The Startup Game Changer: How Carta Is Powering Startups to Triumph - with Peter Walker

The Startup Game Changer: How Carta Is Powering Startups to Triumph - with Peter Walker

Show Notes

Equity management is a critical decision for startups, as the choices made early on can have lasting impacts on the business. It is imperative to make sound early decisions, as they have the potential to determine the company's long-term success. That's exactly what our guest, Peter Walker, head of insights at CARTA, is here to discuss

Introducing CARTA: Reshaping Equity Management

CARTA is reshaping equity management and providing invaluable insights to companies like Slack, Coinbase, and Robinhood, enabling them to focus on their core mission - building their company. Peter delves into a variety of intriguing topics, such as:

  • The reasons behind startups choosing to remain private for longer
  • How first-time founders evolve into second-time founders, consequently expanding the network of business owners
  • The significance of employing tools and iterative techniques in data storytelling and how Venture Capitalists (VCs) are tapping into this data to make informed decisions
  • How companies can enhance their purchasing processes
Tackling the Challenges of Private Markets
Overcoming Liquidity Challenges
  • CARTA's initial mission revolved around the digitization of startup cap tables, primarily benefiting founders.
  • Prior to CARTA's emergence, founders either managed cap tables themselves on spreadsheets or incurred hefty expenses hiring lawyers for the task.
  • This digitization process establishes a reliable system of record, making CARTA the definitive source for determining ownership percentages within a company.
  • Private markets pose unique liquidity challenges, distinct from their public counterparts.
  • Unlike the seamless trading experience in public markets, private markets struggle with limited trading of stock options or shares.
Unlocking Liquidity: CARTA's Strategic Initiatives
  • CARTA is actively investing efforts to address these liquidity challenges in private markets.
  • By tackling issues related to price transparency and trading platforms, CARTA aims to enhance liquidity options for VCs, investors and employees alike.
CARTA's Evolution Beyond Cap Tables
  • CARTA has evolved beyond its original role as a cap table management platform.
  • Now offering comprehensive financial services, CARTA serves public investors and companies exploring acquisitions, illustrating its commitment to the entire startup ecosystem.

Enhancing Market Accessibility and Transparency

Secondary Markets: Enhancing Investor Flexibility
  • Secondary markets play a vital role in providing liquidity to investors by enabling the trading of shares of private companies.
  • CARTA's involvement in secondary markets reflects a broader trend in the industry toward democratizing access to investment opportunities and enhancing market liquidity.
Future Prospects: A Platform for Private Investors
  • Looking ahead, CARTA envisions the creation of a private platform for investors to access and invest in companies at various stages.
  • Such a platform would enhance market transparency and accessibility, empowering investors to make informed decisions based on comprehensive data and insights.
Streamlining Fundraising and Empowering Employees
Carta's Deal Concierge Service
  • CARTA's Deal Concierge service streamlines the fundraising process for startups by handling administrative tasks and facilitating transactions.
  • This initiative aims to reduce the time and cost associated with fundraising, allowing startups to focus on growth and innovation.
Ensuring Greater Employee Equity and Financial Transparency
  • Educating and empowering employees to make informed decisions regarding their equity is crucial for fair compensation and alignment of incentives.
  • CARTA recognizes the importance of transparency and accountability in fostering a culture of trust and responsibility within the startup community.
Market Dynamics and Startup Valuations
  • There is a definite lag between Public and Private markets
  • This delayed response of private markets to public market trends contributes to discrepancies in startup valuations, impacting investor sentiment and market stability.
  • Recent IPOs and market fluctuations highlight the interconnectedness of public and private markets, underscoring the need for transparency and proactive risk management.
  • Understanding market dynamics is essential for startups, investors, and industry participants to navigate uncertainties and capitalize on emerging opportunities effectively.

This conversation with Peter Walker is truly captivating and an eye-opener for founders, investors, and startup enthusiasts alike, as it delves into the intricate world of equity management, market dynamics, and the pivotal role of platforms like CARTA in shaping the startup ecosystem.


Jed Tabernero: 0:01

Picture trying to assemble a complex jigsaw puzzle, but some pieces keep changing shape andothers seem to disappear entirely. That's what managing equity can feel like for many businesses.

Peter Walker: 0:17

Tons of headaches for entrepreneurs and they don't typically get into startups in order to manage acap table. They want to build a unicorn or change the world.

Jed Tabernero: 0:26

And airing your cap tables can cause potential financial and legal headaches Back in the day.

Peter Walker: 0:31

cap table would be simply a spreadsheet or in some cases, even a word doc, where it just outlinedhey, this person owns this percentage of my company.

Jed Tabernero: 0:40

However, the tide is changing.

Peter Walker: 0:43

Today, more than 30,000companies, including household names such as Slack, Coinbase and Robinhood, are leaving the chaos behind by partnering with CARTA  And when you go into a fundraising conversation with an investor, they can look at your cap table and clearly understand who owns what portion of the company, which is a really big deal to investors. As they give you money as the founder, they're expecting a certain percentage or allocation in your company back, so it is incumbent upon them to understand who already owns portions of this company. How does it work with my new investment.

