# This Is How AI Will Reshape Startups Forever | Henry Ward, Co-Founder of Carta NEW ECONOMIES · 2025-11-02 Henry Ward, co-founder and CEO of Carta, explains how AI is reshaping startups and Carta itself — inverting the source of truth back from data to paper by using LLMs to reconstruct cap tables from legal documents. He shares the early hack that got Carta its first users: offering discounted 409(a) valuations through VC portfolio companies. Ward advises founders to diligence investors by talking to founders who exited with them, warns that seed investors often turn on founders in M&A, and notes the VC market is becoming bimodal — large funds get larger while small emerging managers exploit niches. Carta is now expanding into private equity and credit, which he says are 6–8x larger than venture, and opening offices globally. He also recounts meeting Marc Andreessen, who admitted his firm made a mistake passing on earlier Carta rounds, exemplifying the humility Ward admires. ## Questions this episode answers ### How is Carta using AI in its accounting systems, and what does Henry Ward mean by the world flipping back from data to paper? Henry Ward says they use LLMs to write code that performs accounting, keeping the deterministic nature of accounting while letting users describe rules in English. This inverts the earlier shift from paper to data: now AI can ingest paper documents and reconstruct structured data, potentially making paper the source of truth again—a seismic shift in technology. [13:47](https://neweconomies.podhood.com/23638b2a-f9fd-4332-b671-23642185e97f?t=827000) ### What was the early customer acquisition hack that helped Carta get its first users, and why does Henry Ward believe every startup needs such a hack? Henry Ward offered steeply discounted 409(a) valuations to venture capital firms, who then shared a custom discount code with their portfolio companies. This created a viral loop, as founders forwarded the code. Ward says every iconic startup had a non-obvious, moment-specific hack—like Airbnb crawling Craigslist—and founders must experiment to find theirs. [18:28](https://neweconomies.podhood.com/23638b2a-f9fd-4332-b671-23642185e97f?t=1108000) ### Why does Henry Ward believe it's hard for emerging venture managers to scale into the next big firm, and what is the bimodal distribution in VC? Ward sees VC becoming bimodal: giant firms like Andreessen Horowitz grow bigger while many small, niche funds emerge. Mid-sized funds struggle because large firms can subsidize seed investments as lead generation for their growth funds, outbidding pure seed funds. Emerging managers often stay pre-seed to avoid direct competition. [45:19](https://neweconomies.podhood.com/23638b2a-f9fd-4332-b671-23642185e97f?t=2719000) ## Key moments - **[0:00] Intro** - [0:00] "Shutting down my previous startup was the best thing that happened," says Henry Ward. - [0:43] Henry Ward: when AI changes quickly, value speed of learning over shipping features. - **[1:07] Origins** - [2:33] Henry Ward started Carta as a founder without an idea after an investor suggested tackling cap tables. - [4:14] Carta inverted cap table management by making data the source of truth and generating paperwork from it. - [4:27] Henry Ward predicts AI could flip the source-of-truth model back from data to paper by ingesting documents at scale. - **[5:46] AI Revolution** - [8:27] Carta uses LLMs to write Python code for deterministic accounting tasks, not to perform accounting directly. - [9:29] "LLMs are an English compiler to assembly code," allowing anyone to program a computer, says Henry Ward. - **[10:47] First Users** - [11:08] Henry Ward's early user acquisition hack: offering $1,000 409(a) valuations to VCs' portfolio companies through custom codes. - [14:11] Henry Ward: startups are a bad customer base for building a billion-dollar business; Carta is the exception that proves the rule. - **[15:44] Venture Realities** - [18:17] Henry Ward categorizes startups as "execution startups" with clear line of sight to billions, and "innovation startups" that must keep building new products. - [21:56] Q: Are we in an AI bubble? Henry Ward: "For sure," but individually rational because overpaying doesn't matter if you hit an Anthropic. - **[23:30] Liquidity and Fundraising** - [24:43] Henry Ward highlights the secondary tender paradox: best companies can do them but shouldn't sell, worst companies want to sell but can't find buyers. - [25:24] Henry Ward raised Carta's $1.8M seed round through pitch competitions with amateur angels investing $5K at a time. - **[27:00] Emerging Managers** - [29:24] Large VC seed funds are lead gen for growth funds, allowing them to outbid small emerging managers, says Henry Ward. - **[31:02] Investor Relations** - [31:02] Q: How did Henry Ward meet Marc Andreessen? At Series E, after Andreessen Horowitz passed, Marc said, "Sometimes we make big mistakes." - [35:04] Henry Ward warns that seed-stage investors often appear founder-friendly but extract every penny during acquisitions. - **[37:52] Private Equity** - [37:52] Henry Ward sees private equity professionalizing and retailizing, with PE 6-8 times venture size and private credit 3-4 times PE. - **[40:22] Future Plans** - **[42:13] Leadership Challenges** - [42:38] "Being a founder is chewing glass till you like the taste of your own blood," Marc Andreessen, as quoted by Henry Ward. - [43:44] Henry Ward's annual Carta Business School gathers the top 30 young managers to work on the hardest problems for three days. - **[45:52] Five Years** - [45:52] Henry Ward predicts that in five years, Carta will have invented many new things driven by AI, making him feel like an inventor again. ## Speakers - **Ollie Forsyth** (host) - **Henry Ward** (guest) ## Topics AI, Venture Capital ## Mentioned Andreessen Horowitz (company), Carta (company), Agno Workflow (product), ChatGPT (product), N8N (product) ## Transcript ### Intro **Henry Ward** [0:00] A lot of people think, like, closing the business feels like the biggest failure of their life. But hey, it doesn't matter, because that happened to me. I spent 2 years on my previous startup, shut that business down, and it was the best thing that happened. **Ollie Forsyth** [0:12] Now I think about the billion