Men are a niche demographic

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

Danny was back, joining Natasha and Alex and Grace and Chris to chat through the week’s coming and goings. But, before we get to the official news, here’s some personal news: Danny is stepping back from his role as co-host of the Friday show! Yes, Mr. Crichton will still take part in our mid-week, deep dive episodes, but this is the conclusion of his run as part of the news roundup. We will miss him, glad that his transitions and wit will continue to be part of the Equity universe.

Who will take the third chair? Well, stay tuned. We have some neat things planned.

Now, the rundown:

Equity drops every Monday at 7:00 a.m. PDT, Wednesday, and Friday morning at 7:00 a.m. PDT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

#brazil, #carta, #chime, #databricks, #decacorns, #discord, #equity, #equity-podcast, #fundings-exits, #informed, #launch-house, #maven, #media, #monte-carlo, #news-economics, #nuvemshop, #startups, #unicorns, #yik-yak

Equity Monday: Hacks, IPOs, and the next generation of American tech giants

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast where we unpack the numbers behind the headlines.

This is Equity Monday, our weekly kickoff that tracks the latest private market news, talks about the coming week, digs into some recent funding rounds and mulls over a larger theme or narrative from the private markets. You can follow the show on Twitter here. I also tweet.

It’s a surreal day to talk about technology, but here we are. If you can pull your eyes away from the greater geopolitical tragedy that is our world today, here’s what we talked about:

  • T Mobile may have suffered a material breach. If this bears out, it could be a leading tech story for the week. Vice has confirmed that at least some of the data in the leak appears genuine.
  • Indian travel service ixigo is going public. The company’s IPO follows Zomato’s own domestic debut.
  • And speaking of IPOs, the Tencent Music offering in Hong Kong could be on hold until next year.
  • And a trio of American tech companies raised a raft of capital as last week concluded. Carta put together $500 million in a huge deal, as Chime raised $750 million. And as the week closed, Discord was reported to be hunting up a new round at a $15 billion price tag.

And stocks are set to open lower this morning. That’s the morning report. Equity is back on Wednesday.

Equity drops every Monday at 7:00 a.m. PST, Wednesday, and Friday at 6:00 a.m. PST, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts!

#carta, #chime, #china, #data-breach, #discord, #equity, #equity-monday, #fundings-exits, #india, #ixigo, #startups, #t-mobile, #tc, #telecomm, #tencent, #zomato

Carta says it just used its own product to establish a new — and far higher — valuation for itself

Carta, the nine-year-old, San Francisco-based cap table management and valuation software company, just raised $500 million in its eighth round of funding, at a $7.4 billion valuation. That’s more than double where the company was valued eight months ago when it closed its seventh round of funding at a valuation of $3.1 billion.

With so much money flooding into privately held companies, giant leaps in valuation are no longer all that notable. What’s different about this particular story is how Carta’s new valuation was established, which was to run an auction using its own trading platform to sell $100 million of its shares to secondary buyers, then use the valuation at which the shares sold — $6.9 billion — as evidence to primary investors of Carta’s true value.

For a company that’s trying to raise awareness of its trading platform — Carta wants to sell more of the secondary shares of other companies, too — it was a smart marketing play. It was Carta eating its own dog food, in the somewhat repellant parlance of the startup world. Still, it’s unclear whether we’re likely to see it replicated by other companies going forward.

First, what Carta did is — we think — unprecedented in establishing a price for secondary shares. Typically, a small group comes together and negotiates a price or, if it’s 20 or more sellers who are willing to offload shares to buyers, it’s considered a “tender offer” and out comes the prospectus-type document, including financial statements, risk factors and all that other jazz, which is sent to a set group of potential buyers.

In Carta’s case, as Carta CEO Henry Ward suggests in a new Medium post, by running an auction process, many more investors participated in the price discovery of its shares than might have been possible otherwise. (A prior post by Ward pegs this number at 414 participants that participated in 1484 executed orders.)

It makes a lot of sense, says longtime startup attorney Tim Harris of Morrison & Foerster, who was not involved in the process but is a student of market efficiencies. “Ward is basically saying, ‘We’re using a broader market price-seeking process instead of what he describes as one-off. You see it in real estate listings all the time,” adds Harris. “There’s no reason companies can’t do the same.”

The question that startup founders may be wondering right now is whether an auction process like Carta’s can truly help establish a price for primary shares. Naturally, Ward says it can. Indeed, in his Medium post, he says the auction very much strengthened the case that Carta could make to investors, including Silver Lake, the investment firm that ultimately led Carta’s newest $500 million round (a Series G).

While we don’t doubt it was a useful data point, Silver Lake is a sophisticated investment firm has been valuing companies for 21 years; likely, it have arrived at the valuation it did without that earlier auction.

Meanwhile, there are other reasons to think an auction like Carta’s will remain an outlier. For his part, attorney Anthony McCusker, who cochairs the tech practice at Goodwin Proctor, questions whether “companies are going to outsource their valuation discovery to Carta.” Most founders and CEOs would prefer to talk directly with investors when it comes to establishing the valuation of their company rather than leave it to the wisdom of crowds, he suggests.

