June 23, 2023

Navigating the Path to Dominance: An Exploration of Carta's Strategy

Zhenge Liu

Carta is a portfolio of TSVC fund II and the investment was led by Eugene Zhang.


Carta is a comprehensive equity management platform designed to assist startups in managing their ownership and financing aspects effectively. The platform offers a range of services, including cap table management, equity plan administration, valuation, compliance, and fundraising. One distinctive feature of Carta is CartaX, a proprietary private exchange service facilitating startups in trading their shares with institutional investors, family offices, and high-net-worth individuals. Underpinning Carta's operations is a robust strategy - a "One-Stop Shop" approach that involves creating an all-encompassing ecosystem for all stakeholders in the startup landscape. This includes founders, employees, investors, lawyers, and accountants. By catering to a broad spectrum of client needs, Carta sets itself apart in the equity management space.


Carta, a pioneering platform for startup ownership and financial management, has had an impressive trajectory of product expansion and innovation since its inception in 2012. Originally known as eShares, the company began with a focus on cap table management. Over time, Carta acknowledged the need for more comprehensive solutions and expanded its services to integrate equity plan administration, thereby streamlining the management of stock options, restricted stock units (RSUs), and other forms of equity awards for startups.

In an ambitious move to broaden its offerings, Carta introduced valuation and compliance services, including 409A valuations (beginning in 2014), a critical component for startups offering equity. This ensured adherence to IRS regulations and helped prevent potential tax issues. Carta further bolstered its 409A valuation services in 2017 through the acquisition of Silicon Valley Bank's subsidiary, SVBA, a specialist in 409A valuations and audit services. This integration created a one-stop solution for equity management and financial services.

In 2015, Carta initiated its first secondary offering and established a platform for private companies to easily manage liquidity programs. Responding to the need for liquidity in private markets, Carta launched CartaX in 2020, an exchange service for private companies. This move revolutionized the industry, allowing startups to sell shares to a broad spectrum of market participants, including institutional investors, family offices, and high-net-worth individuals. Carta implemented a 1.5% fee on both buyers and sellers of private company shares on CartaX.

In addition, Carta leveraged its extensive data and insights to offer services such as compensation benchmarking, total rewards statements, and tax advisory. These services offered invaluable industry insights to startups, assisting them in maintaining competitiveness. Further expansion saw the acquisition of Mogo in January 2021 to enhance Carta's digital wallet capabilities and tap into Mogo’s member base of over one million.

In the first quarter of 2021, Carta began to venture beyond serving startups exclusively. Carta Ventures made its first fund investment in May 2021, indicating its interest in seeding the next generation of venture investors who will back future founders. Carta also introduced the "Equity 101" program in March 2022, aimed at educating potential investors about investing in startups. This initiative not only supports the growth of quality startups but also cultivates an ecosystem of potential clients, adhering to Carta's tradition of close collaboration with venture capital firms.


When compared to other startups in the same field, such as Ledgy, there are some distinguishing points that make Carta stand out.

While Ledgy is praised for its ease of use, simplicity of setup, and quality of support, Carta exhibits a greater market presence as evidenced by its broader user base and larger market share, indicated by the number of reviews on G2—146 for Carta versus 28 for Ledgy.

Despite the areas where Ledgy outperforms, Carta's range of offerings is more comprehensive and surpasses that of Ledgy. Carta provides services such as 409A valuations, compliance, fundraising, and liquidity via its private exchange service, CartaX. In comparison, Ledgy's services are more niche, focusing mainly on cap table management and equity plan administration.

This is an important distinction as it positions Carta as a more diversified service provider, able to address a wider array of user needs. This could potentially be one of the factors that contribute to Carta's popularity despite the criticism it may face in terms of user experience or business conduct.

By addressing diverse needs and offering a wide range of services, Carta has essentially created a one-stop solution for startups, distinguishing it from other providers in the market and making it a preferred choice for many.

In the arena of private share trading, CartaX faces stiff competition from players like Forge Global and SharesPost. However, CartaX provides a unique value proposition by integrating the private share trading service with other offerings within the Carta platform. This seamless integration allows for a smoother user experience, which can be a strong differentiator.

Strategy Analysis

Carta's move to transform itself from a niche service provider to a holistic startup service ecosystem has been central to its growth strategy. By developing an end-to-end platform for equity management, fundraising, and investor services, Carta has created a comprehensive ecosystem that provides immense value to its customers.

The platform or ecosystem strategy has been successfully deployed in many tech companies, such as Amazon, Alibaba, Google, and Microsoft. This strategy requires significant initial investment, but once a platform or ecosystem is successfully established, they can generate revenue in various ways.

However, this strategy is also highly risky and can be prone to criticisms and potential challenges. According to The Information, a source close to the company noted that while Carta's latest valuation has reached $7.4 billion through fair and accurate stock transactions on its own platform, CartaX, it is still in the phase of spending heavily to expand its ecosystem. The revenue growth rate lags far behind the valuation growth rate.

This disparity suggests that new buyers have to pay an amount equivalent to 46 times the revenue to purchase shares. Therefore, maintaining a high valuation is critical for Carta to continue its financing activities. However, it's important to note that this situation has raised some concerns. There are suspicions that Carta might have inflated its valuation by selling its own shares on its platform, which could potentially involve market manipulation issues. This is a potential risk that could be targeted by critics and regulators, and something the company needs to manage carefully.

As it continues to expand, Carta will need to balance the pursuit of growth with maintaining the trust and confidence of its stakeholders. Transparency and fairness will be key as it navigates the challenges of maintaining its ambitious growth while minimizing potential risks.


Carta has successfully built a powerful value proposition by developing a comprehensive suite of services catering to the diverse needs of startups. The platform's robust offering ranges from cap table management, 409A valuations, equity plan administration, compliance, to fundraising – forming a formidable "one-stop shop" for startups. Carta's adoption of a platform strategy or ecosystem strategy has effectively broadened its commercial empire. This strategic move allows Carta to encompass the entire business chain, securing its dominant position as the primary software technology service provider for startups.

By continually innovating and enhancing its product and service range, Carta stands well-positioned to dominate the equity management space. The company's unique approach and relentless focus on customer needs are key drivers behind its success, marking Carta as a standout player in the equity management field. As it continues to expand and diversify, it will be interesting to watch Carta’s further growth and the innovative strategies it will employ in the coming years.

Even amidst a bleak industry winter, Carta holds steadfast. With its diverse business offerings, it has a variety of sources to sustain its revenue streams. Furthermore, Carta's CEO Henry Ward mentioned in a recent interview that legal costs have tripled compared to previous years, prompting them to raise their fee standards for early-stage financing companies. This move can be seen as a tactical approach to increasing revenue. Other measures such as additional chargeable services, data sales, and strategic partnerships are well within Carta's reach. Hence, the downturn in the startup market is unlikely to inflict serious damage on Carta's operations. This resiliency, combined with its ambitious growth strategies, sets a promising trajectory for Carta's future.


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