By Rebecca Heilweil
This past December, the equity management startup Carta was worth [a reported $800 million] (https://techcrunch.com/2018/12/27/cap-table-management-tool-carta-valued-at-800m-with-new-funding/).
By May, the company soared to a $1.7 billion valuation, thanks to its latest $300 million funding round.
Carta, founded in 2012 as eShares, offers companies products that streamline the process of investor management, such as issuing stock certificates, managing capitalization tables, and handling employees’ exercising of options. It also offers companies appraisals for their common stock ー which companies that offer options must complete ー and fundraising modeling.
The company says that it now serves more than 700,000 shareholders at more than 11,000 companies, and that it handles over $575 billion in equity.
The $1.7 billion valuation comes from the venture firm Andreessen Horowitz, which led Carta’s most recent funding round. The startup’s other investors include Goldman Sachs, Thrive Capital, and Lightspeed Venture.
“They’re betting that we’re going to build a private stock exchange, the NYCS or Nasdaq of private companies, so they’re investing in the option on that,” Carta CEO Henry Ward told Cheddar. “A lot of companies have been trying to solve that problem for a long time. No one’s cracked the code.“
By tracking the information that Carta receives from its companies, such as detailed capitalization structures, it can build the groundwork for a trading market for private companies, Ward says.
“Now we know all the owners, the shareholders, the employees of this company, and we also are the transfer agent, or the settlement platform, so now we can trade across these things,” said the CEO. “We know all the market participants.”
“It’s a weird world that we have hyper-liquidity in the public markets and zero liquidity in the private. 90 percent of the world’s assets are actually privately owned,” explained Ward. “They’re not going to go public, and a lot of them may not want to go public.”
Many companies might prefer to stay private in order to maintain control over investors and keep information private.
“A lot of the companies that are waiting longer, a lot of the outgrowth and growth curves are being done in the private world,” said Ward, pointing to the disparity between Amazon, which went public in 1997 aiming for a [300 million] (https://www.wsj.com/articles/SB859220492737069500) public offering, while Facebook went public in 2012 aiming for [$100 billion] (https://www.nytimes.com/2019/04/10/technology/uber-ipo.html) public offering.
According to [data] (https://www.nber.org/reporter/2018number2/stulz.html) from the National Bureau of Economic Research, there are fewer companies trading publicly now than there were 40 years ago, shrinking from nearly 5,000 to about 3,500 in 2016.
Ward wagers that this trend has barred public, non-accredited investors from the large-scale growth seen by major companies going public right now, such as Uber.
He said Carta’s newest funding will support the creation of this exchange, which he anticipates will see its first trade during the first quarter of next year.