Carta customers say platform tried to trade their shares without consent

Carta, a $7.4bn software company used by start-ups to track their investors, has been trying to trade its customers’ shares without consent, according to a complaint that threatens to undermine trust in the widely used platform. 

Karri Saarinen, co-founder of software start-up Linear, claimed Carta started approaching his investors on Friday without consent. Carta “is now doing cold outreach to our angel investors about selling Linear shares to their buyers”, wrote Saarinen in a post on social media platform X on Friday. 

Since Saarinen’s complaint, it has emerged that Carta employees had approached investors regarding two further start-ups. 

The dispute has raised questions about how Carta is using private information gleaned from customers of its platform to gain an advantage in the increasingly competitive secondary market for start-up stocks.

On Saturday morning, Carta chief executive Henry Ward responded to Saarinen’s post to say he was “appalled that this happened” and that the company was investigating what it said appeared to be a rogue employee violating its policies. 

Shortly afterwards, Ward admitted that two other companies using the Carta platform had also been affected by the same issue. 

Carta’s primary business is helping start-ups to manage their capitalisation, or cap, tables — effectively a record of who owns the company. That can be complex for young companies with multiple classes of stakeholder. Carta was last valued at $7.4bn in a 2021 funding round, according to PitchBook.

Carta also manages a private share trading platform, acting as an intermediary between start-ups and investors to allow early-stage companies to be simultaneously private and liquid. That platform utilises the data provided by start-ups about their investors to create a more efficient secondary market for start-up stock, and Carta takes a small cut from buyers and sellers on any deal. 

A paucity of public listings in the past 18 months has led to an increase in interest in the secondary market for private company stock, which is one of few routes for investors to access buzzy start-ups. Carta is one of a number of platforms competing for trade in private companies. 

While the majority of Carta customers use the platform to keep track of their investor base, not all of them are actively seeking to sell their shares to investors at any given time. The two parts of the business are meant to operate largely independently from one another.

Linear had not arranged a sale, and Carta had used private information to target the company’s investors, alleged Saarinen. 

“I’m perfectly fine with the idea if Carta has [a] secondary sales platform for a company-approved tender offer or secondary sales,” he wrote. “Where I think it crosses the line [is] where Carta uses their employees to solicit these sales . . . knowing company or board hasn’t approved any secondary sales,” he continued. 

“If Carta and Carta Marketplace employees have free access to company information and cap table information in order to generate secondary sales (which companies often don’t want) it all starts to seem rotten.”

Carta and Ward did not respond to a request for comment.