dollars in capital you raised. **Henry Ward** [0:14] Yep. And the way that you scale yourself to billions is: every startup has that, like, hack that worked in the moment but won't work again. If you look at Airbnb, it was they were crawling Craigslist. Facebook, it was like getting the Harvard parties organized. One of the things that all startup founders now should think about is, like, what is the hack that 5, 7 years from now we're like, "Oh, that's the thing that worked." The problem with most people is they're like, "Let me wait till the dust settles and really learn what the best practices are." But when AI is changing so quickly, you have to value yourself on the speed of learning. And so it happens all the time. I tell an engineer, "Hey, try this new thing." And then 3 weeks later it's a stupid idea. But the thing is, we're the ones that are going to create the best practices by learning all the bad practices. If you actually look at billion-dollar companies, and I see it over and over again, I've often bucketed startups into two different flavors. One is. **Ollie Forsyth** [1:07] Henry, welcome to the podcast show. It's great to have you here. ### Origins **Henry Ward** [1:09] Thanks for having me. Excited to be here. **Ollie Forsyth** [1:11] Yeah. The last time I interviewed you, I think it was 2 or 3 years ago now, virtual, and now we're here in SF in person, so it's great to see you. **Henry Ward** [1:19] Yeah, amazing. **Ollie Forsyth** [1:19] So, Carta, you've been on quite, you know, the wild ride in the last few years. But let's go back to the early days. How did the journey all, you know, come about, and what was that kind of, you know, founding moment for starting Carta? **Henry Ward** [1:34] I was working on a different startup that didn't go anywhere, shut that business down. And I like to tell that story because I've been talking to founders recently that have, you know, shut down businesses and sending me emails, you know, for angel investments. And I know how hard a time it is for many of them. And whenever I get that email from, like, a founder or an angel investment, I tell them my quick story. You know, "That happened to me. I spent 2 years on my previous startup, didn't go anywhere, and it was the best thing that happened," because I ended up doing Carta Next. And somebody said to me at the time that I found really helpful is the kind of the old proverb, "It's darkest before the dawn." So I tell that story because I think for many founders, closing the business feels like the biggest failure of their life. And if you're a real founder, it's just another thing you do as part of the journey of being a founder. So out of that company, I ended up working with one of the investors that I had worked with on the last company. We looked at this cap table problem, and he said, "Hey, you know, if you'll start the company, I'll invest in it. I think it's an important problem to solve." I was a founder without an idea, so I was going to work I would work on anything to start a company again, and that seemed like the most reasonable idea I could come up with at the time. And it turned out to be a better idea than I think all of us thought it would be. **Ollie Forsyth** [2:54] So take us back then. I mean, 13, 14 years ago,right? Technology was completely different. How were people doing cap table management back then? Was it very paper-based? **Henry Ward** [3:04] Yeah, it was all paper-based and Excel. And one of the interesting things about what we did in 2013, '14 was, you know, the problem that cap tables had back then was the source of truth of the cap table was on the paperwork that the company issued. So, Ali, if you were working at my startup, the source of truth was I literally gave you a piece of paper that said, "You get 100 options of my company, and you sign it, and I sign it, and that's the proof that you own the 100 options." Seems reasonable. **Ollie Forsyth** [3:33] Yeah. **Henry Ward** [3:33] How that was actually managed at scale, of course, was everyone would then take that paper, put it in a filing cabinet, and type it on a spreadsheet. And everybody operated off the spreadsheet, the data, but the source of truth was still in the paper. And that created all kinds of problems, of course. You know, reconciliation, did we actually capture all of it? What happens if there's vesting? We have to update the spreadsheet, but, you know, the language and rules is captured in the paperwork, but it's not actually doing the calculation. And that was really the problem we solved was we inverted the problem. So instead of paperwork being the source of truth that you then recorded in a spreadsheet or a database, we said, "Come to Carta, type in 100 shares for Ali in our database, and then we'll generate the paperwork that you send to him." And that's all we did. It sounds really simple. That's all we did was we inverted the world from the source of truth being paperwork to the source of truth being data. And then paperwork was the execution of that data. The reason I tell that story now, or today, is because one of the things we think a lot about is, 10 years ago, we flipped the world from paper to data. Now with AI, we think a lot about, "Is that actually going to flip back?" Because now we can ingest paperwork and structure the data at scale, which we could not do 10 years ago. We could not take all the paper documents that a company had issued, dump it into a box folder, and suddenly reconstruct a cap table. We just didn't have the technology for it. Today we do. And does the world invert itself back to, "Hey, we can go back to a world where the source of truth is now on paper, and then we can reconstruct data from that"? And we are seeing that now in many parts of our business. For example, in private equity, the source of truth for private equity transactions are very complex legal documents explaining the investor classes and waterfalls. In our fund accounting business, the source of truth is very complex LPAs and legal agreements, which we don't have a way to structure that data, but with AI, we're now able to. And I just tell that story because it's, you know, we took advantage of this seismic shift in technology, you know, starting in sort of 2010, of open source and