Weekly Roundup: Crowns All Around 👑

Happy Friday, DVC! This week fast food royalty Burger King announced that good vibes are now mandatory. After learning that order speeds seem faster with friendly service, workers are now required to say “You Rule” and offer each customer a cardboard crown.

It’s a strange path to efficiency, but getting a “You Rule” sounds way better than the time a Wendy’s employee complimented my “confusing yet mystical aura” through the drive-thru speaker.

Welcome to DVC!

Welcome to the 50 new members who’ve signed up for the DVC newsletter since last week! We’re happy to have you 👋 

Startup News & Weekly Poll:

In the biggest surprise since Boeing airplane doors started falling off mid-flight, startup secondaries are quickly becoming the primary focus of 2024.

Last week we gave a brief overview of “startup secondaries” - which refer to the sale of startup equity before a company is acquired or goes public via IPO.

This week, cap table management startup Carta was in hot water after being accused of unethical sales tactics in the secondary markets. It’s a doozy - but we’ll try to summarize it below!

Carta’s Cap Tables Get Messy:

Background on Carta:

Founded in 2010, Carta made software to help startups manage their investor cap tables (i.e. the list of “who owns what”). It was WAY easier for founders than crazy Excel spreadsheets, so Carta quickly became a household name in tech.

With data on thousands of companies’ equity structures, Carta’s goal eventually shifted to becoming a “private stock market for companies” - where they collect fees for facilitating secondary sales. From 2019 to 2022, Carta grew its valuation from $1.7 billion to $8.5 billion 🤯 

“The Problem”:

Last Friday Jan 5th, the founder of software development startup Linear posted a screenshot of the Carta sales team reaching out to his investors with an offer to help sell their shares to a 3rd-party buyer.

Going Viral:

The online backlash was swift, with many criticizing Carta for breaching customer privacy and trust to generate sales commissions. Some customers claimed Carta had done something similar to their startups in the past, while others threatened to leave.

Carta’s Response:

Carta’s CEO, Henry Ward, apologized and blamed a rogue employee who “violated internal procedures”. However, he then did what he’s known to do and let the PR professionals handle it fanned the flames with confrontational responses on X.

By Monday Jan 8th, the situation calmed as Carta said it would exit the secondary trading market to avoid a conflict of interest.

Our Take:

It’s a tough one. It’s hard to say whether an employee truly “went rogue”, or if this was just the first time Carta “got caught”. There are still unanswered questions, but it seems like leaving the secondary markets was the right call given they generate just $3M of Carta’s ~$370M/year in revenue.

It also leaves Henry Ward in hot water considering it’s his 2nd PR disaster in just a few months. Though FWIW, his Monday post is remarkably humble, and he accepts responsibility for the failure of Carta’s secondaries business.

Not to sound like a broken record, but the whole situation just shows how messy and opaque the secondary markets are. If Carta (“the company with all the data”) wasn’t able to make it happen, it may be a long time before we see improvements here.

Time for a poll… Choose an answer below and see how you stack up next week!

Last Week's Results:

Last week we asked you if you would sell your shares in Canva if you were an early employee/investor… and 66% of you said “Yes, I’m selling it all and retiring to Bondi Beach!” 🏖️

Personally, I’d do the same. Now, whether there’s a secondary market there to make it happen in the first place is a different story…

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New companies suggested this week:

• Global Air Cylinder Wheels (GACW)

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