Jed Tabernero: 1:17

Their platform is not just simplifying equity management, but it's also giving businesses a clearer picture of their ownership structure and shining a light on untapped growth opportunities.

Peter Walker: 1:29

How can we turn a first-time founder into a second-time founder in terms of their knowledge, interms of their ability to negotiate, in terms of their being able to sit across the table from an investor and really command the?

Jed Tabernero: 1:41

group. So, get ready toappear into the future of equity management with our guest today on Things ofChange podcast. He's none other than Peter Walker, the head of insights at Carta, the game changer in the cap table arena.

Peter Walker: 1:56

We exist to make CARTA  data more useful to the ecosystem, to current clients and then to future clients.

Jed Tabernero: 2:03

So, stick around to learn about how CARTA  is revolutionizing equity management. If you had known how important the technology economy was 20years ago, would you have done things differently? The Internet, cell phones, the cloud and data Things have changed. We're here to talk about it.

Shikher Bhandary: 2:31

Hi I'm Jed. Hi, I’m Shikhar. Welcome to Things of Changed, your new economics and technology podcast, peter, great having you on here. It's a pleasure to have you on the show.

Shikher Bhandary: 2:52

And Peter is a part of Carta, a company that is building the infrastructure for private investing and venture capital investment. So, the customer in this case are startups, big and small, as well as the funding and the partners that invest in these companies.When we say, hey, you know what, there's an investment in this company, there's a misconception that it is easy, in the sense that people just think, oh, you know what, I can just wire someone some money, right, I can just send them aVenmo and, for a certain amount of money, and maybe I get a stake in that company. It doesn't sound easy, but it is actually quite daunting, right? Just because we are talking about financial stuff, we're talking about regulatory implications.Inaccuracies in that ownership and the cap table can have huge implications downstream. That's kind of where CARTA steps in, and it's great having Peter, who runs Insights at Carta, to kind of give us this overview of how he's usinghis teams, using data-driven strategies and innovative solutions to simplify this complexity that we're talking about.

Shikher Bhandary: 4:03

Absolutely Great to be here. Thanks for the invite. Yeah, totally. I guess jumping right in. Startups have enough on their plate already. They have their product, they have their competition, they have all this crazy stuff going on. And managing equity still seems the hardest part and actually the most consequential, because if they get something wrong there, it's a lifelong lifetime of the company, right.

Peter Walker: 4:28

Absolutely Back in the day, you would manage your cap table and the cap table would be simply a spreadsheet or in some cases even a word doc where just outlined hey, thisperson owns this percentage of my company. Which seems easy, but you can imagine all of the headaches and complications that came from different investor preferences, when someone invests in your company, different spreadsheets that are not updated and they don't show the same number when it comes to the percentage of shares, and then you're in a legal fight about whoowns what in this company. So, at the original mission, Henry and our founding team came up with the idea of digitizing cap tables. That's back when we were known as e-shares, And the idea was that you would keep your cap table insoftware rather than on either handwritten or in the spreadsheets, and you would be able to easily update that cap table. You'd be able to issue shares to employees, investors, advisors everyone much more easily and you would save time because Carta would host and reconcile all of those different transactions for you so that your cap table was already up to dateAnd then when you go into a fundraising conversation with an investor, they can look at your cap table and clearly understand who owns what portion of the company, which is a really big deal to investors because as they give you money as the founder, they're expecting a certain percentage or allocation in your company back, So it is incumbent upon them to understand who already owns portions of this company.

Peter Walker: 5:57

How does it work with my new investment? So, all of that was tons of headaches, as you mentioned. It still can be a lot of headaches for entrepreneurs and they don't typically get into startups in order to manage a cap table. That's not the idea. They want to build a unicorn or change the world.

Peter Walker: 6:13

So that's our little piece of their world that we can help them eliminate headaches and put this into the background so they can focus on building the thing that they want tobuild.

Jed Tabernero: 6:22

This is the kind of stuff again that isn't so visible to the normal consumer. So just to clarify, what are businesses doing today to address this issue? I've seen a lot ofs preadsheets on this and a lot of manual solutions towards fixing this issue. Iguess my question is around were you surprised seeing that companies weremanaging such an important and consequential thing, as Shikhar was talking about earlier? So, this super manual process, that's got to be crazy.

Peter Walker: 6:52

I'm honestly still surprised by it. I think we're not the only cap table provider out there. It's getting to be a slightly more crowded space, but internally we talk about the number one competitor we have is Excel still in 2023. Even now, totally, and it's not a problem. That is, in some ways, when you think about it. I was surprised by it.

Peter Walker: 7:13

But if you think about it really logically, it makes sense in that at the very earliest stages, if it's just two founders in a garage making up this new idea, they're probably going to come to some conclusion about who owns what percentage of the company between the two of them. They might write it down or they put it in their incorporation documents and that's it for a while. A lot of times they don't hire. For a while They're trying to experiment with MVPs and there's a whole host of early-stage company building stuff.