cloud, and now we're taking advantage of the shift in technology with AI, and the world's flipping upside down for us. ### AI Revolution **Ollie Forsyth** [5:46] Yeah. This, like, whole AI space, 2, 3 years ago, it wasn't really that massive a hype,right? And it just changes every freaking day. What do you make of what's happening? **Henry Ward** [5:57] I'm having the best time I've had at Carta in a long time. And it's I'm now the CTO of Carta. I run all of engineering. Half my day is spent with engineers. I've tried to push a lot of the commercial responsibilities to the exec team so I can spend more time on technology. And it's for a couple of things. One is figuring out how to use AI is actually a very creative exercise. It's very hard. There's many people doing it wrong. We think we have a perspective on how to do itright. But it's something I think that has to come from the top down. It's not going to be incubated internally. It's got to be both thought of and executed from the very top. So I spend a lot of time there. The other thing is, because it's changing so quickly, the problem with most organizations, especially large ones, is they value themselves on sort of what they accomplish,right? You're like, "Hey, I built the feature. I shipped the thing. I sold the product." Whatever it is, and it makes sense. It's very rational. But when AI is changing so quickly, you have to value yourself on the speed of learning. And so it happens all the time. I tell an engineer, "Hey, try this new thing. Try Agno Workflow,"right? "Try N8N and plug it directly into our general ledger database." You know, "Try these things." And then 3 weeks later, it's obsolete or it's a stupid idea. What was a good idea is now a stupid idea. A typical, you know, middle manager would say, "I wasted my time. That's going to be a negative on my performance review because I didn't get anything out of it." But if the CEO is like, "That was actually time well spent because we now learned how to do that, and we decided this is not the way we want to do it, but because we did the exercise, we understand how this stuff works," the intellectual capital we're building at Carta is incredibly valuable, but only the CEO can really say that. No performance review system will value that. And so that's why I'm spending a lot of time with AI. And that's, to me, why the rapid transition of it for many people, it's a reason not to do it because, like, "Let me wait till the dust settles and really learn what the best practices are." And our view is we're the ones that are going to create the best practices by learning all the bad practices, and we'll figure it out. **Ollie Forsyth** [8:01] It just keeps changing every 5 minutes. So we actually published one of the first generative AI mockup apps. This was 2 days after ChatGPT came out. The thing had, like, quarter million reads in a week. And then, well, a whole year later, we had kind of AI agents, maybe 18 months later, AI agents. Now it's vibe coding. It just keeps changing and changing and changing. Where do you see the space going next, and what impact is AI going to have on Carta itself? **Henry Ward** [8:27] So I'll talk very specifically about where we use AI, because AI is a very broad, you know, horizontal problem set and solution space. And we use it for a very specific use case, which is how do you use AI in accounting realms? And that's what we think of ourselves is we build accounting systems, whether it's cap tables, which is a debits and credits system for equity, or fund accounting, which is actually an accounting system, or it's LP portfolio analytics, which is a liability accounting system. So we do accounting. We do numbers. So how do you use AI in this numbers world? And most of the work that we're doing is figuring out how LLMs can write code that do accounting. So it's not, "Can LLMs do accounting," but, "Can LLMs write code that does accounting?" And the reason is LLMs are stochastic. Accounting's deterministic. You have set rules, and we want if we're going to run an accounting computation a million times, we want it to come up with the same number every time. An LLM does not guarantee that. What we think is really the unlock in our world is we often describe LLMs as an English compiler to assembly code. You know, so you can think of a Python compiler. I know it's not a compiler, but, you know, it's an interpreter. But think of it the same. You know, Python compiler translates Python into assembly, and you run it on a computer. LLMs allow us to write English and compile it into computer instructions. And what's incredibly powerful about that is now anybody can program a computer, including our users. So one of the examples that we do is we solve problems that have, like, complex accounting rules. Like, "Hey, how do you allocate these expenses across all these private equity firms that we're working with?" It's a complex rule. You have to write a develop you need a developer to write the Python code to do it. LLMs are very good at writing Python code. And so now we actually expose to our users, they can tell the LLM what kind of rule that they want in this expense allocation example, and then the LLM will write the Python code that we then run on their behalf. And more and more, what we think is going to happen is our users aren't going to be trained on clicking buttons or, you know, filling out forms. What they're going to be trained on is, "Hey, I'm just going to tell it what I need it to do, and we will generate Python scripting language that will then run on their behalf." ### First Users **Ollie Forsyth** [10:47] It's crazy,right? And this is all just happened in the last 2 or 3 years. Let's maybe take a step back. So Carta has been going 13 years, but, like, every company out there, it all starts from somewhere. Getting into your first couple hundred users, how do you go around doing that? So other founders, you know, listening to this podcast, can, you know, maybe get some ideas on how they can land there first. **Henry Ward** [11:08] Yeah. So I had a hack, which won't work today, but I'll explain the hack, and I'll explain why it doesn't. **Ollie Forsyth** [11:15] Are you saying you're old school? **Henry Ward** [11:16] Yeah. No, I'm just saying, like, the world has