It was 2012 and Henry Ward was not having an easy time of it. Trying to raise seed money for his fledgling fintech was turning into a task of Sisyphean proportions. At that time, investors were only interested in your pitch if it had pictures. No, seriously – pictures. His platform was designed to streamline private company investment processes but his requests for funding were falling on very deaf ears.
“[Investors] were like, ‘Cap tables? Really? Why aren’t you doing like photo-sharing cap tables or something?” CEO and founder Henry Ward of Carta said in an interview. “And now fintech is hot, and you can’t get a photo-sharing app funded to save your life.”
Fast forward to 2019 and Carta has covered a lot of ground in five months. They recently closed $300 million in series E funding and this comes on the heels of a successful $80 million series D funding round from December 2018. While raising consecutive rounds of capital isn’t entirely novel, the rate at which they have done so is definitely noteworthy. They raised funding at nearly four times the amount, at double the price, and in just half a year and it doesn’t look like Carta will be slowing down anytime soon.
Carta is an equity platform software that allows users to buy, sell and trade privately held assets in a similar way users do with public traded companies. They have built their business by capturing a way to capitalize on the upsurge in startup valuations and business has been good to them. Their own valuation has soared to new heights and recently reached $1.7 billion.
“We are building, growing quickly and growth is expensive,” the Carta founder shared. “We’re building a new financial infrastructure, and that is expensive.” The company recently revealed their annual reoccurring revenue (ARR) reached $50 million – which is more than double their $23.2 million earnings in 2017.
The company formerly branded as eShares is best known for helping private companies and investors collate and create a real-time picture of who has ownership at a startup. Their real genius started when co-founder Manu Kumar came to the realization that publicly traded companies were traded online while private companies were still issuing paper stock certificates. From there, it was about building his company and educating others on what they could offer.
“It seems counter intuitive, but most high-end attorneys don’t like managing cap tables or processing stock certificate and option grant paperwork,” Ward said. It is a strong revenue stream but doesn’t offer higher yield margins that look good to a firm’s top line. On the other hand, the work remains high-risk.
“One attorney described the dilemma well when he said ‘I’m in a client services business. No client has ever said to me ‘Great job for not screwing up my cap table!’ But screwing up a cap table is usually how you lose clients,” Ward explained.
“It is a high-risk and low-reward activity for most attorneys and the early adopters were very excited to help us solve this problem for them.”