Peter Walker: 7:39

And then you get to the point of your kind of are forced to think about cap tables for one of tworeasons Either you want to hire someone and you want to give them a portion of your company because that's become so standard and so value and across techstartups, or you want to get an investment from someone and that also requires that you give them equity, or at least the promise of equity, using aninstrument like a safe or something. So that's when people start thinking, ohwow, I really got to get this sort of modernized a little bit, and hopefully that's when you that's the point at which you come to Cardale. So, if you getit started earlier, you'll waive your headaches and there's less lawyer time and you just kind of save everybody a lot of annoyance and teeth gnashing.

Jed Tabernero: 8:24

Yeah, I've read a couple of articles saying that Carta's such a significant upgrade from lawyers and spreadsheets.

Peter Walker: 8:33

We love lawyers. We love lawyers, but initial cat table stuff, that's not a good use of their time.

Jed Tabernero: 8:39

Right, right, yeah, and a lot of money. Sorry, that's my puppy.

Peter Walker: 8:44

She also hates spreadsheets, you know.

Shikher Bhandary: 8:47

She's very anti-coach.That's great.

Peter Walker: 8:50

Whenever it comes up, she just can't stand it Yeah.

Jed Tabernero: 8:54

Could you kind of share what was the biggest unlock of a product that Carta was bringing to your customers?

Peter Walker: 9:01

Yeah. So, a company was founded back in 2013 for that initial mission of digitized cap tables and move from Excel and spreadsheets into software and then kind of essentially if you want to look at the company in a very simplistic way, we've just basically found other problems that look a lot like that initial problem and we go andsolve those for founders. So the next one was 409A And if you're not in the tech startups, you might not have ever heard that term 409A evaluations before.But essentially what it is is a mandate by the US government that says you need to have an independent third party, someone place a fair market value on the shares of your company if you're a private company, so that we have some idea of what they're worth before you start giving them out to employees and other people. So you typically get this once a year, unless you raise around, and then it might be twice in that year, And that used to be a ridiculously long headache.

Peter Walker: 10:00

I mean, this would be the kind of thing where a founder and a Series A company would come in and this team would be going through reams of data these lawyers, these accountants and they would try to comp this Series A company to public comps that might be Facebook or other thing. It's a weird process. So a lot of what we did was to automate and turn those 409A evaluations from services into software. It's not completely done, but we've made a huge strides on that.So it's a lot easier to get a 409A through Carta now than it used to be. Andthen it's just kind of layering other products on for founders and along theway we added an amazing business that helped VCs as well.

Peter Walker: 10:41

But on the founder side, i think one of the most interesting ones that we use it's only about two years old now is Carta Total Compensation, and that gives founders.

Peter Walker: 10:50

So, if you can imagine, as the equity holder, as the person who runs the cap table, we can see what each individual employee gets in terms of their equity grants, like one of their stock options when they join, which is a pretty unique view into compensation.So what we did was we said, okay, we have this equity piece. If companies come on and want to use this equity piece to help make better offers to new candidates, we'll go ahead and take the salary from their existing HR systems and match it up So we can say, hey, for a level five engineer in San Francisco, here's what the current market is for their salary and their equity. So helping founders understand how to hire better, what exactly their offer should look like and then how that changes over time has been a great unlock for a lot of founders. Obviously, hiring is a little bit down right now, but even so it's wonderful to get a sense of what is market, because it's such an opaque sort of thing.

Shikher Bhandary: 11:41

That's so interesting.It's kind of like a LinkedIn/ Indeed/ Glassdoor for early-stage startups, but data is a bit more from the source. Yeah, exactly.

Peter Walker: 11:54

Instead of self-reported, it's directly from the cap tables in the HR system, so it's not as comprehensive, obviously, as a Glassdoor which takes jobs from all sorts of different places. Ours is very tech startup focused, but even so I'd probably say the data is certainly more reliable.

Shikher Bhandary: 12:11

That's awesome, and thefirst problem to solve was managing the gap table and now the expansion. Just last year, Carta acquired Vauban, which is a competitor in UK. So it seems like Carta is trying to become the infrastructure player for startups in general, from their money to their hiring to other decisions. How were the insights thatyou were able to generate? We follow you on LinkedIn a lot and there's just somuch data that's coming out. We kind of keep tabs with the startup ecosystem, but it seems like the data that you're publishing is really different from, say,a Bloomberg or whatever startup media is out there, because it seems like it'scoming from the source. So how does that process work?

Peter Walker: 12:58

Yeah, so my team at Carta is an insights team and we work sort of cross-functionally between the data andthe marketing teams here, and it's a pretty unique position, honestly. So the way that I describe my role is we exist to make Carta data more useful to the ecosystem, to current clients and then to future clients. So with that in mind because again we have access to this underlying gap table when a new company goes out and they raise their Series A, they record all the information about thatSeries A on our cap. So they'll say, hey, we got this much investment for this valuation, we gave up this much of the company. Here were the different termsinvolved, all those kinds of things. So you can imagine, if you looked individually, you could see what each company was doing and obviously, we would never publish individual company data like that. But at an aggregate level you can say is the median Series A valuation going up or down? How much? For what kinds of companies? Is there a big difference between a SaaS company in San Francisco and a renewable energy company in Seattle, for instance? So my team gets to break all that data out and then offer it up to the market in the form of reports and everything like that.

