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Carta Accused of Pushing Secondary Sales Without Consent

Anuj Kumar Verma
Last updated: February 12, 2024 1:42 pm
Anuj Kumar Verma
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  • Carta solicited secondary sales without consent.
  • CEO Henry Ward apologized but Linear may leave Carta.
  • The incident damages Carta’s brand as an impartial data custodian

Contents
Linear CEO slams CartaCarta CEO apologizesCarta struggles to contain the fallout

Linear CEO slams Carta

Finnish startup CEO Karri Saarinen sparked outrage after revealing that Carta, the cap table management company his firm relies on, privately solicited an investor about selling shares without Linear’s knowledge or approval.

In a viral LinkedIn post, Saarinen said it felt “sh**ty” that Carta, entrusted with sensitive data, would cold contact a family member and Linear backer to gauge interest in an undisclosed buyer purchasing stakes at a specific price.

Carta CEO apologizes

While Carta CEO Henry Ward apologized and claimed the outreach violated internal policies, Saarinen learned of at least four investors and two other companies who received similar unsolicited secondary sale pitches in recent months or years.

After speaking to Ward directly, Saarinen said his trust in Carta hasn’t recovered, and Linear will likely switch platforms.

The exposed practices cast doubt over Carta’s goal of building a private stock market where companies and investors transfer securities, as Ward once envisioned.

Carta struggles to contain the fallout

Carta board member Matt Murphy of Menlo Ventures downplayed the incident as a one-off breach of protocol dealt with appropriately. However, vague data protection language in customer contracts gives Carta leeway to share info.

As startups compare notes, the loss of trust presents reputational and customer retention issues that Carta can scarcely afford amid other lawsuits alleging discrimination, retaliation, and misconduct.

Saarinen’s public airing of unethical tactics severely blows Carta’s brand as the impartial custodian of sensitive cap table data.

TAGGED:div5

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