Carta – Founders, History, Services, Business Model and Growth

Carta is a privately held American technology company that provides equity management software for private and public companies. The company was founded in 2012 by Henry Ward and Manu Kumar. Carta is headquartered in San Francisco, California, and it has offices in New York City, London, and Bangalore.

Carta’s mission is to “empower entrepreneurs and investors to build better companies.” The company’s software helps private and public companies to manage their equity, including issuing shares, tracking ownership, and managing cap tables. Carta also provides a number of other services, such as fundraising, investor relations, and compliance.

Carta’s software is used by over 100,000 companies, including Airbnb, Stripe, and Reddit. The company has raised over $1 billion in venture capital funding, and it is valued at over $4 billion.

Here are some of the key features of Carta’s software:

• Equity management: Carta’s software helps companies to manage their equity, including issuing shares, tracking ownership, and managing cap tables.
• Fundraising: Carta’s software helps companies to raise capital, from seed rounds to IPOs.
• Investor relations: Carta’s software helps companies to manage their investor relations, including communicating with investors and tracking shareholder votes.
• Compliance: Carta’s software helps companies to comply with securities regulations, such as the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Carta is a leading provider of equity management software for private and public companies. The company’s software is used by some of the most innovative companies in the world, and it is helping to make it easier for companies to raise capital and manage their equity.

Founding History of Carta

Carta, formerly known as eShares, was founded in 2012 by Henry Ward and Manu Kumar. The idea for the startup originated when Henry Ward, a former executive at a hedge fund, encountered the complexities and inefficiencies of managing equity ownership in private companies. Ward recognized the need for a modern solution to simplify the process and increase transparency for all stakeholders involved.

In the early days, eShares operated as a digital platform that aimed to digitize paper stock certificates. The goal was to provide a secure and efficient way for companies to issue and manage their equity electronically. However, as the founders delved deeper into the challenges faced by private companies, they realized that cap table management was just one piece of a much larger puzzle.

The company underwent a significant transformation in 2015 when it rebranded as Carta and expanded its vision beyond digital stock certificates. The founders recognized the potential to build a comprehensive software platform that would not only streamline equity management but also address critical issues like valuations, compliance, and investor relations.

Carta gained early traction by targeting startups and small private companies, which often faced significant hurdles when it came to tracking equity ownership and managing cap tables. The company’s user-friendly interface and automation capabilities resonated with entrepreneurs and early-stage companies looking for an efficient way to handle equity-related processes.

The startup quickly attracted attention and investment from prominent venture capital firms, including Union Square Ventures, Menlo Ventures, and Social Capital. These investments enabled Carta to expand its team, develop advanced features, and scale its operations to cater to a growing customer base.

In subsequent years, Carta continued to refine its product offering and broaden its market reach. The company introduced features like 409A valuations, which helped private companies accurately value their stock options and comply with tax regulations. They also expanded their services to address the needs of venture capital firms, providing portfolio management tools and streamlining the investment process.

As Carta grew, it expanded its customer base to include larger private companies, leading law firms, and institutional investors. The company also made strategic acquisitions to enhance its capabilities and broaden its product portfolio. For instance, in 2019, Carta acquired the valuation firm Solium, further strengthening its expertise in equity valuations.

By 2021, Carta had become a well-established player in the fintech industry, serving thousands of companies and managing trillions of dollars in equity. The company’s success and rapid growth led to multiple funding rounds, valuing Carta at several billion dollars.

Products and Features of Carta

Carta offers a comprehensive suite of products and features designed to streamline equity management, valuations, compliance, and investor relations. Let’s delve into the details of Carta’s key offerings:

Cap Table Management

Carta’s cap table management system provides a centralized and real-time view of a company’s ownership structure. It enables companies to efficiently manage equity issuances, maintain accurate ownership records, and track changes in ownership over time. Some key features of Carta’s cap table management include:

• Automated Equity Issuance: Carta automates the process of issuing equity, making it easy to grant and track stock options, restricted stock units (RSUs), and other forms of equity compensation.
• Scenario Modeling: Companies can perform “what-if” analyses to model different equity scenarios, such as new fundraising rounds or employee option grants, and see their impact on ownership percentages.
• Waterfall Analysis: Carta provides a detailed waterfall analysis, which allows stakeholders to understand how the proceeds from a potential exit event would be distributed among shareholders based on their ownership.
• Compliance Tracking: Carta helps companies stay compliant with regulatory requirements by tracking vesting schedules, managing insider trading restrictions, and providing audit-ready cap table reports.

Valuations

Carta offers robust valuation software that enables companies to determine the fair value of their equity for financial reporting, tax compliance, and other purposes. Some key features of Carta’s valuation offering include:

• 409A Valuations: Carta performs 409A valuations, which are essential for private companies to comply with IRS regulations when granting stock options at fair market value.
• ASC 718 (formerly FASB ASC Topic 718) Reporting: Carta assists companies in complying with ASC 718, the accounting standard for stock-based compensation. It provides tools for calculating and reporting the expense associated with equity-based compensation.
• Cap Table Modeling: Carta’s valuation software integrates with its cap table management system, allowing companies to model different valuation scenarios and understand the impact on their equity ownership and dilution.
• Audit and Compliance Support: Carta provides documentation and support to help companies undergo valuation audits and meet compliance requirements.