Peter Walker: 14:13

To be honest, the reasonwe do it is because we can, and it seems, like you said, there's a lot ofdifferent ways to get data about the private markets, but not all of them arevery transparent and candidly.

Peter Walker: 14:26

Some of them are quitewrong a lot of the time.

Peter Walker: 14:28

So we were like, if ourjob, if we exist as a company, to create more owners which is the mission of Carta,the way that we want to do that is by incentivizing more people to startstartups and then grant equity ownership to employees, advisors, financialinvestors, et cetera.

Peter Walker: 14:43

So it helps us foreveryone in the ecosystem to be working off of the same set of facts, and if wecan be the ones to provide those facts so that the conversation between aninvestor and a founder is easier they can come to a conclusion much morequickly on what the valuation of a company should be then we've done our job,and so that's the mission of my team And I think it ladders up really nicely tothe mission of the company, and I don't think there's very many teams that getto do exactly what we do, but I'd imagine that over the next three to fiveyears, within tech startups specifically, the value of this first-partyproprietary data is going to become more and more significant, and I would beshocked if more companies aren't doing a little bit of what we're doing hereover the coming years.

Shikher Bhandary: 15:29

Some of the stuff that you are providing is like real time. You're talking about Q1 when Q2 just literally has started. It's so insightful for startups because usually there's such a lag, but your team labeling that data and making it accessible just is such an unlock, not just for the Venture Capital industry (VCs) but the startups as well, the founders, the employees, all of them.

Peter Walker: 15:55

A lot of that credit should go to my data science team, who are absolutely wonderful, keeping up allthese models. I've been in startups my whole career but I hadn't spent a lot of time thinking about it from the venture point of view. The venture over thelast 10 years has kind of exploded as this more professional asset class. Butfor a long-time venture and it still sometimes is a relationship business. It'slike who do you know? How do you get access to these important investors? Howcan you network in this fairly small city in Silicon Valley in San Francisco inparticular, in the last 10 years it's gone over this radical shift of this venture everywhere, all of these different ecosystems sprouting up, even ifSilicon Valley is still sort of the home.

Peter Walker: 16:38

Another way that we like to frame our data insights internally is how can we turn a first-time founder into a second-time founder in terms of their knowledge, in terms of their ability to negotiate, in terms of their being able to sit across the table, comeand investor and really command the room? A lot of that comes from data access.It is an asymmetrical thing. It used to be that VCs had a lot of data fromtheir prior investments and founders were walking in with basically nothing.But hopefully over time we can make sure that those first-time founders feelreally confident when they're going out and raising for their startups. Becauseeventually, if more deals, if more startup deals are done and people can cometo quicker assign estimations of value, then more people get equity. These startups grow more quickly. That's kind of a boon to all of us.

Jed Tabernero: 17:24

Do you have maybe an anecdote of someone who's used these insights to change the way they've done their startup? and, beyond the basic services that you guys provide, this is huge unlock.

Peter Walker: 17:36

Great question. Yeah,there's been a. Multiple stories come to mind here. I think one of the most recent ones is we put out a little mini report and a couple of graphics on whatstartups are paying their first five hires in equity. So if you just take the founding team, take them out of it and say the first five people that this founding team hires, who are the core of this new business, what do you give them in terms of percentage ownership in the company? And we put this littlereport out and then we got some really wonderful notes back from a couple founders who were in the precede stage and they're saying thank you so much for these benchmarks.

Peter Walker: 18:17

It really helped guide the conversation when I was hiring my first engineer, or I was hiring my firstproduct person, and we were able to come to a much cleaner agreement as to what the percentage ownership of that person should be.

Peter Walker: 18:30

So giving a lot of times what happens is it's never going to be that you look at a chart from Carta and you say, okay, that's the number for me, because there's a whole host of whyyour startup is unique, why your relationships with investors are unique, all those kinds of things. But what it can do is it can guide the conversation So you can say, okay, for this first hire I'm going to pick between one and two percent, and then your discussion is between one and two percent It's not between a quarter of a percent and 10 percent and you just can't come to conclusion. So I think that those early hire stuff has been one of the most rewarding kinds of things that we worked on, because it's just super cool to see founding teams hire their first five or 10 employees. It's such an exciting time in a business. I was employee number 13 at an old startup and I remember being a really big deal.

Jed Tabernero: 19:18

Yeah, now employees can't come in and demand some crazy number of shares.

Peter Walker: 19:23

Well, they certainlycould. It's just a question of whether or not they'll get them.

