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Carta<\/a>, a once-high-flying Silicon Valley startup that loudly backed away from one of its businesses earlier this year, is working on a secondary sale that would value the company at $2 billion, TechCrunch has learned.<\/p>\n Carta is working with the investment bank Jeffries on the sale and initially hoped to find demand for the offering at a valuation of $4 billion, but according to our sources, even $2 billion may prove ambitious.<\/p>\n That\u2019s a massive, if not entirely unexpected, drop in valuation for Carta, which originally focused on cap table management software but began over time to evolve into a \u201cprivate stock market for companies.\u201d Its goal was to take advantage of the network of companies and investors that used its platform and into which it has insights. The big idea was to become the transfer agent, brokerage and clearinghouse for all private stock transactions in the world.<\/p>\n As part of that narrative, Carta launched an exchange that aimed to find buyers for shares using an auction-style system, and it later used this same system<\/a> to bolster its own value in the eyes of investors. Indeed, after big leaps in valuation, from $1.7 billion<\/a> in 2019 to $3.1 billion in 2020, Carta announced in the summer of 2021 that it was worth a whopping $7.4 billion after first selling $100 million worth of its shares at a $6.9 billion valuation on its own platform.<\/p>\n Roughly 15 months later, in late 2022, the company\u2019s CEO, Henry Ward, told Axios<\/a> that Carta was worth even more \u2013 $8.5 billion \u2013 following a separate secondary sale. (He did not disclose how many shares were sold at this valuation or who bought them.)<\/p>\n Those ballooning numbers were already astonishing to some industry insiders who\u2019ve long snickered that Carta has merely mashed together a lot of disparate, moderately lucrative businesses in an effort to position itself as the next-big platform company.<\/p>\n But that $8.5 billion valuation seemed even more destined to fall following an imbroglio<\/a> earlier this year with a startup customer whose complaint about the company resonated with much of the rest of the startup world.<\/p>\n It all began in early January when Finnish CEO Karri Saarinen complained very publicly<\/a> that Carta was using information about his company\u2019s investor base to try to sell its shares to outside buyers without the company\u2019s knowledge or consent.<\/p>\n Ward at first blamed a rogue Carta employee, but startup founders began comparing notes \u2013 and sharing similar experiences \u2013 and within 72 hours of being accused of misusing customer information, Carta said it was getting out<\/a> of the business line that landed it in so much trouble.<\/p>\n \u201cBecause we have the data, if we are trading secondaries, people will always worry that we are using the data, even if we are not,\u201d Ward announced<\/a> at the time on Medium. \u201cSo we have decided to prioritize trust, and exit the secondary trading business.\u201d<\/p>\n A public relations disaster for Carta, it was hardly the first time Carta has landed in the press for all the wrong reasons. The company has a long history of being sued<\/a> by, and countersuing, former employees who\u2019ve alleged the company has a toxic culture, including one that disadvantages women.<\/p>\n Now, Carta is seemingly returning to its roots \u2013 and an earlier valuation that\u2019s probably better suited to the business. While Carta\u2019s cap table business is still growing \u2013 a source familiar said Carta generated $380 million in revenue last year \u2013 it also lost $65 million in 2023, and there \u201caren\u2019t a whole lot of other places for it to grow,\u201d said this person.<\/p>\n Another related challenge is Carta hasn\u2019t found a way to make its fund administration business profitable on a gross margin basis. Partly, it may be how the company has priced that business, but it doesn\u2019t help that a lot of Carta\u2019s customers aren\u2019t returning as they fail to raise subsequent new venture funds. Meanwhile, a set of Carta\u2019s earlier customers are now so big that they\u2019ve moved onto bigger banks like Morgan Stanley for some of the same services that they once received from Carta.<\/p>\n Carta did not respond immediately to a TechCrunch request for comment.<\/p>\n Over the years, Carta has raised roughly $1.2 billion<\/a> from investors, according to the startups tracker Tracxn. <\/p>\n Some of the venture firms to lead rounds in the company include Union Square Ventures, Andreessen Horowitz, Spark Capital, and Tribe Capital.<\/p>\n<\/div>\n