changed considerably. You know, when I, you know, was doing this, the hard part, of course, for us was we couldn't raise any money because everybody was like, "The market size is too small." But I'd run around to all these VCs and pitch them on, "Hey, I'm doing this cap table thing," and they'd say, "Great idea. I'm sure, you know, it'll be good, but, you know, you'll make $3 million a year, and it's a lifestyle business, but, you know, it's not venture." And I say, "I understand. But, hey, would you be willing to do this? I do 409(a) valuations as well, and I know your portfolio company is spending, like, $5,000, you know, for every 409(a) valuation." This was back then, 5,000 to 7,000 bucks. And I'll do it for, like, 1,000 bucks. And all you have to do is just, here, give them I'll give you a custom code, and if you send this to your portfolio company's CEOs and they send it come to me, I will honor the code, and I'll give it to them for 1,000 bucks. It would be super cheap. And, like, oh, of course, because the VC now wins. They get to get a discount for their portfolio company as it looks like they're adding value. They're doing me a solid, you know, and they want to be helpful. Like, everybody wins. And so I'd literally just run my fingers across the keyboard and make up a random number, and I would email it to them. They'd say, "Thank you, Henry," and they'd forward it to their, you know, CEO, you know, at Google Group thing. And then I get 30 emails, you know, forwarding it to me going, "Hey, my investors sent this. Can we get a discount?" And that just created this viral loop. And it was how we got going. It won't work anymore because now that's way overdone. Every startup, every portfolio company is asking their investors to get them customers. Doesn't work anymore. But back then, we were the only ones because nobody was selling to startups back then. But the reason I tell that story is I think every great company, you know, if you look at Airbnb, it was they were crawling, you know, Craigslist. **Ollie Forsyth** [13:09] Yeah. **Henry Ward** [13:10] You know, Facebook, it was, like, getting the Harvard, you know, parties organized, you know? **Ollie Forsyth** [13:15] Yeah. **Henry Ward** [13:15] Like, every startup has that, like, hack that worked in the moment but won't work again. There's a moment in time that it works. And I think one of the things that all startup founders now should think about is, like, what is the hack that 5, 7 years from now, we're like, "Oh, that's the thing that worked." And it's going to be unassuming. It's going to be non-obvious. You'll only get there by experimenting and trying to figure out what works. And that will be the thing that unlocks it. **Ollie Forsyth** [13:42] Yeah. I kind of feel the beauty of something like Carta is you're, you know, catering to startups,right? And as soon as they raise, they can tell all of their friends about it. And the good thing is there are not that many, you know, competitors out there,right, anymore. So it's kind of you have that insane viral network effect. How has the customer acquisition kind of channel changed over the years? Now is it very much you are kind of the market leader and people know about it, or is it still very much word of mouth and so on? **Henry Ward** [14:11] It's definitely an ecosystem go-to-market model. So I would say for us, the startup thing is both good and bad. You know, it was good that we sold to startups because they were willing to try something new. They were adopted. It's a small ecosystem. You have a 10x better product. Word spreads quickly and all of those things. So that's super positive. The problem, of course, is it's startups. They go out of business a lot. They don't have a lot of money. You know, you know, 90% don't go anywhere. You know, it's just it's a very difficult space. One of the things that I think I feel a little bad that we did a disservice to many companies is because Carta was successful at building a billion-dollar business selling to startups, everybody else thought they could too. Like, "Oh, we'll just build a, you know, they're the easiest customer. They're the best. You know, if Henry could do it and if Carta could do it, anybody can do it,"right? **Ollie Forsyth** [15:06] Yeah. **Henry Ward** [15:06] But if you actually look at how many billion-dollar companies that exist selling only to startups, we're the only ones. We're the exception that proves the rule. Startups always were a bad customer base, always a bad market, and always will be. You have to have a very unique niche to win this market. And what I always encourage founders, you know, in my, you know, angel investments or whoever I'm talking to is if you have to sell to startups to kind of figure out the product, go for it, but go outside startups as quickly as you can because it's very hard to build a big business selling to startups. **Ollie Forsyth** [15:44] Yeah. We see maybe a few companies. I mean, if we take startups and SMBs together, there's probably HubSpot, Zapier if you count that, like, also catering to startups, you guys, but really apart from that, not much,right? What was that kind of relentless just ambition to keep going? ### Venture Realities **Ollie Forsyth** [16:02] If people are saying, "What are you doing? Don't sell to startups. Like, go and chase other money elsewhere," why did you just focus on the product, which was for startups? **Henry Ward** [16:11] So we always had this, you know, go deep and narrow versus broad and shallow. And so it wasn't just sell to startups. It was how deep in the value chain of a startup could we get to? You know, so two founders and a dog, you know, doing founder stock. Then it was preferred stock. Then it was option grants. Then it was 409(a) and stock option expensing and QSPS and credit total compensation. We just kept adding more to the stack there. Very quickly, we also learned, "Hey, we think we can help the venture funds. You know, we're tracking all their investments. We should be able to help them somehow." And that became our fund administration and fund accounting business. And that actually, a lot of people don't know this, grew faster than cap tables. It's only a 5-year-old business. **Ollie Forsyth** [16:54] Really? **Henry