Jed Tabernero: 19:28

Yeah, really interesting because this makes the product a lot stickier, the type of value that you're buildingf or the people who invest in this and who build their infrastructure on this.It's going to be long term. So really cool to see this growth. Talking about this data analytics piece and how you've incorporated it into the wholebusiness model of CARTA, I think I'm really interested because I think I had seen you on TV before. I think I've seen you on BBC, if I'm not mistaken.

Peter Walker: 20:00

Ah, yes.

Jed Tabernero: 20:00

But I've seen becauseduring the pandemic I'm a subscriber of BBC and I watch your stuff all the timeBut I had seen a clip of you when I was looking you up that you were presentingsome insights about COVID. Yeah, it was just really interesting for me becausedoing the research on you, just your background on this stuff, is the valuethat you've provided, at least for Carta, in your insight’s role, and thatinsight scene that you've created comes from your interest in this space,gathering this type of data and providing some sort of expertise. Just wantedto ask you what was your personal journey to getting into DataViz, and thishelped unlock a lot of things in your company and your career. So I just wantedto hear that story.

Peter Walker: 20:44

Yeah, I mean. thank youfor putting it kindly as interest, instead of spending a lot of time inDataViz.

Peter Walker: 20:52

But actually it startedat my old startup which was called Public Relay. It's actually back east and itdoes media analytics for Fortune 500 companies typically, and in that role, Iwas both got my hands dirty with a lot of Tableau analytics and leading teamson that, and then, after getting a bit burned out with DataViz originally, Ikind of poured it over to the marketing side and ran product marketing teams,and so that's the background. That's the marriage of product marketing, datastorytelling with DataViz skills. And then, as you mentioned, the pandemic happened. It's March of 2020, April 2020.

Peter Walker: 21:28

We're all sitting aroundin our apartments pretty worried and also kind of with a lot of nervous energy,and I got on Twitter for the first time which you can decide whether or notthat's a good idea And I just started putting out graphs from data sets that Ifound across the web And some people found those graphs useful and then westarted conversations And then actually the journalists who ran one of the biggest data sets, the COVID tracking project at the Atlantic, got in touch andsaid hey, would you come and help us run this DataViz team that we're standingup internally. So I went and did sort of a moonlighting product for them for 10or 11 months and that's like a PhD in putting data out both quickly and liketon of feedback. Like, as you can imagine, you're working with COVID data likearound testing cases, hospitalizations, deaths, like very serious metrics, andyou're putting it out on social platforms every day. You're going to get a tonof feedback and not all of that feedback is going to be positive. You know, myDMs were pretty much a wreck for that year and it's like going to grad schoolfor both data storytelling and then also having to set up systems so you cancome out with something new every day that's from the same set of data.

Peter Walker: 22:45

So that was an incredible experience, probably the most rewarding thing I've done in my career so far, and actually an engineer who was volunteering with that project workedat Carta And so she introduced me to RCMO and the rest is history there. But Ido firmly feel that over the next three to five years, more and more companies and organizations will turn to their first party data and say how can we buildour brand, how can we become the thought leader in the space with somethingunique to say? Because there's a ton of wonderful blogs and different pieces ofcontent, but it's easier to get attention, I think, with that piece ofproprietary data.

Shikher Bhandary: 23:26

It's so fascinating how project in a different industry could result in you applying the principles to startups and then that also having such a profound effect on the ingestors of that data. So were there big takeaways that were you able to map it to? the Carta insights? Is there something like it could be even a font size that you're like no, this is the way, this is the best way to do it and that's the mandate, because I will learn it. Yeah, pushing out the most sensitive data for one year.

Peter Walker: 24:04

That is a greatquestion. I'm not sure it would default to font size and I have a nice ear, as opposed to, you know, at CTP.

Peter Walker: 24:12

At least I have awonderful design team who can like give me some guidelines on how we wantthings to look a little bit. No, I think the most important things that Ilearned from the time at CTP that I've ported over to Carta, I would call. Iwould say three things. So, first and foremost, iteration matters way more thanday to day content. So, you know, don't get hung up on whether or not this isexactly what we should be putting out, or have a ton of different reviewsessions set up to say, like this is one graphic, do we feel comfortable withit? Just put stuff out. And then you start putting things out and the marketwill tell you what's interesting and what's not interesting. So I feel like alot of times companies will go into this kind of thing and they'll say we needto build a 20-page PDF report with, like the best you know global consumerinsights that we found, and they should actually probably just be putting outdaily graphics on LinkedIn or Twitter, because that feedback loop is incrediblyimportant and it sharpens the way that you build graphics immensely. The secondthing and this is a personal one it's not a must have. But tooling matters alot here. So I am a Tableau aficionado. I've tried basically every BI toolunder the sun And I think Tableau is the right mix of complexity in what youcan build and then ease in the visual presentation of that building. So I'm abig advocate there And I also use a bit of Figma, the design tool, basicallyevery day to like up, level the graphics and make them, you know, add someinteractivity occasionally and that kind of thing. And then the last part isyou know the and this is something that I've been really grateful that CARTA hasallowed me to do And I think that other companies should adopt it.

