements are accurate, with mechanisms in place to assure accuracy.
With this in mind, Henry Ward and Manu Kumar have strived to assist people in becoming equity owners and investors in private marketplaces.
A Startup Raises from Rebuilt Beliefs Between Entrepreneurs
Henry Ward and Manu Kumar founded Carta, a technology business with headquarters in San Francisco, California, that specializes in capitalization table management and valuation software. Ward and Kumar are both serial entrepreneurs.
Prior to this, Ward served as the company’s founder and CEO of Second Sight, a platform for optimizing retail investors’ portfolios. He was extremely passionate about assisting people in becoming equity owners and investors in private markets, which is why he founded Carta.
In addition to advocating for women’s equality, Ward has also been seen discussing worker justice. He has stated his conviction that employees would eventually own stock in the firms they work for. Additionally, Ward emphasized that Carta’s objective is to ease the transition by turning more employees into shareholders.
Ward’s most recent venture, Second Sight, a set of financial tools that was, in his words, “an absolute failure,” had been backed by Kumar. Whatever the reason, Kumar continued to trust Ward. He now got a fresh thought for him. Kumar has a distinguished academic background as well, having graduated from Stanford with a doctorate in computer science after finishing his undergraduate and master’s degrees in software engineering at Carnegie Mellon.
The goal of Carta is to replace stock markets and create owners. After successfully developing tools for businesses and VCs in the private market, Carta is now developing products that give shareholders liquidity.
Carta has built software as a tool to assist businesses in maintaining their capitalization tables, which display the ownership percentages, stock dilution, and equity value in each round of investment by founders, investors, and other owners. The business runs the CartaX private stock exchange, which allows shareholders and workers to sell their shares prior to the firm going public or being bought.
In addition, Carta added such handy items as Carta Liquidity and Carta Total Compensation to its lineup of goods after acquiring Mindshare. By releasing liquidity for private enterprises, Carta Liquidity provides a private stock exchange and expands on Carta’s equity management skills. A tool for managing compensation is Carta Total Compensation. The business had managed employee stock options, and it expanded on that to create a wider package to manage cash and equity pay.
Early-stage startups make perfect clients for Carta. As they develop, early-stage firms will start charging for services. Startups are more likely to employ Carta for future needs like managing liquidity and remuneration as they become more accustomed to it. Popular Carta clients include Flexport, Thumbtack, Robinhood, and Tilray.
What Golden Opportunities Did the Initial Challenges Offer the New Star
Carta got their foot in the door in 2012 and released its first product more than 8 years ago. It provided fundamental equity management software, including cap table management and the ability for businesses to issue electronic shares for a cost of $20 per certificate. However, when it first began, Carta had little credibility.
The First Naïve Footstep into The Market
Along the journey of positioning, Ward tried to communicate Carta’s value. Founders who used a spreadsheet to maintain their cap tables perceived the competition to Carta as being “free.” When Ward tested the founders’ willingness to pay a subscription fee for access to the cap table software, he encountered resistance.
“Henry, I pay $20 a month for QuickBooks and I use that every day,” they would reply. “Why would I pay you $50 a month when I might only log into my cap table once every three months?”
This was an all-or-nothing decision for their entire firm; Carta was not providing them with a product that founders could test. Making cold calls was ineffective. Ward, the sole salesperson for Carta, focused all of his efforts on investor meetings, seeing them as opportunities to kill two birds with one stone. “We needed investors, and I was working hard to get money on my own.”
Ward had to face the truth that many startup owners, who were their target market, were not well-versed in the intricacies of cap tables. At the time, cap tables were only controlled by legal firms, therefore no one was aware that cap table software even existed. And in fact, by that time, Carta was yet to build a strong awareness it needed.
Whilst Ward was aware that this might be the case, he had a quite different idea of how to nurture Carta.
The Miracles of Listening and Changing
Ward was motivated by this criticism to abandon subscription pricing and instead concentrate on a transaction cost per certificate. Since the cost of sending physical certificates was the same as the cost of each electronic share certificate, the $20 cost per certificate seemed like a no-brainer.