Ward** [16:54] But it grew the first 5 years, grew faster than the first 5 years at cap tables. And I think it's going to be, you know, at least as big, if not bigger, soon than the cap table business. And so one of the, you know, going back to my early start about, "Hey, I was a founder without an idea. I just wanted to be a founder, so I grabbed the first reasonable idea I could." One of the there's many disadvantages in that, but one of the advantages is I'll work on anything that moves the startup journey along. And so there's no problem too mundane, too small, too boring. Like, I'll do anything. **Ollie Forsyth** [17:31] Yeah. **Henry Ward** [17:32] To move the business forward. And so we've just been very good at concentrically growing from a small base of cap tables into now we're in fund accounting and LP management and private equity and loan servicing and private credit. It just keeps expanding from that. **Ollie Forsyth** [17:45] I kind of feel like we were talking about this before we came on. Once you have the startups and you have this ecosystem of people, you can sell so many different products. How would you think about building products, and how would you be disciplined around doing it? Because you could be like, "Let's go and launch everything,"right? But you have to be focused. **Henry Ward** [18:03] Yeah. I think it's really the temperament of the founder and the organization. So, you know, one person's focus is another person's myopic, you know, myopism. **Ollie Forsyth** [18:16] Yeah. **Henry Ward** [18:17] And so our view, I've often bucketed startups into two different flavors. So one is what I'll call execution startups. So think, you know, like the Rippling, the MongoDBs, you know, these companies that have a product that they have clear line of sight to a billion in revenue. Like, it's, you know, they know exactly what to do,right? If Rippling builds a better HRIS, there's billions to go after. They just have to be better than everybody else. And I call them execution startups. We didn't have line of sight on any single product to billions in revenue. So I call us an innovation startup. We had to, like, innovate on one thing, use that to innovate on the next thing, to innovate on the next thing, and keep going. And that's just true of us. And so if you're, you know, a Rippling or a MongoDB, you know, you have a database and just build a better database and you scale yourself to billions. For us, we had to keep building new products. And the way that you, you know, MongoDB should focus on building the best database in the world, we actually need to diversify and build a lot of different products because otherwise we're going to run out of oxygen. So it really depends on the company and founder. **Ollie Forsyth** [19:22] Yeah. Well, there's some of the products that maybe haven't worked as well as you had hoped. **Henry Ward** [19:27] Oh, like, all of them. I mean, I would say on average, I, you know, I've probably got, you know, I'm hitting one reasonable product for every eight attempts. **Ollie Forsyth** [19:38] Okay. So for every product you launch, you said one works? **Henry Ward** [19:42] For every eight products I've tried, one really works. And so it's very interesting because venture is power law. You know, the top company outperforms everything else. Even within the company, products are power law. One product dominates everything else. And so one of the things we think a lot about is if you're going to launch a lot of products, you have to take a power law perspective to it. You know, you might launch six products. Five won't go anywhere. **Ollie Forsyth** [20:07] Yeah. **Henry Ward** [20:08] But you need but if that one gets to 100 million, it's totally worth the five that didn't work. But you do need to get to that one. **Ollie Forsyth** [20:13] Yeah. **Henry Ward** [20:14] If you roll if you do six and none of them work, that's a big problem. **Ollie Forsyth** [20:18] I think it's very normal, like, in startups as well,right? It's you try every product until that one works. Okay. Let's talk about maybe what's happening in venture capital. Lots is happening in, like, the VC ecosystem. What would you make of kind of what's happening in the world of ventureright now? **Henry Ward** [20:34] You know, there's definitely, you know, a category shift. You know, I would say, you know, there was the explosion of social media, you know, in the early 2010s, you know, Instagram, WhatsApp, you know, Snapchat, all of those things. And then we started getting the vertical B2B software explosion. Then we got the fintech explosion, and now we're in the and then I would say through COVID, we had the, like, the distributed work, you know, cloud explosion. **Ollie Forsyth** [21:03] Yeah. **Henry Ward** [21:04] And now we're in the AI explosion. And you see these companies that exploded. The winners are separating from the losers. There's not that many winners. Many are losing. They're losing slowly because a lot of these businesses are relatively capital efficient. And so, you know, they got to 20 or 30 million dollars, but they're growing 20%, you know, cash flow break even. They're just kind of limping along, which is probably the worst place to be. You sort of want a company to go to zero or go, you know, go to the moon, but you don't want 20 million static. **Ollie Forsyth** [21:35] Yeah. **Henry Ward** [21:36] And so there's just a lot we're working through in the backlog of companies that didn't work out, but now all the money is going to AI. I think the same thing's going to happen. Just like B2B, overfunding, too many AI companies. There'll be a handful of winners. There'll be many, many losers. It will take a while to work through all of that, and we'll see what the next phase is. **Ollie Forsyth** [21:56] It's kind of crazy, isn't it? I mean, like, I've been meeting some of the companies here in SF this week. Some of them are eight months old. They're generating $10 million in revenue already. Are we in an AI bubble? **Henry Ward** [22:08] I mean, for sure. But I don't view it I think it's like this provocative, like, "Oh, that means it's going to pop," all that kind of stuff. It's just it's very rational. What I think people don't completely understand is, like, as a group, we