Peter Walker: 25:56

I don't think that a lotof, at least within tech, you know buying processes. It's less about casestudies and what you can download from people's websites and much more aboutlike, do you trust the people at that company? So, like, building internal brands,having your subject matter experts or employees at the company be spokespeoplefor your brand, and doing it with data is often a great way to start. But,like, just allowing people to speak naturally on these platforms, it justgarners way more attention than you know what you can do on the brand side orwhat you, you know, if only your CEO is allowed to talk, and things like that,which, unfortunately, you know, hearing from startups is still sometimes thecase. So those would be three points that that I would say would be a great.You know, those were learnings that I took from the tracking project that havebeen very helpful. That's awesome.

Shikher Bhandary: 26:45

I'd like to step back abit, go a bit macro on you, peter. If and understand, like considering, over the last 10 years, this industry has kind of exponentially grown, what are some specific areas that you as a team are actively looking?

Peter Walker: 27:03

Okay, one year or two years down the line, it's a complex problem space, I would say within cap tables in general, and then basically just infrastructure for founders. So I think the biggest mindset shift that we've had is, you know, for a while we were a cap table company and that's what we did. But when we look around at our product suite now, are we a cap table company? Yes, certainly, that's like a core part of our business, but we're so much more than that, like we have so many other things to offer, and that's good and bad. That's good because you can, you know, help a lot of different personas, but it's bad because it makes the message a lot more cluttered. How can you stand out in all of these spaces?And we have competitors in all of these spaces that do only one thing. So, like being a platform company around private markets is it's a much more difficult challenge.

Peter Walker: 27:52

So the two things I'll highlight in terms of you know, bets that we are making internally that wet hink are great places to look. So one is on specifically around venture capital. VC as an asset class has grown tremendously over the last 10 years. I think it will only continue. It's having a little bit of trouble now, but myfirm belief is it'll only continue to grow over the next 10. And that's for alot of reasons, but one of the biggest easy ones to understand is companies aregoing public much later in their life cycle. So if a company has already been in existence for 12, 13, 14 years by the time it goes public, a lot of investors want to get access to the alpha that that company creates before it hits the public market.

Jed Tabernero: 28:33

So people are going downmarket in that way.

Peter Walker: 28:35

So back office for venture funds is like a big, big bet for Carta that we're already, you know, deeply into. And then the other one, which is pretty exciting We can't we can't really haven't cracked the code here yet is around liquidity. So liquidity inprivate markets just means trading of stock options or shares. So, as you can imagine, if you want to buy a stock of Apple, you know one Apple stock, you goon to Charles Schwab right now and you buy it, no problem, you get it from Robinhood, all about it. so keep it moving and understand what you think.

Peter Walker: 29:06

That's not true for private companies. It's very, it's much murkier, it's much harder to transact, there's much less price discoverability on how much should a potential investor pay for one share of Carta, for instance, which is still private. So a lot ofteam and time within Carta is being spent on how do we unlock liquidity in the right ways for both Private market investors and then eventually, private market employees as well, so that they can realize some value from their shares. They don't have to wait 12 years for that IPO. So those are the two probably next like big private market bets that Carta has made and will continue to sort of double down.

Shikher Bhandary: 29:49

That's really cool because, you know, on both points I I literally jotted it down because I was like, wow, this is such Really great insights. Because on the first point, you mentioned how okay, you know, you are traditionally a kept able to accompany, butnow you're much more than that. Now your insights can get tapped into public investors who are waiting for a company or are Mulling over a decision to takea company public. So the first thing that came to my mind is Adobe buying Figma would probably need Carta 's insights to understand how does this look? Yeah,now that's a public company that also needs your services in addition to a big startup.

Shikher Bhandary: 30:35

Right, so that was areally interesting point on the first thing, and on the second, it's like I bet, throughout Uber surge, there must have been some investors who wanted tosell at series G because it's like, okay, we've had it enough. How many, how many series rounds are we going to have? are we going to do like XYZ? So you know they had so many fundraising rounds that I bet people were like, okay, you know what, i'm good, i've invested in series a and now it's a series H, like, maybeI can, maybe I can take off. You know, 10%, 20% off the table, just because that seems like proper risk management.

Peter Walker: 31:14

Yeah, so that's exactly what the thinking is there that secondary markets which exist It's not although Carta is inventing secondary markets, but they're really. They're really tough to deal with right now Is that there's going to be more desire to To take bets off the table or say hey, you know, oftentimes what we're hearing is thata Seed stage investor is like I invest in seed stage companies. I, you know I don't really have any interest nor Expertise and how to think about betting ona series F company that's going to go public in two years, i might. My thing isthe earliest stages, so I'd love to take the winners off the table a little bitearlier and use that capital to recycle it back into early-stage start-ups. So hopefully that that mission continues to be realized.

