Recapping the Carta drama

On Jan 5, Karri Saarinen, CEO of Linear, criticized Carta for reaching out to his angel investors about selling shares without permission. Founded in 2019 and has since raised over $52 million in funding, Linear provides software to streamline the process of software project management and issue tracking.

Carta, a $7.4 billion equity management platform, apparently did not inform Linear before initiating an order book for their shares.

The original message from Saarinen is:

“This might be the end of Carta as the trusted platform for startups. As a founder it feels kind shitty that Carta, who I trust to manage our cap table, is now doing cold outreach to our angel investors about selling Linear shares to their non disclosed buyers.

They never contacted us (their customer) about starting an order book for Linear shares. The investor they reached out to is a family member whose investment we never published anywhere. We and they never opted in to any kind of secondary sales.

Yet Carta Liquidity found their email and knew that they owned Linear shares.”

Saarinen’s key points are around a breach of trust, lack of communcation and privacy concerns. Linear entrusted Carta with managing their cap table, but feels “shitty” by Carta’s direct outreach to their investors for secondary sales. Carta did not inform the startup about initiating an order book for Linear shares. The outreach was to a family member investor, whose investment details were private and not publicly disclosed, raising questions about how Carta obtained this information and knew about their Linear share ownership. As an aside, Linear pays Carta around $10,000 annually to manage their cap table.

Henry Ward, Carta’s CEO, acknowledged the mistake but questioned Saarinen’s continued use of Carta despite his public criticism. “But despite feeling so upset about our mistaken email that you are calling for the end of Carta, and eliminate 2,000 jobs and strand 40,000 customers, you didn’t ask to cancel your contract with Carta,” tweeted Ward. “It seems you are still planning to stay with us despite all of the public bashing? I don’t understand? Was this just to firebomb us for your personal twitter and LinkedIn exposure?”

Some big name investors behind Carta include Goldman Sachs Private Capital Investing, Andreessen Horowitz, Lightspeed Venture Partners, Menlo Ventures and Tiger Global Management.