Investor Services

Carta’s investor services cater to the needs of venture capital firms, institutional investors, and limited partners (LPs). These features help investors manage their portfolios, monitor their investments, and facilitate communication with portfolio companies. Key features include:

• Portfolio Management: Carta allows investors to track their holdings across various companies and view performance metrics, distributions, and other key portfolio data.
• LP Reporting: Carta generates comprehensive reports for limited partners, providing insights into fund performance, cash flows, and other important metrics.
• Document Management: Investors can securely store and access legal documents, investment agreements, and other critical information related to their investments.
• Communication Tools: Carta facilitates seamless communication between investors and portfolio companies, enabling secure messaging and document sharing.

Compliance and Governance

Carta helps companies maintain compliance with legal and regulatory requirements related to equity management. It provides tools and features to support good governance practices and ensure transparency. Key compliance and governance features include:

• Equity Plan Administration: Carta assists in managing and administering equity compensation plans, including stock option plans, RSU plans, and employee stock purchase plans (ESPPs).
• Insider Trading Compliance: Carta helps companies enforce insider trading policies by tracking blackout periods, managing pre-clearance requirements, and facilitating compliance reporting.
• Audit and Compliance Support: Carta provides robust reporting capabilities and audit trails to support compliance and regulatory audits.
• Electronic Document Signing: Carta’s platform allows for secure electronic signing of legal documents, streamlining administrative processes.

Overall, Carta’s suite of products and features empowers companies, investors, and stakeholders to efficiently manage equity ownership, perform accurate valuations, ensure compliance, and enhance transparency in the complex world of equity management.

Business Model of Carta

Carta operates on a subscription-based software-as-a-service (SaaS) business model. Let’s explore the key components of Carta’s business model in detail:

Subscription Revenue: Carta generates its primary revenue through subscription fees charged to its customers. Companies, venture capital firms, and institutional investors pay a recurring fee based on the features and services they require. The subscription pricing typically varies depending on factors such as the size of the company, the number of stakeholders, and the complexity of their equity management needs. The subscription model allows Carta to provide ongoing support, maintenance, and regular updates to its software platform.

Tiered Pricing: Carta offers different pricing tiers to cater to the diverse needs of its customers. The tiers are typically based on the size and stage of the company, with different feature sets and usage limits. The pricing tiers enable customers to select a plan that aligns with their specific requirements, providing flexibility and scalability as their business grows.

Upselling and Add-On Services: Carta employs an upselling strategy to offer additional features and services beyond the core subscription plans. For instance, companies may opt for add-on services such as advanced valuation capabilities, customized reporting, or dedicated support. By providing these optional services, Carta increases its revenue per customer while delivering tailored solutions that address specific customer needs.

Enterprise and Custom Solutions: For larger enterprises and organizations with unique requirements, Carta offers enterprise and custom solutions. These solutions are tailored to meet the specific needs of the organization and may involve additional customization, integration, or dedicated account management. Enterprise solutions often involve negotiation of pricing and contract terms based on the scale and complexity of the engagement.

Valuation Services: In addition to its software platform, Carta provides professional valuation services to help companies determine the fair value of their equity. This service typically involves conducting valuations for financial reporting, tax compliance, and regulatory purposes. Valuation services are offered as an additional revenue stream for Carta and can be utilized by both Carta platform users and external clients.

Partnerships and Integrations: Carta forms partnerships and integrations with complementary service providers and platforms in the financial and legal industries. By integrating with other software tools commonly used by its customers, such as accounting systems, HR platforms, or legal software, Carta enhances its value proposition and provides a seamless experience for users. Partnerships may also include referral programs, where partners refer customers to Carta in exchange for incentives or revenue sharing.

Data and Insights: As Carta manages vast amounts of equity-related data, it has the potential to generate valuable insights for its customers. Carta may explore monetizing this data by providing analytics, benchmarking reports, or industry insights to its customers or third parties. By leveraging its data assets, Carta can create additional revenue streams and contribute to the broader ecosystem of financial and market intelligence.

Carta’s business model revolves around providing a comprehensive equity management platform, combined with additional services and customization options. By addressing the complex needs of companies, investors, and stakeholders in the private market, Carta generates recurring revenue from subscriptions, upselling, custom solutions, valuation services, partnerships, and potentially data monetization. This model allows Carta to deliver ongoing value to its customers while ensuring the scalability and sustainability of its business.

Growth of Carta over the years

Here are some of the key factors that have contributed to Carta’s growth over the years:

• The growth of the startup ecosystem: The startup ecosystem has grown significantly in recent years, and this has led to an increase in the demand for equity management software. Carta’s software is well-suited for the startup ecosystem, as it is easy to use and scalable.
• The increasing complexity of equity: As companies grow and raise more capital, their equity structures become more complex. Carta’s software helps companies to manage this complexity, and it provides a single source of truth for all of their equity data.
• The regulatory environment: The regulatory environment for equity has become more complex in recent years. Carta’s software helps companies to comply with these regulations, and it provides a number of features that make it easier for companies to manage their compliance risks.
• The company’s strong leadership: Carta is led by a strong team of experienced entrepreneurs and investors. The company’s CEO, Henry Ward, has a deep understanding of the equity markets, and he has a proven track record of success.

As a result of these factors, Carta has experienced rapid growth over the years. The company’s revenue has grown from $1 million in 2012 to over $150 million in 2023. Carta’s customer base has also grown significantly, and the company now serves over 15,000 companies.

Carta is well-positioned to continue to grow in the years to come. The company is addressing a growing market need, and it has a strong product and leadership team. Carta is also well-funded, with over $1.1 billion in venture capital funding and is valued at $8.5 billion.

Carta is a well-funded and rapidly growing company. The company is well-positioned to continue to grow in the years to come.

Also Read: Netskope – Founders, Business and Revenue Model, Growth

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