Markets can also “be gamed,” as notes Harris of MoFo, observing that the integrity of any platform “depends on oversight and the quality of bids on a platform,” (Harris half-kiddingly wonders what happened, for example, to the bidder who said he or she would pay $28 million to join Jeff Bezos on his trip to space, then later cited “scheduling conflicts.”)

As for us, we wonder how many founding teams are willing to open up the secondary sale of their shares to a potentially much wider circle of backers when historically, they have not.

We also wonder whether, for some companies, that discovery process could backfire. After all, Carta is a hot commodity that likely didn’t need to set a floor for its auction offering. But we can imagine scenarios in which companies’ secondary shares aren’t worth to outsiders what founders think that they are.

Of course, the industry is changing fast, so very little would surprise us at this point. Indeed, whatever happens, the auction is clearly part of a larger trend toward transparency that continues to play out in interesting new ways all the time.

As Harris notes,  when he began practicing law 26 year ago, “venture was a completely closed ecosystem.” Now, he says, “There’s a wealth of data being shared and disseminated to maker smarter business decisions. You can just go to Pitchbook or Crunchbase to learn a lot of what you need to know.”

Featured above: Carta founder and CEO Henry Ward.

#224, #auction, #carta, #silver-lake, #tc, #venture-capital

Raise, a startup building Africa’s Carta, gets backing from 500 Startups

As startups in Africa continue to grow and raise money at a ridiculous pace, so too will their cap tables expand. Most African startups’ bulk of VC money is from foreign investors, making it imperative for African startups to incorporate abroad, especially in the U.S.

The processes for incorporation are quite complicated, and even though most founders still get the hang of it, they risk the chance of messing up their cap tables. For instance, some Nigerian startups are guilty of issuing preferred shares in naira and then canceling to issue dollar-denominated SAFEs when they get incorporated in the U.S.

Raise, a startup building Africa’s Carta is tackling these challenges and has received backing from 500 Startups to scale its technology.

In 2019, Marvin Coleby, Tina Nyamache and Eugene Mutai set out to create a blockchain solution that would make it easier for people to buy and sell shares in pre-IPO companies in Africa. After running several iterations, they found out that most companies still struggled with the concept of equity and liquidity. They spent money managing corporate structures for holding companies in Delaware, Canada, and Europe but maintained paper-based subsidiaries across Africa.

According to Coleby, most of the equity across Africa is still stored, tracked and updated using paper certificates, manual processes and fragmented government databases. This raises transaction costs to manage subsidiaries and issue employee stock options. It also inflates costs to enter and exit positions in private and public companies.

Raise

Image Credits: Raise

So they started Raise to help startups, investors, employees, and law firms manage deals, cap tables and corporate compliance

On the platform, Raise customers can also automate due diligence, set valuations, track employee stock vesting and make routine documentation for licenses and government documents in Nigeria and Kenya. 

When Raise launched in 2019, it was in private beta and was backed by Binance Labs, the sole investor in its pre-seed round. Since proceeding to a public beta in 2020, Raise has onboarded customers like Anjarwalla & Khanna, Africa’s largest law firm; startups Bamboo, Workpay and Mono; and VC firms like Microtraction and Chrysalis Capital.

But the long-term problem Raise is trying to solve is liquidity, Coleby tells TechCrunch on a call.

“Everything we do is to find a way to make it easier for founders, customers, employees, investors to get liquidity from investing in companies,” he said. “Companies are raising money, people are investing, and employees are getting stock options. However, there are only one or two exits now and then. That’s because we build with the Silicon Valley model where we have to grow, scale until we get some big exit. From our perspective, liquidity doesn’t have to be that way. It can be small little pieces of liquidity that employees and investors get over time.”

By that measure, Africa’s capital markets for private and public companies are painfully illiquid. It takes several months or years to buy or sell equity, and, according to Raise, over $1 trillion of stock in Africa is “illiquid, paper-based and priced in inflationary currencies.”

Nigerian stock trading platforms like Chaka, Bamboo and Trove help Nigerians create liquidity for assets locally and internationally. However, Raise aims to build the platform behind them to streamline more asset classes and investment opportunities.

While that’s still in the works, Raise organizes ownership data for African companies and makes them accessible. It’s a similar play to what Carta, a $3 billion company offering cap table software, does for U.S. companies.

Over time, onboarding cap tables and equity data will also open up use cases for Carta to become a blockchain-based digital asset platform. The plan is to become more like Africa’s Nasdaq for private companies as it hopes to sell indexes, ETFs, futures, and assets for them. Coleby says in that way, Raise will become an equity engine for processing Africa’s hundreds of billion dollars of trade and securities volume.

Coleby says the number of companies going live is increasing 60% month-on-month. The platform manages about 200 cap tables with assets worth more than $400 million. The next phase of growth, according to Coleby, will be onboarding Series A and growth-stage companies onto the platform.

The company is active in Nigeria and Kenya. Coleby says a seed round is in the works to continue growing deeper into those markets and experiment with funding and liquidity operations across the African VC space.

