The CartaX platform: Establishing a foundation for private market liquidity

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Private market liquidity is table stakes for companies, founders, and investors. CartaX, a private stock market, was created to provide greater access to liquidity with a suite of customizable solutions.

CartaX team
CartaX team
The CartaX team
April 05, 2022

The private markets had a record year in 2021. Global venture investment topped $600 billion for the first time, with U.S. venture-backed companies taking in $329.6 billion of the total. And VC fundraising reached an all-time high in the U.S., exceeding $100 billion for the first time.

The abundance of venture capital awaiting investment has created historic shifts in the private markets. In the past, raising capital was one of the primary reasons companies went public. But the maturation of private equity and venture capital industries over the past several decades has allowed private companies to stay private longer by raising larger and larger rounds of primary capital. At the same time, more types of investors have been building ownership positions at earlier stages, when companies are growing fast and valuations are still attractive.

These trends have made employees and early investors in later-stage businesses eager to access liquidity that a transition to the public market would have offered. Demand for their shares isn't lacking: As institutional investors grow their private market portfolios, the ownership targets they seek have risen to levels that private companies can't always meet during a primary financing. Consequently, investors are increasingly turning to secondary transactions as a way to gain exposure to high-growth private companies.

In response to these evolutions in the private markets, Carta launched CartaX to give founders, companies, and C-suite leaders greater control of secondary liquidity by creating a private stock market designed for private asset secondary transactions. CartaX aims to increase liquidity in the private markets with a suite of customizable liquidity solutions for private companies at every stage of development.

The CartaX liquidity platform

The CartaX liquidity platform enables companies to offer liquidity to employees and early investors without sacrificing the control and customization enjoyed in the private markets, and without the need to register as a public company or list on a public exchange. By incorporating controlled liquidity programs into their business strategies, companies can improve employee recruitment and retention, return capital to early investors, build deeper relationships with long term investors, and develop relationships with new investors as their business evolves. Running these liquidity programs on CartaX helps companies, shareholders, and investors transact seamlessly and realize these benefits more efficiently.

As with designing a custom car, companies can customize a liquidity program on CartaX aligned to their specific needs. CartaX begins by identifying those needs in partnership with the company. For instance, does the company want to offer liquidity as an employee benefit, provide an exit opportunity to several early investors, increase the exposure of the lead investor in the last primary financing, or a combination of all three?

Once the goals of the liquidity program are identified, CartaX partners with the company to determine the most effective transaction framework to achieve those objectives. Transaction frameworks range significantly in structure and timing but have the following core components, which CartaX helps companies customize:

  • Shareholder eligibility
  • Investor composition
  • Transaction price & size1
  • Transaction timing
  • Transaction information & disclosure materials
  • Transaction framework

To combine these transaction components into a bespoke liquidity program, the CartaX team helps companies interpret their secondary trading history, understand what levers may impact their valuations or tax outcomes during a secondary, and gain insight into how their peers are structuring their transactions. Ultimately, understanding these transaction components and prioritizing these goals helps to determine the transaction framework, such as a tender offer, auction, or block trade, that best suits the company's needs.

The following contains highlights from:

1 For fixed price transaction offers

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    • Tender Offers
    • Carta Cross auction
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