Startup Accuses Carta of Unethical Practices in Share Management

A prominent startup CEO alleges Carta made unauthorized share offers to investors, sparking concerns about privacy and ethical conduct in cap table management.
Startup Accuses Carta Of Unethical Practices In Share Management
Carta Accused Of Misusing Sensitive Startup Data

Carta, a Silicon Valley-based cap table management company, faces accusations from Finnish CEO Karri Saarinen of Linear for allegedly using sensitive customer data unethically. Saarinen claims Carta approached his angel investors without consent, offering to sell Linear shares to undisclosed buyers. This breach of trust has raised serious questions about Carta’s business practices.

Linear, a project management software firm and Carta customer, was shocked to find Carta reaching out to its early-stage investors, offering to facilitate share sales. Saarinen, who discovered this through a family member and investor in Linear, expressed his betrayal on LinkedIn, criticizing Carta for not consulting them before initiating any secondary sale discussions.

Carta’s CEO, Henry Ward, responded to the backlash, apologizing and acknowledging an employee’s breach of internal protocols. However, Saarinen remained unconvinced, citing similar experiences from other investors and companies, suggesting a broader pattern of behavior by Carta.

The incident has prompted a broader discussion about Carta’s customer data usage and the protection of sensitive information in its contracts. Despite claims of separation between its cap table management and private stock market aspirations, the controversy has left customers questioning Carta’s ethical standards and data protection policies. Saarinen’s experience, detailed in a Twitter post, reflects a growing concern among startups about the confidentiality and integrity of their financial data when dealing with third-party service providers like Carta.

In light of these events, Carta, which has faced previous negative press, finds itself at a critical juncture. Its ability to maintain customer trust and uphold ethical standards in handling sensitive financial data is now under intense scrutiny, as startups like Linear consider moving to other services. Carta’s future as a trusted platform in the startup ecosystem hinges on its response to these allegations and its commitment to ethical business practices.

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