Next, Raise is building a marketplace that continues connecting and educating investors, employees, and founders in one platform with their law firms to use trusted and verified data to do deals and issue stock options to employees.

#500-startups, #africa, #carta, #raise, #recent-funding, #startups, #tc

Is buying and selling short-positions in private companies next? This fintech startup is banking on it

Even the most casual industry observer has to be stunned at times by the pace of dealmaking right now. Not quite halfway through 2021, startups are routinely closing new rounds just months apart and sometimes seeing their valuations triple and even quadruple with every new round.

Maybe they will all become trillion-dollar companies. It’s more likely, however, that they will not, which is where year-old Caplight comes in. Led by Javier Avalos, a former investment banker who recently spent more than three years with the secondaries platform Forge, Caplight is right now building a model that it says will enable institutional investors to take long and short private company positions via synthetic, cash-settled derivatives, so whether or not they own any actual shares in certain startups, they can bet on their rise or fall.

Caplight isn’t the first company drawn to the idea. Another young startup in New York, Apeira Capital, is also looking to “short” overvalued startups.  More, Avalos and his cofounder, Justin Moore, a former engineering manager at Forge, could also face competition, from their old firm, for example, as well as Carta, the venture-backed company that makes software to manage equity stakes in other startups.

Still, Avalos thinks he’s on to something. Caplight already has $400 worth of interest from more than 30 institutions, he says. It also just closed on $1.7 million in pre-seed funding led by Fin VC, with participation from Susquehanna Private Equity Investments, Clocktower Ventures, and Dash Fund. We talked with him late last week to learn more; below are excerpts from that chat, edited lightly for length.

TC: You were at Forge, which helps people buy and sell pre-IPO shares. What opportunity did you see while working there?

JA:  I think what platforms like Forge have done really well is build tech solutions for startup employees, for startup founders, and for the companies themselves, and that’s great. What we’re really focused on are larger institutions who need true liquidity, meaning higher frequency of trading, whether that’s buying and selling option contracts, or entering swap-type agreements. [They need a way] to quickly move in and out of positions, as well as hedge themselves.

Caplight [aims to become the] infrastructure that enables any other fund that is looking to take directional positions in private companies. It’s meant to be the plumbing that connects that fund to a market, but not just the marketplace –all of the infrastructure that comes with that. So holding assets in prime brokerage; being able to quickly settle transactions through clearinghouses; being able to provide [the] data to inform a mark to market to value those contracts.

TC: Even more specifically, what are you offering?

JA: So we [want to] allow institutional investors to hedge their private company stock — to generate income on their private company stock by selling out-of-the-money option contracts, for instance. We also allow institutional investors to take short or long positions [and] we’re doing all of our transactions synthetically, so the underlying shares don’t don’t actually have to move.

TC: Is that private company stock used as collateral or encumbered in any way? Do you need the permission of the startup?

JA: The pre-IPO stock can be used as collateral. It doesn’t always need to be though. The great thing about building a synthetic platform is you can inject liquidity into the market by working with sellers who don’t actually own the stock. If I’m a hedge fund, and I don’t own shares of a pre-IPO company, but I still want to express a short interest — a negative view on that company — I could use Caplight to do that. I’d just need to hold other tradable securities as collateral. That’s part of the beauty of what makes this a marketplace that can have very rapid settlement and execution.

TC: So if a hedge fund wants to go short, it just needs to needs to find another party on your service who’s willing to take that trade? 

JA: What you need is two parties — one who one who’s interested in going short on the name, and another who’s interested in going long on the name. Beyond that, you need a model that helps these parties arrive at not just an agreed-upon valuation of the company today, but also where they’re comfortable striking a contract at some point in the future, and then a methodology for valuation at any point in time in between those two points.What we’re talking about here is a methodology to create a mark to market on what the value of that contract is at any given time between the time you enter the contract and the time you ultimately go to settle the contract. Those are really the three main ingredients that are needed here.

TC: How do you develop this methodology? How automated is it?

JA: We’re in the process of building that out now. There’s quite a bit of work, as you can imagine, that goes into that. And part of the mandate that we have having raised this pre seed funding is to go out and find the best talent to come in and help us with this.

TC: Assuming some of these inputs would include fund-raising announcements, any announced revenues, and where things are trading on the secondary market, what are other inputs might surprise people?

JA: Maybe a less obvious one is that when public mutual funds own private tech companies’ stock, they have to report out on at least a quarterly basis where they’re marking those positions, and that’s all public information. So that’s another alternative data set that we would love to pull into our platform in product form.

TC: Why does your company make sense now versus earlier? Does it tie to smart contracts?

JA: Smart contracts are are definitely an enabler. But I think it’s more of a function of where we are in the markets. Forge alone is [ approaching a billion dollars a quarter of volume] and that’s just one platform. When you sum up all the activity, we think there is $20 billion of transaction volume, meaning pre IPO shares that are trading hands each year. For that size marketplace to exist without the ability to have directional bets on top of that, or hedging that is made very easy, it just didn’t make sense to us that hedging and derivative-type transactions don’t exist.

