Price discovery in private markets
Carta raised a $500M Series G, valuing the company at $7.4B. The round was led by Silver Lake. Of our eight rounds of capital raised, this was the largest and also the simplest.
I don’t like fundraising. It takes a lot of time to explain the busi ness to each and every investor, and even more time to go back and forth on terms with the investors who are interested in investing. A lot of time is spent figuring out the valuation. Apple’s stock is repriced thousands of times each day by institutional and retail investors submitting bid and ask orders in a marketplace. My stock is repriced once every 18 months by a handful of venture capital associates making models and assessments, and ultimately by me and my investors agreeing on a price and shaking hands.
Price discovery in private markets is inefficient because information is asymmetric. CEOs have to collect bids by hand and negotiate one investor at a time. And investors have (much) more market information than CEOs do. The asymmetry gets worse because CEOs fundraise once in a while. Investors invest all year round.
