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Carta CEO Advocates for Private Markets

  • 1.  Carta CEO Advocates for Private Markets

    Posted 04-20-2023 12:02

    Yesterday, Carta CEO, Henry Ward, addressed the U.S. House Committee on Financial Services to advocate for private markets and increased access to ownership.

    Henry stated, "I'm proud to be here today as an advocate for the venture ecosystem-for the entrepreneurs who have an idea, for the startups they create, for the investors who support them, and the employees who build for them. Startups are America's innovation engine. And it's this venture ecosystem that allowed us to build Carta."

    "Most of our innovative companies have been backed by venture (see: Apple, Uber, Amazon, Moderna). We take for granted what venture does for innovation and how it's transformed our lives. So much of the technology we use today is a direct product of startups and venture capital."

    "The U.S. has driven every major technological innovation in the last 30 years. It's one of the most important ways we lead the world. And most of that innovation has come out of the venture ecosystem. We must not take this ecosystem for granted."

    Next, Henry
    addressed two key issues that limit access to venture capital-concentrating much of venture to the coasts, driving exclusivity and preventing diversity. These issues reflect the private market regulatory framework.

    First, the primary avenue to raise capital requires entrepreneurs to have a "pre-existing relationship" with an investor. This rewards those who are in the club and excludes those who aren't. It creates a slanted system where "It isn't what you know but *who* you know."

    Second, the accredited investor definition limits investing to the wealthy. This rule, coupled with the pre-existing relationship rule, makes things worse. It limits access to not just people you know, but only rich people you know.

    To close out his remarks, Henry
    explained why regulations requiring companies to IPO prematurely is harmful to investors, employees, and the public markets:

    "As we saw recently with the SPAC craze, many private companies were taken public prematurely. Those companies, employees, and investors were severely punished-and they're now picking up the pieces."

    "Companies that went public 20 years ago couldn't do so today. The expectations for scale, quarterly predictability, resiliency of business model, and financial means have grown. For companies that've achieved this level of maturity, the public markets are a wonderful place. But for companies that haven't, the public markets are unforgiving."

    "The answer to creating more public companies isn't to make private markets more hostile, but to make private markets work better. Doing so makes it easier to start companies, nurture their growth, and create the pipeline of tomorrow's public companies."

    What stood out to you in Henry Ward's remarks? Do you agree with this stance on private markets? 

    You can view the entire testimony here:

    Hannah Givens