TC: This is a work in progress. In the meantime, what’s to stop Forge or Carta from doing what you’re doing?

JA: It’s something I spend a lot of time thinking about. It goes back to a point that I mentioned earlier, which is that I think Carta and Forge have done a really good job of building tech solutions that serve the companies, and I think a lot of future growth from Carta and Forge and some of the other players is pegged on their ability to develop company relationships. And when you have a lot of [your] growth pegged on building out these relationships — a lot of the valuation that’s being ascribed to Forge and Carta and other secondary platforms is tied their ability to maintain those relationships — to turn around and stand up a marketplace that allows institutions to go short on the same companies that you’re fighting to build relationships with is a direct conflict.

Above, from left to right, Caplight founders Javier Avalos and Justin Moore. For more from this chat, including some of the legal hurdles Caplight has to overcome to operate its business, and how it attracts buyers and sellers to the platform, you can hear our longer conversation here.

#carta, #finance, #fintech, #forge, #hedge-funds, #justin-moore, #secondaries, #tc, #venture-capital

Citadel ID raises $3.5M for API-delivered income and employment verification

This morning Citadel ID announced a combined $3.5 million raise for its income and employment verification service. The startup provides an API to customer companies, allowing them to rapidly verify details of consumer employment.

The capital came from a blend of venture firms and angels. On the firm side, Abstract and Soma VC were in there, along with ChapterOne. Brianne Kimmel put capital in as well, according to the startup. And denizens with work histories at companies like Zynga (Mark Pincus), Stripe (Lachy Groom), Carta (Henry Ward), and others also put cash into the fundraise.

Citadel was founded back in June of 2020, before raising capital, snagging its first customer, and shipping its product all inside of the same year.

The idea for Citadel ID came when co-founder Kirill Klokov worked at Carta, the cap-table-as-a-service startup that recently built an exchange for the trading of private stock. Klokov discovered while working on the tech side of the company how hard it was to verify certain data, like employment and income and identity.

As Carta deals with money, stock, and the collection and distribution of both, you can imagine why having having a quick way to verify who worked where, and since when, mattered to the company. But Klokov came to realize that there wasn’t a good solution in the market for what Carta needed, sans building integrations to a host of payroll managers by hand and dealing with lots of data with varying taxonomies. That or using an in-the-market product, like Equifax’s The Work Number, which the founder described as expensive and offering relatively low coverage.

To fill the market void Klokov helped found Citadel ID, quickly building integrations into payrolls managers where there were hooks for code, and working around older login systems when needed. Citadel ID’s service allows regular folks to provide access to their employment data to others, allowing for the verification of their income (a rental group, perhaps), or employment (Carta, perhaps) quickly.

Per the startup the market demand for such verifications is in the hundreds of millions every year in the United States. So, Citadel should have plenty of market space to grow into. Citadel ID has around 20 customers today, it told TechCrunch, and charges on a per verification basis.

Finally, while Citadel also offers data via its website and not merely through its API, the startup still fits inside the growing number of startups we’ve seen in recent quarters foregoing traditional SaaS, and instead offering their products via a developer hook (sometimes referred to as a ‘headless’ approach). API-delivered startups are not new, after all Twilio went public years ago. But their model of product delivery feels like its gaining momentum over managed software offerings.

Let’s see how quickly Citadel ID can scale before it raises its Series A.

#brianne-kimmel, #business, #carta, #citadel-id, #co-founder, #companies, #computing, #entrepreneurship, #equifax, #fundings-exits, #henry-ward, #human-resources, #lending, #mark-pincus, #private-equity, #rental, #startup-company, #startups, #stripe, #tc, #twilio, #united-states, #verification, #zynga

Carta’s startup liquidity service CartaX conducts first transactions on its own cap table

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.

#carta, #finance, #liquidity, #secondaries, #startups, #venture-capital

This serial founder is taking on Carta with cap table management software she says is better for founders

Yin Wu has cofounded several companies since graduating from Stanford in 2011, including a computer vision company called Double Labs that sold to Microsoft, where she stayed on for a couple of years as a software engineer. In fact, it was only after that sale she she says she “actually understood all of the nuances with a company’s cap table.”

Her newest company, Pulley, a 14-month-old, Mountain View, Ca.-based maker of cap table management software aims to solve that same problem and has so far raised $10 million toward that end led by the payments company Stripe, with participation from Caffeinated Capital, General Catalyst, 8VC, and numerous angel investors.

Wu is going up against some pretty powerful competition. Carta was reportedly raising $200 million in fresh funding at a $3 billion valuation as of the spring (a round the company never official confirmed or announced). Last year, it raised $300 million. Morgan Stanley has meanwhile been beefing up its stock plan administration business, acquiring Solium Capital early last year and more newly purchasing Barclay’s stock plan business.

Of course, startups often manage to find a way to take down incumbents and a distraction for Carta, at least, in the form of a very public gender discrimination lawsuit by a former VP of marketing, could be the kind of opening that Pulley needs. We emailed with Yu yesterday to ask if that might be the case. She didn’t answer directly, but she did mention “values,” as long as shared some more details about what she sees as different about the two products.

