Carta valuations questioned as Carta is accused of misusing its clients’ data
Serious allegations regarding Carta’s misuse of client data have been raised over the last few days. While the story is still unfolding and Carta’s CEO is in cleanup mode, he has not been upfront about another major Carta business line that is utilizing client data seemingly without permission or notice.
We have seen multiple valuations performed by Carta that utilize proprietary data from other clients’ valuation reports to perform unrelated 409A valuations. This is extremely atypical as reputable valuation firms do not utilize non-public client data to prepare valuations for unrelated entities. In addition to the fact that this would be a breach of trust and misuse of proprietary client information, use of this data would also be unverifiable and indefensible in the event of regulatory scrutiny. Further, all this client data may be made public in the event of an IRS or SEC audit.
As a result, thousands of clients could have their private data revealed, and this could adversely impact your company in numerous ways. Rather than risk an unauthorized leak of your company’s data, simply use a competent and independent valuation provider like Redwood to perform your valuation instead of a cap table provider like Carta.
A fundamental issue is that companies like Carta are loyal to their venture investors, not their customers. They care more about their own valuation than properly performing your valuation. Given Carta’s loyalty is not to its customers, their behavior is not likely to change so clients should position themselves to move off this platform as soon as possible. The best and easiest way to start this process is to use an independent valuation provider not related to Carta or other cap table platforms. Redwood can help you seamlessly transition off the Carta platform starting with a proper valuation.
Contact Redwood today for an independent and defensible valuation with the assurance that your data will be kept confidential and secure.