Investment

Family group back novel non-IPO fundraising platform

Carta is winning support from family offices, investment syndicates and top venture capitalists in its mission to help company founders and employees manage, and sell, shares in their businesses, without needing to undergo an IPO.

A syndicate called 8090 Partners, backed by the billionaire Ozmen family, recently invested in Carta along with Republic Labs – which also seeks out deals for family offices – and QD Ventures, a tech investor. Goldman Sachs was an early backer.

According to Pitchbook, private equity firm Silver Lake is seeking to raise a $500 million-plus for Carta at a price that would imply a valuation for the company of $7.4 billion, double the size achieved early this year. 

Carta was founded in 2012 by Henry Ward, previously a founder of Secondsight, a portfolio optimisation service for retail investors. Initially called eShares, Carta sets out to help privately-owned businesses, and their employees, keep a record of the underlying value of their equity, and stock options on a ledger known as a cap table. 

It is continually updated to take account of buying, selling and third-party price appraisals, known as a 409A valuations which help investors through audit, tax and performance measurement. Carta offers administration to 20.000 corporate clients and nearly a million individuals. One of its best-known clients is Robinhood, the share trading platform.

Once a sufficiently large network of investors started using Carta’s cap tables, it proceeded to develop a crossing network for unlisted stock to help company founders and employees raise cash without needing to go through a laborious IPO process. 

In 2020, Ward commented: “Positive trends in private company valuations mean companies don’t need to go public to access capital. They also have more options to create liquidity for employees, further reducing the need to go public. Looking at these trends, it’s clear that private is the new public.”

He later added: “It’s an odd artefact and history that private markets have zero liquidity, public markets have hyper-liquidity, and there is nothing in between.” Intriguingly, family offices and other institutions have also become concerned by the way excessive market liquidity is producing volatility in the public markets and distorting the value of portfolios. They now view less liquid private assets as an interesting alternative.

Ward’s share transaction service, CartaX, was trialled by Carta itself in February. It sold equity worth nearly $100 million to 52 investors, out of a pool of 100, of whom a fifth comprised family offices. The underlying value was $6.9 billion, or marginally less than current levels. 

Securities firms are not entirely convinced that Carta will manage to disrupt existing markets, where Nasdaq Private Market and Fore Global have been active for years. The SPAC market has shown that the transfers to the public sector can be efficient, and prompt, compared to an IPO. Private equity firms have been involved in secondary market transactions for years.

A rival share trading service is offered by AngelList, founded by Raval Navikant, who sees value in markets where participants think differently, but far less in markets where traders behave the same way and act like a mob.

JP Morgan also sees potential in the trading of private assets. It has invested in Zanbato, a private company share crossing network founded by Joe Lonsdale, who also runs wealth platform Addepar. 

Carta believes it can offer efficiency to clients who use its cap tables, reducing overheads and cutting out third-party administration. Goldman Sachs Principal Strategic Investments is an investor. Its global co-head Darren Cohen says Carta’s solutions: “address pain points in inefficient markets.”

New arrivals Fatih and Eden Ozmen are billionaires who developed the Sierra Nevada aerospace corporation, a space pioneer whose clients include Nasa and the US armed forces. Keren Ozmen represents the next generation for the family, steadily developing a successful venture capital firm. 8090 Partners has developed a syndicate that represents twenty wealthy families and entrepreneurs.

Tech veteran Andreessen Horowitz is another Carta investor and founder Marc Andreessen has joined its board of directors, expressing confidence in its extensive network of users which should help CartaX develop liquidity for stock transfers. Lightspeed Venture Partners, Menlo Ventures, Tribe Capital and Tiger Global are among Carta’s other investors.

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