TC: Why start this company? Has Carta’s press of late created an opening for a new upstart in the space?

YW: I left Microsoft in 2018 and started Pulley a year later. We skipped the seed and raised the A because of overwhelming demand from investors. Many wanted a better product for their portfolio companies. Many founders are increasingly thinking about choosing with companies, like Pulley, that better align with their values.

TC: How many people are working for Pulley and are any folks you pulled out of Carta?

YW: We’re a team of seven and have four people on the team who are former Y Combinator founders. We attract founders to the team because they’ve experienced firsthand the difficulties of managing a cap table and want to build a better tool for other founders. We have not pulled anyone out of Carta yet.

TC: Carta has raised a lot of funding and it has long tentacles. What can Pulley offer startups that Carta cannot?

YW: We offer startups a better product compared to our competitors. We make every interaction on Pulley easier and faster. 409A valuations take five days instead of weeks, and onboarding is the same day rather than months. By analogy, this is similar to the difference between Stripe and Braintree when Stripe initially launched. There were many different payment processes when Stripe launched. They were able to capture a large portion of the market by building a better product that resonated with developers.

One of the features that stands out on Pulley is our modeling feature [which helps founders model dilution in future rounds and helps employees understand the value of their equity as the company grows]. Founders switch from our competitors to Pulley to use our modeling tool [and it works] with pre-money SAFEs, post-money SAFEs, and factors in pro-ratas and discounts. To my knowledge, Pulley’s modeling tool is the most comprehensive product on the market.

TC: How does your pricing compare with Carta’s?

YW:  Pulley is free for early-stage companies regardless of how much they raise. We’re price competitive with Carta on our paid plans. Part of the reason we started Pulley is because we had frustrations with other cap table management tools. When using other services, we had to regularly ping our accountants or lawyers to make edits, run reports, or get data. Each time we involved the lawyers, it was an expensive legal fee. So there is easily a $2,000 hidden fee when using tools that aren’t self-serve for setting up and updating your cap table.

TC: Is there a business-to-business opportunity here, where maybe attorneys or accountants or wealth managers private label this service? Or are these industry professionals viewed as competitors?

YW: We think there are opportunities to white label the service for accountants and law firms. However, this is currently not our focus.

TC: How adaptable is the software? Can it deal with a complicated scenario, a corner case?

YW: We started Pulley one year ago and we’re launching today because we have invested in building an architecture that can support complex cap table scenarios as companies scale. There are two things that you have to get right with cap table systems, First, never lose the data and second, always make sure the numbers are correct. We haven’t lost data for any customer and we have a comprehensive system of tests that verifies the cap table numbers on Pulley remain accurate.

TC: At what stage does it make sense for a startup to work with Pulley, and do you have the tools to hang onto them and keep them from switching over to a competitor later?

YW: We work with companies past the Series A, like Fast and Clubhouse. Companies are not looking to change their cap table provider if Pulley has the tool to grow with them. We already have the features of our competitors, including electronic share issuance, ACH transfers for options, modeling tools for multiple rounds, and more. We think we can win more startups because Pulley is also easier to use and faster to onboard.

TC: Regarding your paid plans, how much is Pulley charging and for what? How many tiers of service are there?

YW; Pulley is free for early-stage startups with less than 25 stakeholders. We charge $10 per stakeholder per month when companies scale beyond that. A stakeholder is any employee or investor on the cap table. Most companies upgrade to our premium plan after a seed round when they need a 409A valuation.

Cap table management is an area where companies don’t want a free product. Pulley takes our customers data privacy and security very seriously. We charge a flat fee for companies so they rest assured that their data will never be sold or used without their permission.

TC: What’s Pulley’s relationship to venture firms?

YW: We’re currently focused on founders rather than investors. We work with accelerators like Y Combinator to help their portfolio companies manage their cap table, but don’t have a formal relationship with any VC firms.

#8vc, #caffeinated-capital, #carta, #funding, #fundings-exits, #general-catalyst, #morgan-stanley, #recent-funding, #startups, #stripe, #tc, #venture-capital, #yin-wu

Preaching Equality, Start-Up Didn’t Practice It With Employees

Current and former workers at Carta, a hot Silicon Valley fintech company, said they were belittled, excluded and punished if they spoke up.

#carta, #discrimination, #start-ups, #ward-henry, #women-and-girls, #workplace-hazards-and-violations

Are option grants promoting gender and racial inequity?

You’ve probably seen them on highway billboards and your Instagram feeds: startups promising to get it right on racial and gender inequity when it comes to employee pay. But how much progress has actually been made? Are companies even aware that upcoming stock option grants might worsen the very problem they claim to be fixing?

Last week, a top female executive at well-known equity management platform Carta resigned, alleging hypocrisy in the company’s public advertisements for equity compensation — or the now infamous statement by their CEO “Fair equity should be table stakes” — and their actual stance on correcting these wrongs within the company. This top executive was Emily Kramer, the very Harvard MBA brought on board in part to help improve stock option inequity at Carta and within its thousands of company users. These developments left me wondering what more can be done by leaders in equity management to help ameliorate these issues before they get harder to solve.

