As startups have stayed private longer and liquidity has become harder to secure for early employees and investors, more and more shareholders have looked for ways to unload their shares to others. All the way back in 2011, companies like SecondMarket were seeing nine-figures’ worth of shares being traded on their secondary share platforms.
That wave of liquidity startups ran into two problems: One was regulatory, and the other was a lack of company information about cap tables and that company’s current financial picture. Stock buyers were essentially flying blind while buying into companies, which some investors were more than willing to do, but that blindness limited the market demand for secondary shares significantly.
Carta is hoping that its base as the cap table management solution of choice for many startups will allow it to parlay that position into a new service it has called CartaX. We’ve heard rumblings about the service for more than a year now, but according to a new blog post by founder Henry Ward, it looks like the product is exiting beta and starting to operate in the real world with real money.
Yesterday, Carta sold just shy of $100 million of its shares across 1,484 market orders to 414 participants through its own CartaX product at a price of $6.9 billion. Ward says that is up from the $3.1 billion valuation of the company’s Series F round from last year.
As a comparison, secondary transactions typically involve secondary buyers who negotiate these deals manually one-on-one with individual sellers. What makes CartaX interesting is that it could allow for much faster and more frequent secondary sales at companies based on the same sort of computerized trading models that currently power the stock market.
Liquidity is a huge issue for startups, and while CartaX is just getting going, it fulfills a key need for many participants in the startup ecosystem, and it’s a key financial product to watch as it expands in 2021.
Meanwhile, revenues are looking good at Carta these days. According to an article earlier today by Zoë Bernard and Cory Weinberg at The Information, Carta has an ARR of $150 million. That’s a 46x revenue multiple if all the numbers are correct, which these days is good if not great for SaaS companies approaching the public markets.
This post first appeared here: https://techcrunch.com/2021/02/04/cartas-startup-liquidity-service-cartax-conducts-first-transactions-on-its-own-cap-table/