“All we did was switch the comparison costs for them, so now they weren’t comparing us to other B2B software, which is very cheap. They were comparing us to legal bills, which turned out to be a lot more money. They might issue 20 stock certificates and pay $400 right off the bat, no problem.” Founders started paying Carta up front on a transaction basis after making this straightforward change in the comparative charges.
After making a straightforward change to make things better, Ward kept getting turned down by investors on Sand Hill Road. They disapproved of the transaction-based business model and were concerned that the market for electronic shares was too tiny.
Ward then started his “N-of-1” market strategy. The goal of Carta’s plan was to quickly develop a range of equity products, each of which would target a distinct market niche and use network effects to gain market share. The launch of Carta’s second product, 409A valuations, in April 2014, following the GA (general availability) of their electronic share offering in January 2014, changed the game for the business.
Until now, stock option-eligible investors, employees, and other parties have been able to receive digital share certificates from firm founders using Carta’s software. Additionally, it creates a single dashboard that allows issuers to monitor stock ownership, the timing and cost of shares issued, and the willingness of owners to sell. The portfolio management software from Carta is widely used by venture capital organizations.
Notable Achievements Positioning Leader in Financial Industry
Over the course of 10 rounds, Carta has secured capital totaling $1.1B. A Series G round of funding was received by them on August 13, 2021. 86 investors are paying for it. As of August 13, 2021, PrivCo estimates that Carta’s post-money value is in the neighborhood of $1 billion and $10 billion. The company has invested in two companies and purchased three businesses; on September 1, 2022, Capdesk was the most recent acquisition.
Because it enables business founders to issue share certificates to angel and venture investors, employees, and others who qualify for stock options, this solution is adopted by more than 6,000 clients, including well-known tech start-ups like MongoDB and Slack, as well as venture capital firms like Menlo Ventures and Union Square Ventures.
Carta is on such a meteoric rise that will allow it to deliver services and goods to customers worldwide. It’s a business to keep an eye on as it develops as a pioneer in the fintech sector, notably in the provision of services to venture capital and other financial firms.
Right since its inception, this San Francisco-based startup has proved the ability to upend the current order and alter how businesses conduct business. In Forbes’ The Cloud 100 list for 2019, Carta was ranked #44 – which grew to #27 just one year later. Additionally, Forbes included the business in its Fintech 50 list for 2019.
Notably, Carta is also leveraged by venture firms to manage their portfolios. They can utilize Carta to generate financial reports for their limited partners after quickly determining the value of the shares they own in various corporations (the people or institutions whose money they manage).
The Carta platform has grown to be one of its most well-liked varieties. It has become a leader in the FinTech sector thanks to ground-breaking technology that offers financial companies an all-in-one platform. Currently, the platform serves 143 venture firms that represent over 700,000 shareholders while working with over 11,000 enterprises.
Good Founder Emerging as Strong “Recruiter”
While Henry Ward collaborates with various skilled people that are experts in their respective fields – such as sales, finance, etc., the founder is particularly skilled at key things, chief among them recruiting.
Given the San Francisco-based Fintech’s rapid growth, Henry Ward is proclaimed as a superb recruiter who is excellent at “selling” vision and igniting employee enthusiasm. He will, hence, frequently visit teams that are feeling demoralized and spend time with them helping them close candidates and providing context.
So, the key is to identify your competitive advantage. What special qualities can you contribute to the group? He considers how he can be so important to his employees that they want to work for him even more every morning. If people truly want to work for you, you can have an amazing team, but if they don’t, you won’t.
Regardless of the issues surrounding Carta, it is undeniable that Carta is advancing financial industry modernization by offering electronic solutions that digitalize paper stock certificates, warrants, stock options, and derivatives, modernizing the processes involved in issuing stock certificates and related products.
The company’s vision – to create an inclusive culture that is based on fairness, friendliness, and equity for all – should be advocated by all means. And Carta is expected to have an unwavering drive forward in the finance industry by aggressively pursuing such ambitions.