Anyone who’s worked closely to venture capital and tech in America knows that stock options are a key lever of attracting top talent, especially for companies with risky business models and low odds of success. Yet, equity compensation has received much less attention than cash pay. Further, this “paper wealth” can be invaluable to women and persons of color as the country attempts to attack its shameful income inequality. If you’ve had the opportunity to work with Carta, then you also know that gender and racial inequity in compensation exists with stock options too, not just cash.

Carta must act swiftly to implement a new feature across its entire platform: an alert to startup founders and legal administrators that upcoming option grants result in gender and racial inequity, when compared with the rest of the company’s employees doing similar work. Backed by the precept of “equal work, equal pay,” Carta has a unique opportunity to use its near informational monopoly to ameliorate “equity inequity” and make good on unkept promises. This feature ensures internal parity: that women and persons of color are compensated by equity grants on par with white and/or male colleagues performing the same work, in similar positions.

Having input equity compensation into Carta myself as a startup attorney, there’s no way I could have known if new grants were equitable across the capitalization table, unless Carta sent an alert or the company circulated its own report. The sad reality is that it’s way too challenging to independently perform this review on your own. Carta can because it’s a clearinghouse for equity compensation, used by more than 14,000 companies across the marketplace, with unique access to the tools and information required to know if a company’s astray from its stated values.

Wouldn’t it be helpful if Carta notified a client’s management team and lawyers that new grants didn’t achieve gender and racial equity while they still had a chance to adjust the numbers, before board grants? According to Carta’s own 2019 gender equity gap study published following a review of a sample of their own users’ capitalization tables, male founders represented 6.5% of equity holders but own 64% of all equity. Further, at the employee level, female employees own 49 cents in equity for every dollar men own. If companies affirmatively understood the gravity of their actions, the state of paper wealth in the United States would be far more equitable and inclusive.

I’d imagine social justice-minded companies would be happy to make adjustments to stock grants when it was easiest, not after the fact. After all, once options are granted by the board, it becomes an administrative hassle to redo. Yes, many companies do internal audits afterwards, uncovering inequities — but it’s usually too late or burdensome to make all of these employees whole, some of whom might have already departed. Let’s not forget that startups generally can’t even grant options to individuals no longer providing services to their company. A proactive, preemptive approach is not only reasonable, but required. Carta’s well-placed to make up for its broken promises by nudging users to get it right the first time.

Remember, later-stage companies have the money to perform comprehensive equity pay analysis, but early-stage companies often don’t. It’s at formation when inequities are easiest and cheapest to tackle, particularly for the promising early-stage, future unicorns that Carta spends so much time attracting in its successful Launch program — one that offers discounted services to retain startups as they grow. Attorneys, board members, startup operators — heck, even the most junior staff — need to be unafraid in using Carta as a tool to help bring these issues to light.

I want to believe that companies that promise racial and gender equity in compensation make it happen, but not all do. Some don’t care. But others are just overloaded with pitch decks, Slack notifications and the immense expectations of investors searching for big returns. It’s not an excuse, just a reality. What a difference it would make if Carta let management know of the problem before it was too widespread to fix.

#carta, #column, #corporate-finance, #diversity, #emily-kramer, #finance, #opinion, #startups, #stock, #tc, #techcrunch-include

Carta’s former marketing VP is suing over gender discrimination after spearheading report on pay inequality

Emily Kramer joined the Silicon Valley company Carta to build up the company’s brand. Now, the company’s former VP of marketing is looking to shine a light on Carta for another reason: in a new lawsuit against Carta, which makes equity management software, Kramer accuses the eight-year-old outfit of gender discrimination, retaliation, wrongful termination, and of violating the California Equal Pay Act.

Carta declined an interview request today, saying through a spokesperson that it isn’t commenting because the suit is a “pending legal matter.”  But we spoke earlier this afternoon with Kramer, who has separately outlined her side of the story in detail in a Medium post, where she accuses the company of both unfair labor practices and of being disingenuous in its stated “commitment to transparency and equality in equity.”

The equality piece is certainly the bigger of the two issues, by Kramer’s own telling. She says she learned that she was underpaid when, in the summer of  2018, roughly six months after she joined Carta, it partnered with the women-led investment collective #ANGELS to produce a report that highlighted ownership of venture-backed companies’ equity by gender.

The suspicion driving the report  — and later proved out by its findings — is that as with salary, where women continue to earn less than their male peers, they are also given less equity ownership in the startups for which they work. Kramer, who says she spearheaded the effort, posted the report, which included internal analysis that showed that Carta too, was allocating less equity to women than men.

In response, says the report, 40% of the women at Carta received an equity fix, compared to 32% of the men.

Perhaps unsurprisingly, it was through this same report that Kramer, the only female executive at Carta at the time, says she discovered she was herself underpaid by $50,000 relative to her peers, and that her original equity grant was one-third of the same amount of shares paid to comparable employees, who she says were all men.