may be irrational, but individually, we're rational. You're an investor. We're funding all of these startups. You place 10 bets. Nine of them are not going to work out for sure, and you overpaid. But the thing is, is if it's not going to work out, it really doesn't matter if you overpaid or not. And then if you get one that's anthropic, it doesn't matter if you overpaid. **Ollie Forsyth** [22:46] Yeah. **Henry Ward** [22:46] And so it's very rational, but it does inflate everything. **Ollie Forsyth** [22:51] Yeah. **Henry Ward** [22:51] And then when we have clarity on what's working and what's not working, all of that stuff will pull back. People will, you know, they're people are making investments because we don't know what's going to work yet, but they want to be ahead of it. And then when they figure out what's going to work, they will get more precise about what they invest in. The companies that don't work will go out of business. Everyone will laugh at them and say how stupid they were, but they weren't. You're only stupid in hindsight, but in this moment in time, it's very hard to predict the winners. So we're absolutely in this exciting phase. Most people view it as a bad thing. I think it's great,right? **Ollie Forsyth** [23:25] Yeah. **Henry Ward** [23:26] It's what creates funding for more startups and all the startups behind us. ### Liquidity and Fundraising **Ollie Forsyth** [23:30] Yeah. It kind of feels also just in the AI space, just how quickly, like, it's changing. But I think, like, something relating to what Carta is also working on, you know, especially these companies who generate hundreds of millions of dollars in revenue, they start to do secondaries for their employees. Why is it important for companies to do this? And for companies who are kind of at that stage who might be listening, when do you think is theright stage for those types of companies to start offering their employees to, you know, participate? **Henry Ward** [24:00] We do a ton of these tender offers or secondary programs for the companies. It's all dependent on where the founder is and kind of the founder philosophy. I mean, there's some founders that, you know, all the metrics suggest they do secondary, and they just don't believe in it. And there's others that are like, metrics may not suggest they should do a secondary, but they philosophically believe it's important. I don't think there's a golden rule to it. I do think there's an argument to be said that the CEOs that have companies that are strong enough to support a secondary tender and do it will have an advantage in recruiting because employees will trust that CEO and want to go work for that company because they will get some early liquidity. There is this very strong problem, though, or conflict that happens, which is if you're a great company going to the moon, you have all the ability to do a tender offer, and that's also the company people should not sell stock in. And so that's always the challenge on this. And then the company that's not doing that great, that's the company people want to sell stock in, but people don't want to buy. And finding that meeting point of the bid-ask is the challenge in these secondaries. **Ollie Forsyth** [25:12] Yeah. And all of these companies, you know, it all starts from somewhere also,right? And, you know, quite a few of these startups now are raising millions of dollars in revenue, like, very quickly, and also millions of dollars in capital. Carta, you guys, 13 years now, I think about a billion dollars in capital you raise, give or take. **Henry Ward** [25:29] Yep. **Ollie Forsyth** [25:30] Take us back to those fundraising meetings, the relentless hustle. Why did you not give up? And how much did it take to get your first rounds closed? **Henry Ward** [25:40] Oh, it was very tough. The seed round was really tough. The feedback was always market size is too small. Cap tables isn't a very interesting problem. The seed round was really hard. In fact, the only reason we did the seed round was we pitched secondary markets. Like, we were going to build a Nasdaq for private markets, but we were going to do cap tables first, and that would be the wedge product into building a secondary exchange. And so the only people that really funded the seed round, they weren't really investing in cap tables. They were investing in the stock market idea. **Ollie Forsyth** [26:13] Yeah. **Henry Ward** [26:14] But it was super tough. I had learned the hard way through the previous company how hard fundraising was. So as hard as I describe it was for ECRs, it was way easier than the previous company. **Ollie Forsyth** [26:24] Yeah. **Henry Ward** [26:24] And so for me, it was just you just kept grinding. And, you know, we raised, you know, at the time, what was a reasonable seed round. It was 1.8 million bucks. I raised it 25 to 50K at a time, going, you know, this is, like, old school. But I remember, you know, having to do pitch competitions on a Tuesday night where in a law firm conference room where all these amateur angel investors were hanging out, drinking beer, eating popcorn, you know, watching these pitches, and would throw 5K into the bucket for you. And that's how we raised money back then. **Ollie Forsyth** [26:58] Yeah. **Henry Ward** [26:59] Whatever it took. **Ollie Forsyth** [27:00] One of the trends I'm also seeing in venture capital is a lot more angels coming in or people actually starting their own funds, former operators, former founders, these 10, 50 million dollar funds. Do you think this is the new trend? ### Emerging Managers **Ollie Forsyth** [27:12] Are we going to start seeing more of them, or is it are we in a hype cycle and maybe there's just not going to be so much of them? **Henry Ward** [27:19] We see a ton of them. It's one of our top customers at Carta. Like, our number one customer is founders that need cap tables. Our second is emerging managers that need fund administration and fund operation software. And so we see them all. Big fans. What we're really seeing in the market on the VC side is it's becoming bimodal. And so the bigger funds, the Andreessen, the Sequoia, they're just getting bigger. And then we're getting many more smaller funds. The ones in the middle are the ones that are