Private Markets Start-up Carta Joins Unicorn Club with $1.7 Billion Valuation

Carta, a Palo Alto-based technology start-up offering private company valuation and equity management services, has announced a $300 million investment injection propelling it into the Unicorn Club of Silicon Valley companies valued at more than $1 billion.

Carta’s series E funding round, led by venture capital firm Andreessen Horowitz with participation by Lightspeed Venture Partners, Goldman Sachs Group and Meritech Capital, among others, follows closely on $80 million raised in the company’s series D round in December, which increased its value then to $800 million.

After the series E round and subsequent investments, however, the company’s total valuation stands at $1.7 billionOpens a new window .

The seven-year-old company started its journey when someone askedOpens a new window : Why can I buy Google stock on my phone, but investing in a private company costs $20,000 in legal fees, takes 45 days to close, and ends with a mailed paper stock certificate?

CEO and co-founder Henry Ward set out to tackle this problem by offering a simpler method of online securities shares that grew into a digital platform that allows private companies to manage equity electronically with the participation of shareholders, employees, auditors, and lawyers.

Carta’s capitalization table softwareOpens a new window automatically tracks the details of a company’s issued stock, providing information in real time on all securities issued and who owns them.

The firm notes the irony of many artificial intelligence, blockchain and information-security start-ups that still rely on paper share certificates and what Carta regards as out-of-date Excel spreadsheets, with lawyers charging huge fees as the companies rush to get their capital tables updated at key moments.

Carta also offers a service to assist with 409A valuations, named after a section of the federal Internal Revenue Code requiring privately-held companies to set stock option prices at fair market value before the shares are offered.

The service includes a waterfall model, enabling a company to assess how much each shareholder will take away at different exit valuations.

Carta, formerly known as eShares, says its now serves more than 11,000 corporations and 700,000 shareholders, both venture capital-type private investors and employees who have bought in through company stock options.

In 2018, the company also launched a fund administration service. Its real-time portfolio management platform has $9 billion in assets under administration.

Following the latest funding round, Marc Andresseen – co-founder of Andreessen Horowitz, co-creator of the Netscape web browser and an early investor in Facebook – will join Carta’s board of directors.

“We believe Carta will change how Wall Street and the financial world operate by transforming private markets,” Andreessen says.

Carta has laid a foundation of an extensive network of limited partners, venture capital funds and start-ups, he says, adding, “The network effect is why I’m bullish on the future of this company. Carta is redefining business ownerships as we know it.”

Will Kohler of Lightspeed Venture Partners was impressed by Carta’s vision and ownership network. “We believe the company is best positioned to change how capital markets work,” he says. Dareen Cohen of Goldman Sachs Principal Strategic Investments adds that Carta is led by a team with a proven track record. Its innovative solutions, he says, “effectively address pain points in inefficient markets.”

Investor interest in private markets is increasing. They are attracting more investments than initial public offeringsOpens a new window and with Carta apparently filling an unmet need for a sort of private stock market.

A 2018 McKinsey reportOpens a new window concluded that $448 billion had been raised in U.S. private markets the previous year, representing a 15% increase from 2016. Additionally, 91% of limited partners surveyed for the report said private markets provided better returns than publicly listed stocks.

>The Securities Exchange Commission has pledged to make it easier for main street investors to get in on private companies, including the hottest start-ups. In an interview with the Wall Street Journal last year, SEC Chairman John Clayton made the point thatOpens a new window “the private markets are awash in capital these days. The question is, who is participating?”

Carta hopes it can be a key player in making private markets more accessible and efficient. “We’ll use our new funding to enable liquidity across our network,” the company claims. “Private markets are so illiquid that founders and employees often wait a decade for an IPO to earn money from their equity. We think it’s time for this to change.”