Indeed, at the crux of her suit against Carta is that equity grant. While on the heels of the report, the company bumped up her pay by $50,000 and provided her nearly 300,000 more stock options in addition to the 150,000 options she was originally provided, it declined to backdate or accelerate the options to account for the previous six months of her tenure.

That might not seem like such a big deal. But given Carta’s ever-soaring valuation — it was marked at half a billion dollars when Kramer joined the company and it was more recently assigned a $3 billion valuation by its investors — that’s tantamount to a “significant” amount money, Kramer tells us. And she wasn’t about to leave it on the table.

The disparity wasn’t a complete shock to Kramer, who’d previously worked in marketing at Ticketfly, Asana, and Astro Technology (acquired by Slack) . According to her lawsuit, filed by attorney Sharon Vinick, Kramer emailed Carta’s founder and CEO, Henry Ward, when she was initially offered the job, noting that the equity offered was “lower than my expectations.”

According to Kramer, Ward told her that any more equity would be “unfair,” as compensation at her level was uniform for all employees. He also said Carta planned a company-wide review of its salaries and stock options later in the year, and that if it revealed that she was being underpaid, her compensation would be adjusted.

Clearly, Ward and Kramer have different views on whether or not that ultimately happened.

In our call with Kramer, she said still believes in the company’s mission to make equity more understandable for its users and that “therefore I believe it’s a solid product.”

She declined to say whether she has exercised any of her shares, but she said that Carta gives its employees a longer window to do this than many other startups. (How much time is is based in part on their tenure with the company, she’d added.)

Kramer also said that she hopes the company can “live up to”  how it markets itself externally, as an ally of women who are paid less for the same amount of work.

Kramer says her experience inside of Carta — which still has an exclusively male board of directors —  was not of a company that values women as much as men. She alleges that not only was she the only woman who reported directly to Ward during her tenure,  but that two other VP-level execs who joined at roughly the same that she did were promoted to C-level positions despite having “less, and less relevant” work experience in their respective fields whereas her efforts to be promoted went nowhere. (Asked if there were other VP-level male colleagues who were also not promoted during the same period, Vinick said that no one at the time had a comparable role to Kramer, who grew to oversee 27 other people.)

Kramer adds that she stopped being included in meetings where a marketing head would normally be included, fundraising meetings among them, and believes that her efforts to remedy what she perceived as a “sexist culture” within the male-dominated company were at the root of all of these developments.

Eventually, Kramer says, she felt she was forced to resign after a meeting with Ward turned heated and he said Kramer was in violation of the company’s “no asshole policy.” When she wrote him two days later to resign, he wrote back within eight minutes, accepting her resignation and suggesting that both might learn from their experience working together.

Vinick, Kramer’s attorney, tells us Carta is being sued for emotional, punitive, and economic distress and says that now that her law firm has filed the suit, Carta will be served officially with the complaint within another week or two, at which point the discovery process can begin.

Carta does not ask its employees to sign arbitration clauses in their employment agreements, so unless it settles with Kramer or a judge finds some reason to dismiss the case, which seems unlikely, it could eventually head to trial.

In the meantime, the decision to sue is a big gamble for Kramer, but Vinick says she is proud of her client. “Standing up to these situations is an extraordinarily difficult and potentially career-limiting move to take,” but will ultimately help “shine a light on the problem of this equity gap.”

Carta has raised more than $600 million from investors to date, including Andreessen Horowitz, Lightspeed Ventures, and Goldman Sachs.

In April, as it was sealing it up its newest round of funding, it also conducted its first major layoff, parting ways with 161 employees. At the time, Business Insider spoke with eight former employees and one investor who described Carta as a “quickly changing company with huge vision but little focus, where hiring and hypergrowth” had become its core priorities.

#andreessen-horowitz, #asana, #carta, #diversity, #drama, #goldman-sachs, #henry-ward, #lawsuit, #lightspeed-venture-partners, #personnel, #secondaries, #tc, #venture-capital

AngelList’s ‘Carta for India’ product helps startups manage cap table and employee grants for free

AngelList, a platform that helps startup founders discover and connect to angel investors and job seekers, on Wednesday branched out to a new category in India to further serve the ecosystem.

The startup platform said its new product, called EquityList, allows founders to easily manage their cap table, which as the name suggests, is a table that documents a firm’s percentages of ownership, value of equity in each round, and equity dilution.

AngelList’s new offering pits it against the talk-of-the-town Carta’s core service — though by limiting EquityList to India, AngelList is tapping a booming market that the Palo Alto-based startup is yet to explore.

By targeting India, AngelList is also ploughing through a field that is vast but doesn’t have as many challengers. Most startups in India currently rely on lawyers, papers, and Microsoft Excel to manage their cap tables.

EquityList also enables startup founders to manage equity they are granting to employees. The tool, which allows the grant letter to generate and deliver in a single-click, also enables startup employees to accept the grant, view its value, and make use of it, explained Sumukh Sridhara, who oversees product and engineering at AngelList India, in an interview.

