The latest hot tech goss involves Carta, a $7.4B player on the VC scene, and a founder who accused it of misusing confidential data. Please join us for tea.
Carta is a company that manages and protects cap tables (short for capitalization table) for ~40k startups, per Fortune. A cap table is a detailed list of a company’s current and potential stockholders. That’s important info for both the company and potential investors.
OK, so what happened?
Karri Saarinen, CEO of software startup Linear, posted to X Friday that a salesperson at Carta Liquidity, a Carta subsidiary, contacted a Linear angel investor, saying Carta had a “firm buy order” for their Linear shares.
According to Saarinen, the investor in question was a family member who’d never publicly disclosed their investment, and Linear was never asked to approve a sale.
Saarinen said he suspected that someone at Carta used Linear’s cap table to connect a potential buyer to a Linear shareholder — which is pretty dang shady for a company that’s supposed to be securely managing said data. So, yeah, big yikes.
Carta CEO Henry Ward claimed that an employee had violated internal policies, affecting three companies, including Linear.
He also said Carta had launched an investigation and reached out to the impacted founders, and on Monday, that it would be exiting its secondaries business entirely to avoid conflicts of interest.
So, it is over?
Unclear. Carta’s quick pivot out of the secondaries market feels like the correct move, though it may be tough to rebuild trust.
Saarinen later said he’d heard from seven Linear investors and “close to 10” companies who’d received similar messages, indicating the problem may have been more widespread than Ward thinks or has admitted.
Not to mention, this isn’t Carta’s first yikes:
- It was sued by former employees alleging sexual harassment and a “toxic” culture, while Ward has been called demanding and vindictive.
- Some clients have accused Carta of erratic and poor customer service.
- The company held multiple rounds of layoffs last year.
And as Axios pointed out, part of Carta’s valuation was based on that now-nonexistent element of the business.