Jed Tabernero: 32:03

We have some products around liquidity now and those are pretty fantastic for For individual companies and my company sponsored transactions, but there's a whole host of cool, interesting things to be done on liquidity side have you or anyone in the company played around with the idea of Carta also diving into private platformfor investors Where they could actually come in and see companies at which Series they're in and and decide whether or not they want to be part of thepie? Is that something you guys have played with?

Peter Walker: 32:39

We haven't. It's. It's certainly not the first time it's come up. We haven't built anything like that yet and some of it is just. You know where do we fall back on as a company and say Who do we serve Primarily? we serve you, start a founders, and you know there are many people who've asked us in the past Can you, can you build a marketplace right? Can you build a marketplace so that I, as a founder, can be matched with VCs more easily? Can't? only, again, we really haven't cracked that one very well and we there's been a couple little attempts, but really it's not been something that we focused on, and Some of that is we want to do right by all founders, we don't want to favor anyone, and some of that is it'sa difficult marketplace to start, but we do have both nodes of the network. Soyou know, watch this space. I don't think we're going to. I don't think it'sone of the problems we're solving this year, but it's definitely an interesting idea.

Jed Tabernero: 33:31

Yeah, it's particularly super interesting to me because not only do you have two parts of the node, you also have all of the data that would be relevant for these types oftransactions, and The most Fundamental thing is providing good data as well.You know, when you go through these transactions and they trust you as a goodp lace to keep their, their cap tables, and You know. It's just an interesting thing to think about because you have literally all the tools for for this marketplace. I don't want to spend too much time on this, but it's something itjust came up, as you know, as an idea as we were looking at this.

Peter Walker: 34:08

I think the other partand you just reminded me of this, and I should have brought it up earlier but one of the things that we have thought about going into and we're starting tomake some bets on is Okay, carter. The original thesis of Carta is digitizing these cap tables. Who does that mostly help? it helps founders, because whatwere they doing before? they were either doing it themselves or have paying lawyers to do it, and lawyers are incredibly expensive sometimes. So that is athat is establishing a system of record, so Carter is the one source of truth on who owns what percentage of your company.

Peter Walker: 34:40

You can imagine, though and we're starting to see this is that it would be a great jump to go from a system of record to a system of Transaction, where the actual fundraising and money changing hands happens through card of pipes, because we can reconcile itso much more quickly.

Peter Walker: 34:56

We already have access to all the underlying data. It's just like a more seamless, streamlined process. So we're actually trying this thing called part of deal concierge, where Startups can come to us and they can say hey, I am raising the seed round, here is my term sheet from the investor, and what we'll do is we'll say, instead of you know paying lawyers all They're, you know billable hours, you use the lawyer for what they're great for, which is the negotiation part, and we'll handle all the admin work, like summing up signature docs and, you know, looking at the term sheet and analyzing the terms and stuff like that. So we're actually part of the fundraising process instead of just being a system of record for who owns what that's. That's literally like a month old, maybe two weeks old, so It's exciting times, but that that would be a really cool way to like Make again. If the whole goal is to make it easier for founders to create great companies, you know helping them. Fund raises is certainly part of that.

Shikher Bhandary: 35:51

A lot of this just is like a black box, you know no one knows what's happening inside. Yeah, the people who are inside don't know what's happening outside of just the air workflow. I would say it's personal data, like company does not really want to, unless they go public. They don't really want to share certain amount of details with regards to Stock comp and stuff like that. So yeah, absolutely.

Peter Walker: 36:12

It's very private data that we are lucky enough to be trusted to Handle and to hold in confidence. But you're right, it's it's. The space itself is super opaque and it's just tough to know what's going on. Heck, we're, we're sometimes like what's going on.

Shikher Bhandary: 36:28

Just on that point, companies and VCs would love the data, right? Well, there's some, some insight that just got you go like, wow, i would have never thought about this. The reason I asked this is because you have many of these posts and these trendsYou know. A recent one was how, in 2023, the startup valuations are dropping.Another one was employees are foregoing options a lot faster. At what stage isa company more likely to be acquired? I was like that is so interesting.That's, that's a great way to think about it.

Peter Walker: 37:01

I mean, i love the acquisition one. I think startup acquisitions are so funny because it's yeah, it's like the, the thing that everyone sort of wants but doesn't actually talk about that much. You know, like when you're, when you're an early stage founder, you're like I'm going for IPO, this is a rocket ship. Like here we go. Not a lot of people are like I am planning on being in this company for three years until it gets bought, but that is the, that's a very typical route and that's a fantastic, can be a fantastic exit for the founders and employees. So there'snot no shame in that at all. I think one that I've been most Part of the thingsthat I get to look at, which are sadly not as exciting these days and youmentioned this a little bit is just like how is everything that's happening tostartups impacting startup employees in particular? So not founders, notinvestors, but the day-to-day employees that are building these businesses, thechart that you mentioned. So part of the promise of building a startup as anearly employees, that you're going to get equity, you're going to get ownershipin that startup, and that's part of why you joined You want to be aligned tothe business and set up.