“It’s actually cumbersome to keep track of the numbers in Excel,” said Rajan Bajaj, founder and chief executive of SlicePay, a Bangalore-based startup that offers payment cards with pre-approved credit lines for students, gig-workers, freelancers and startup employees.

“Equity of a startup is perhaps the fastest growing asset in the world and it makes sense to manage it with a digital ledger like your stock broking account,” he said.

Utsav Somani, who oversees AngelList’s India operations, said the platform is making EquityList available to startups at no charge. In an interview with TechCrunch, he said EquityList will help startups save countless hours and capital that currently goes into legal documentations.

“Several Indian startups have become unicorns over the years and many more are moving to join the list. But employees at these startups don’t really know what’s the worth of their paper stake, and what they can do about it,” he said. “Employees need to feel that they are valuable. In the U.S. and other markets with more mature startup ecosystems, employees are up to speed on these matters,” he said.

During its pre-beta days, 20 startups ranging from pre-Seed to Series B used EquityList and the early reception was overwhelming, said AngelList, adding that startups using EquityList don’t share any data with the platform.

Misbah Ashraf, co-founder and chief executive of Marsplay, a New Delhi-based startup that operates a social app where influencers showcase beauty and apparel content to sell to consumers, agreed. “There is a lack of transparency everywhere with stock options and how ESOPs’ (Employee Stock Option Plans) value is changing,” he said.

Miten Sampat, chief strategy officer at Times Internet, said it was only logical that AngelList looked into this category, and that it was high time that more firms addressed these challenges. AngelList is also well-positioned to scale this in the market, he said.

A venture capitalist, who did not wish to be identified, said he wasn’t surprised that AngelList was making EquityList free. “They want to be the system of record, a standard for the market. They want startups, and other venture capitalist funds to use EquityList.”

Somani agrees. He said EquityList would enable AngelList, which launched in the nation a year and a half ago, to gain trust and credibility with startups and other players in the ecosystem.

Another venture capitalist who also spoke on the condition of anonymity as he did not wish to upset others said that while EquityList appears to be replicating ‘Carta for India’ and address real challenges but that India was not that big of a market — which would explain why Carta has no play here.

“India is a big and wide-open market,” said Somani, who launched his micro VC fund last month. He added that AngelList would eventually expand EquityList to other markets.

Times Internet’s Sampat said EquityList also paves way for AngelList to perhaps explore becoming a secondary private market for startups one day. Somani did not rule out the possibility, but said there are enough regulatory hurdles to work out first.

#angellist, #apps, #asia, #carta, #startup, #startups, #times-internet

Data shows which tech roles might be most vulnerable amid layoffs

Layoffs are having a big impact on industries across the board due to COVID-19. This week alone news came out of massive cuts for TripAdvisor, Lyft, and reportedly Juul and Uber.

But according to data tracker Layoffs.fyi, the cuts have affected certain job roles more than others.

Sales and customer success roles are the most affected by post-coronavirus startup layoffs, crowd-sourced data shows. Other top categories include engineering and operations roles. 

Earlier this month, restaurant tech startup Toast cut 50 percent of staff. About 70% of those laid off were in the sales or customer success roles. In restaurant review platform Yelp’s layoffs, 67% of cut positions were in the same bucket.

Equity management startup Carta laid off people, too, and about 47 percent of those cuts were in the sales or customer success roles.

It is not hard to make sense of why sales and marketing roles are the most impacted. The very function of these jobs is tied to a healthy market. 

Sales and new deals have slowed or halted altogether for many businesses during the COVID-19 pandemic. This is because social distancing, and overall economic weariness, might not have people spending as much as they normally would have.

The cuts filter out disproportionately to other startup ecosystems, as sales and marketing roles are often based in satellite offices. 

But the cuts don’t just impact sales. In a number of cases, layoffs in one department adversely impact all departments of the company. For example, Carta’s CEO Henry Ward noted that reductions across sales, marketing, onboarding and support will likely seep into other roles as well.  

“As those departments become smaller, many of the teams that support those departments like recruiting, HR, operations, and parts of R&D, have to downsize with them,” Ward wrote in a Medium post. “Even though the analysis starts with customers, it quickly starts affecting all parts of the organization. This makes sense. We exist only because our customers exist and allow us to serve them. And when our customers suffer we suffer too.”

The graph below shows a makeup of roles impacted by COVID-19 related layoffs.

Engineers aren’t immune either. According to the report, engineers historically land high, competitive salaries versus sales roles, which largely are based on commission. In some cases, it means that a company trying to dial back costs needs to look at the highest-paid roles and slim accordingly. 

In Groupon and Eventbrite, engineering roles were the majority of positions that were cut, per Layoffs.fyi. Operations roles were also among the most cut for companies like Ritual and Turo. 

Check out the layoff tracker tool here. Tip us of any cuts you’re hearing or experiences at tips@techcrunch.com, or tweet me at @nmasc_.

#articles, #business, #carta, #ceo, #economy, #eventbrite, #groupon, #henry-ward, #layoff, #lyft, #ritual, #sales, #tc, #tripadvisor, #turo, #uber, #yelp