struggling. And it makes sense. Scale, you know, in capital, capital markets, scale begets scale. So you expect these to the bigger firms to continue to compound. And then on the lower end, what keeps them in market is these early-stage venture funds. They have some niche that they can exploit. So, like, the classic is we just had a couple of Carta employees leave and start their own funds, you know, small emerging manager funds. And their niche is they know anything related to Carta. So their specialty is ex-Carta employees that go to start. You know, they're always the first check-in to that. Anything that integrates with Carta, they're the first check-in to that. Anything that is the Carta for something else, they're the first check-in to that, and that's their niche. The problem, of course, is how well does that scale? How many Carta of something? How many ex-Carta employees? And so there'll be many of these emerging managers that can take advantage of a niche. Not many will be able to scale those and sort of cross the, you know, who's building the next Andreessen Horowitz? That's a very difficult question to answer. But I do think there's just going to be bigger, you know, Andreessen Horowitz is going to keep getting bigger and bigger, and you're going to have a lot of emerging managers. The middle is where the chasm's going to be. **Ollie Forsyth** [29:02] Yeah. Do you think these emerging managers can become the next A16Zs, these Sequoias of the world? Because, like, these firms have been around a long time. And I'm kind of thinking there is, you know, partly the future of venture capital. Is it going to be all around being hyper-focused? Distribution is also a big thing. You know, what do founders need now? They need customers, and they want distribution. **Henry Ward** [29:24] Yeah. I think it's going to be very hard to build the next Andreessen Horowitz. And not that it was easy to do it then either, but because venture is achieving such scale, the problem with a seed fund today is in the larger venture firms, like the Sequoias, the Andreessen Horowitzes, the Lightspeeds, the seed funds are lead gen for the growth funds, you know? And so because they make all their money on the growth funds. So the seed funds are lead gen, which means they can subsidize the seed funds. The seed funds can pay a higher price because they don't care as much about the economics of the seed fund as long as it gives them rights on the growth fund. So now let's say you're a VC with a seed fund but no growth fund. You're a small emerging manager. How do you compete with a competitor that goes, "Look, I don't need to make money on the seed fund. I can outbid you on anything I want to win because I'll actually make money on the growth fund." And so that's why I think it's going to be very hard for these emerging managers to reach scale, which is why you see a lot of pre-seed funds. You know, basically, I'm going to write the first 50 check, the K check, the first 100K check. They're really trying to get in before the seed funds come in. You don't see very many first rounds being builtright now that are pure-play seed funds. **Ollie Forsyth** [30:41] Yeah. It's super interesting. I think this is a space to watch. I think especially, like, the emerging managers, operators, like, becoming angel investors' rights. I do think, like, one thing this AI hype cycle maybe creates, there's going to be a lot more companies, like, starting, operators becoming angel investors, and maybe, like, this is a really interesting, like, flywheel network effect. The question is, how many of those startups become successful, obviously,right? We mentioned A16Z, Marc Andreessen, who sits on your board. How did you first meet him, and what's the greatest lesson you have learned so far from him? ### Investor Relations **Henry Ward** [31:15] So I met him in our Series E, about a year before a Series E round. And Andreessen Horowitz had passed on the earlier rounds, and I finally got sort of the attention of. **Ollie Forsyth** [31:29] Yeah. You got a conviction. **Henry Ward** [31:31] Yeah. It was actually a guy named Alex who runs their growth and fintech platform, who's one of the smartest fintech investors. Or I shouldn't say one of. He is the smartest fintech investor I've ever worked with. So anytime I have a question about fintech investments, he's the guy I call. Anyway, I got to know him. He brought us in to Andreessen Horowitz, and I got to meet Marc and got to know him over a six to nine-month period. And I remember the first time I met him, we walked into his office talking about the business. He had this nice office over on Sandhill Road. And at the end of it, he goes, "You know, we're very interested. Let me write my phone number for you." And on the back of his business card, he writes his cell phone, and he hands it to me. And he says, "Call me anytime." And I said, "Thank you. But Marc, I got to ask. You got, you know, this is my Series E round. You know, you passed your firm passed on every round before then. What happened?" And he goes, "Sometimes we make big mistakes." And I was, like, super impressed, you know? And he talked about why they make mistakes, you know, what kinds of mistakes they make, what they learn from the mistakes they make. And it's something I so admired about working with him is not just the incredible intelligence, but the humility around how hard what we do is. **Ollie Forsyth** [33:01] I read in one of the interviews you see him once a quarter or something. **Henry Ward** [33:04] Yeah. **Ollie Forsyth** [33:05] And, you know, for founders who are thinking about structuring their board as well, when did you decide was theright time to structure your, you know, your board and actually, like, create one? Is it post Series A, Series B? How does it work? **Henry Ward** [33:20] I think the, you know, if you're raising venture capital, kind of the board construction gets forced on you. You know, every time you raise a round, they usually try to get a board seat on it. So the board construction sort of gets built on top of you. Where you start to go outside of kind of just investment board members is usually when you decide, "Hey, when do I want to add an independent?" And I think, you know, for us, we