Nearly 72 hours after a prominent startup client complained that Carta was misusing the information it was entrusted with — scaring off many of Carta’s tens of thousands of other customers in the process — Carta exited the business that got it into trouble. With the client.
Henry Ward, co-founder and CEO of Carta, posted on Medium Tonight “Because we own the data, if we trade secondary data, people will always worry that we are using data, even if we don’t. So we decided to prioritize trust and get out of the secondary trading business.
It’s a dramatic turn of events for Carta, which originally focused on cap table management software but began evolving over time into a “private corporate equity market” to tap into the network of companies and investors already using its platform and with insights. The big idea was to become the transfer agent, brokerage and clearing house for all private equity transactions in the world.
While this move made Carta more valuable in the eyes of venture backers, the company has to expand after all! — put the company in a dangerous position after Finnish CEO Kari Saarinen posted on LinkedIn on Friday that Karta was using information about his company’s investor base to try to sell its shares to outside buyers without the company’s knowledge or consent. “As a founder, I feel nice,” Saarinen wrote, Linear, a four-year-old project management software company that is a Carta customer [of] It is ironic that Carta, who I trust to manage our cap schedule, is now cold calling our angel investors about selling Linear shares to undisclosed buyers. “They (their client) have never approached us about starting an order book for linear shares,” Saarinen continued. “The investor they approached is a family member whose investments we have not published anywhere. We and they have never been involved in any kind of secondary sales. However, Carta Liquidity found their email and learned they owned Linear stock.
While Ward publicly apologized to Saarinen, blaming a rogue employee who “violated our internal procedures and went out of bounds to reach out to clients he shouldn’t have,” Saarinen continued the discussion publicly, saying he had identified several other founders whose investors had also been contacted by representatives. Carta without their knowledge.
This story is evolving. . .