Carta Inc., the operator of a cloud platform that helps startups manage the financial tasks involved in raising funding, has closed a $500 million investment led by Silver Lake.

The investment values Carta at $7.4 billion, founder and Chief Executive Officer Henry Ward (pictured) wrote in an announcement today. That’s up from about $3.1 billion last year. 

Carta provides a cloud platform that approximately 20,000 companies use to manage their capitalization tables. Cap tables, as they’re better known in the tech industry, are the documents that describe which investors own what percentage of a startup. They often also contain related financial information.

A startup usually has to update its cap table after every new funding round. When new investors come onboard through a funding round by buying a part of the startup, the investors’ stakes must be added to the cap table. Moreover, the data the document contains on existing investors’ shares often has to be updated as well because of stock dilution.

All that adds up to a significant amount of manual work for startups’ leadership teams. Carta’s platform can automate or speed up many of the tasks involved in the process, which it says makes the task of raising capital more time-efficient. 

As part of its feature set, Carta also offers an analytics tool that helps companies perform financial planning. The tool makes it possible to calculate how raising a new round of funding would impact the stakes of existing investors. Moreover, executives can use it to estimate what return each investor would receive in the event their company is sold.

Carta provides a range of other solutions as well alongside its core cap table management capabilities. The startup offers tools for publicly traded companies and has a professional services business that assists venture capital firms with financial tasks, such as determining the valuation of a startup in which they’re looking to invest. Carta earlier this year expanded its product portfolio again by launching a trading platform, CartaX, through which investors can buy shares in companies through online auctions.

The startup sold some of its own shares through CartaX ahead of the $500 million funding round it announced today. Carta used the share sale to help set its valuation ahead of the funding round.

“We transacted $100M of secondary in that auction, and a few days after the transaction settled we had inbound interest for a primary at that same valuation,” Ward wrote in Carta’s funding announcement today. “We knew that we had about $1B in aggregate demand, and we had a price in hand. We were able to choose a lead investor based on the value they could add to the business, not the valuation they were willing to offer.”

A report in The Information earlier this year cited sources as saying that Carta is generating annual recurring revenue of about $150 million. That’s up from a reported $50 million two years ago, which partly helps explain Carta’s $7.4 billion valuation.

The jump in startup investments that has occurred over that time frame no doubt contributed to Carta’s top-line growth. According to market intelligence provider PitchBook Data Inc., venture funding reached a record $80 billion in 2020 and could surpass $100 billion this year.

The financial technology segment of which Carta is part has a big role in the recent growth of venture capital activity. Fintech startups have raised numerous nine-figure funding rounds over the last few quarters. Rapyd Financial Network Ltd. closed a $300 million investment just this month and, in late July, Solarisbank AG raised $224 million to help other companies build digital finance services. 

Photo: Carta