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Carta’s valuation will be slashed by billions in an upcoming secondary sale

Cartaa once-successful Silicon Valley startup that famously pulled out of one of its businesses earlier this year is working on a secondary sale that would value the company at $2 billion, TechCrunch has learned.

Carta is working with investment bank Jeffries on the sale and initially hoped to find demand for a $4 billion offering, but according to our sources, even $2 billion could prove ambitious.

It’s a huge, if not entirely unexpected, drop in value for Carta, which originally focused on limit table management software but has since evolved into a «private exchange for businesses.» His goal was to take advantage of the network of companies and investors who used his platform and into which he has insight. The big idea was to become a transfer agent, brokerage and clearing house 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 this the same system in order to strengthen its own value in the eyes of investors. Indeed, after huge jumps in valuation, since 1.7 billion dollars in 2019 to $3.1 billion in 2020, Carta announced in the summer of 2021 that it was worth a whopping $7.4 billion after first selling $100 million worth of its stock at a $6.9 billion valuation on 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 this valuation or who bought them.)

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Those heady numbers were already astounding to some industry insiders who had long smirked that Carta had merely cobbled together a bunch of disparate, moderately lucrative businesses in an effort to position itself as the next big platform company.

But that $8.5 billion estimate seemed doomed to fall even further after intricate earlier this year with a startup client whose complaint about the company resonated across much of the startup world.

It all started in early January when Finnish CEO Karri Saarinen complained very public that Carta used information about its company’s investor base to try to sell its stock to outside buyers without the company’s knowledge or consent.

Ward initially blamed a rogue Carta employee, but the startup’s founders began comparing notes—and sharing similar experiences—and within 72 hours of being accused of misusing customer data, Carta said to go out business line that got him into so much trouble.

«Because we have data, if we’re trading secondary data, people will always worry that we’re using data, even if we’re not,» Ward announced on Medium at the time. «That’s why we decided to prioritize trust and get out of the secondary trading business.»

A public relations disaster for Carta, it was hardly the first time Carta had made the press for the wrong reasons. The company has a long history be sued by former employees who claimed the company had a toxic culture, including one that disadvantaged women, and sued them.

Now Carta is seemingly returning to its roots – and to an earlier assessment that is arguably better suited to business. While Carta’s table top business continues to grow — a source familiar with the matter said Carta posted $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 person.

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Another related challenge is that Carta has not found a way to make its fund management business profitable on a gross margin basis. Part of that may be the way the company priced that business, but it doesn’t help that many of Carta’s clients don’t return because they fail to raise subsequent new venture funds. Meanwhile, the pool of Carta’s former clients is now so large that they have moved to larger banks such as 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 picked up the rough 1.2 billion dollars from investors, according to startup tracker Tracxn.

Some of the venture firms leading rounds in the company include Union Square Ventures, Andreessen Horowitz, Spark Capital and Tribe Capital.

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