Peter Walker: 38:14

A lot of employees today are choosing not to exercise their right to buy those shares, so they're just letting them expire when they leave the company or when they're forced to leave the company through a layoff. That's a shame. I think that that is sometimes it's done. A lot of times it happens for great financial reasons. You don't want to give up some cash right now for the promise of something later. You don't believe in that prospects of that startup anymore. If you were just laid off, i don't blame you. That's a tough moment, but it is sort of contra to the general view that part of what you're doing is you're working for this equity.So Carta, obviously the platform that manages equity, but where these trends and a lot of what we do is around educating employees to make the right financial choice for them around their equity.

Peter Walker: 39:03

But I do think that there are things that the ecosystem startups as a whole can do a little bit better to make sure that employees are educated. one Then you're aligning the incentives. If an employee works for you for two or three years, they should probably have like this is my own hobby words, but they should probably havelonger than 90 days when they leave to make a choice about whether or not they get that equity Which is the standard now. So that's a bit of a. I can kind ofrant about that for a while, but it trickles down when you see all the turmoil in the public markets that's going to go to private markets and that's going togo to private market employees over time.

Shikher Bhandary: 39:40

Yeah, it seemed like that lag took quite some time. Right Like, we saw that big crash in 2022 where all the public markets and also the public companies that have private competitors right Like, if you see markdowns in the public companies, why are the private companies still at those lofty valuations? And I was reading an article where the mismatch was the highest it's ever been last year and now it's slowly aligning where, yeah, it makes sense that a private competitor fora public company should be at similar valuations, seems like just because of lack of liquidity, it's kind of frozen in the private state.

Peter Walker: 40:29

Yeah, you said it really well that like it feels, like it moves like molasses. You know it's like stuffhappens every day in the public markets and it's instantly. You can see all these stock prices changing every second, whereas in the private markets, youknow you get revalued once every two years sometimes.

Jed Tabernero: 40:46


Peter Walker: 40:47

And so, like, a lot of stuff happens in between those time periods. It's, in some ways, it's why companies stay private longer because there's more opportunity to recover froma mistake, for instance, or or pivot in a business model. Where a pivot in a business model in a public company is you know I just asked Zillow like it's almost impossible to do So. That's a great reason to keep private, but it does make itf eels as though these private markets like haven't responded more quickly orquickly enough to what's going on in the public comps that they have. And that's it's like an accordion, like it comes from the public and then it hits late stage privates, then it hits mid and then it hits early and then it hits like startup employees. So it's definitely it kind of moves like a wave andit's kind of. I think I hope we're at the sort of bottom part of the wave forvaluations And we'll see what happens over the next six months, but it's certainly not been the most fun 12 months in startups lately.

Shikher Bhandary: 41:50

Yeah, and I mean we might be closed because just yesterday, i think day before, Cava, the Mediterranean restaurant, when public and was up 100% on the first day. so everyone's like IPOs are back baby!

Peter Walker: 42:08

I don't know if I would call Cava a tech company, necessarily.

Shikher Bhandary: 42:12

Well, we'll take it.We'll take it If it has an app. It's a tech company according to the markets100%, you're totally right.

Peter Walker: 42:18

You're totally right.We'll claim that one for ourselves for sure. That's a big win.

Shikher Bhandary: 42:21

So hopefully this is a sign positive sign for things to come in the coming days And yeah, it was great having you on Peter Again, we discovered your great insights online. We just want to give you the stage to kind of share with our listeners how they can kind of reach out to you and access some of the great insights that you haveput out.

Peter Walker: 42:42

I put out probably fouror five graphics a week around startups through my LinkedIn. So that's PeterJames Walker, and if you just search that in LinkedIn with Carta, sure I'll come up. And then we also write a weekly newsletter called The Dataminate, wherewe put out one sort of more in-depth piece around what's happening in startupdata every Thursday morning. So if you go to / subscribe, you will be able to find the Dataminate there. And those are the two main places.So we've got a lot of interesting, fun contents coming up soon And hopefully,if everything goes right, we'll have a place where everyone can sort of lookthrough all of the visuals themselves on a public on our website by the end of the year. That's the big project. So I say it publicly, so I will hold myself accountable in turn.

Shikher Bhandary: 43:32

You're here first. We can always go retroactively and cut that bit, so it's all good. No, no, no.

Peter Walker: 43:38

I need the public shame if it doesn't happen.

Shikher Bhandary: 43:41

That a personal tech project along time.

Jed Tabernero: 43:43

Yeah, exactly, we'll put it on LinkedIn if it doesn't happen.

Peter Walker: 43:46

So I need to put me on.Blast guys. It's more than that's more than fair, you know.

Jed Tabernero: 43:53

As we reach the end of this eye-opening conversation, it's clear that Carta is transforming the landscape of equity management. With their innovative platform, businesses can bid farewell to the complexities and embrace the future of streamlined processes and new found growth opportunities. We extend our gratitude to our guest, Peter Walker, for sharing his invaluable insights. Remember to visit Carta's website to learn more about their game-changing solutions. Thank you for joining us on Things Have Changed podcast. Until next time, stay curious.

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