started, like, we asked our first independent, Mike, Michael, after Series B he joined. And it's been fantastic. He's an industry expert, and he's still on the board today. **Ollie Forsyth** [34:01] Yeah. **Henry Ward** [34:02] 10, 11 years later. I think one of the things that a lot of founders do is they don't add independents very early, understandably, because they're like, "Well, I'm a Series A company. I'm a Series B company. I already got two, three investors, board members I don't want. Why would I just add more?" And so they just don't want to do it, and they postpone it. And there's an argument to be made, like, keep your board small. The other side of the argument is your board members on the investor side have different incentives than what a governing board or, like, an independent would have. And at some point, you know, you get outnumbered by the investors, and that's actually when you should, or before that happens, start bringing in some independents because ideally, really, the independents are aligned with you. They're aligned with common. And a lot of people don't think about this when you're just building the company and you're growing. I see this come up often. We've done 11 acquisitions. We've got two more coming this year. A lot of these are startups. The biggest problem we have in acquisitions is seed stage, early-stage investors. When they come in with a check, they are very founder-friendly. When it comes to sell the company, they are not. And I can categorically tell you, every time a deal has gone bad and a founder has gotten screwed over in M&A, it's the seed founders that screw them over because there's no reputation. You know, they're not Andreessen Horowitz. There's no reputation. They're just another emerging seed founder. There's another GP. This is probably one of their only exits that they've ever had. And their job, and they will hide behind fiduciary duty, their job is to extract every penny they can out of it. And you hear them on the way in, "We're founder. You know, we support the founder." And on the way out, they do not. And I see it over and over again. I actually think, you know, it's hard to do this, but when people ask, like, "How do I do diligence on investors?" I would not diligence founders that have had the investor invest in them. I would diligence founders that have had the investor invest in them and they exited with them because that's when you can tell if an investor is good or not is at the exit. **Ollie Forsyth** [36:10] That's probably, like, a really interesting product you guys could launch because you have the data,right? Maybe it's coming soon, I don't know. But, I mean, that would be just so useful for founders. **Henry Ward** [36:21] It's less on the data, and it's more on what they will block and get in the way of. So, for example, you know, we've had deals where we work with a founder, we agree on the deal, and we have X dollars, you know, for the company and the cap table. And then we reserve Y additional dollars as incentive interests for the team and the founders, you know, to stay on, on top of the cap table. And the seed founders will go, "Well, hey, if you're going to pay, that should come to us too. Like, that should actually go to the cap table. Like, you should pay it, split it." And that happens all the time. It is remarkable how bad some of these seed founders treat the founders on the way out. **Ollie Forsyth** [37:02] Yeah. It's not good. Like, we see it a lot as well. Founders, you know, they have a super good exit, but actually, in reality, they get nothing. So if you could give any, you know, tips for founders, you know, who are raising, whether it be have a good, clean cap table and just have good, friendly terms. **Henry Ward** [37:20] I think so. I think friendly terms, I would say the best diligence you can do for an investor is ask for a referral to a founder that the investor invested in and they exited and talk to that founder about how the investor was at the exit. That's the best indicator of what they're like. And if they go, "Well, I've never had one," that's also another interesting data point that they've never had an exit. ### Private Equity **Ollie Forsyth** [37:52] Yeah. OK, so part two of our show is talking about tech trends. And I've seen quite a few of your interviews recently and some of the trends I think you're really excited about. And it's all around kind of, like, private equity,right? What's happening in the world of private equity in terms of trends and insights? And what are you most excited about now? **Henry Ward** [38:11] Two things are happening in private equity. One is the asset class itself is what I'll describe as professionalizing. Private equity 20 years ago is like venture today. It's sort of a, you know, shoot from your hip type, you know? You know, most of these firms aren't really run like real businesses. You know, they're just kind of deal makers. They're not really, they don't have a systemic way of how do we build this as an asset class. I think venture is starting to get some scale, but it's still in its infancy. Private equity was like that 20 years ago. Private equity now is really becoming an industrial growth engine. I mean, it is becoming a true asset class. And these firms are professionalizing and bringing in management teams and running better. So that's one thing that's happening. The second thing is what I'll call the retailization. So private equity is accessing retail investors through these things called semi-interval funds or interval funds or semi-liquid funds. And so you're just seeing the asset class become democratized and getting much, much bigger. You know, we feel like we've got a good, established, mature business and venture. Now we're spending all our time in private equity. And private equity, it's early days for us, but it's the fastest growing part of our business. And we view it as, you know, six to eight times the size of venture. And then if we look at private credit, which is the next kind of domino for us to go after, that is an additional three to four X the size of private equity. And so these TAMs just get bigger and bigger the further you move away from venture. We're in San Francisco, so our world is venture. But if you get outside of San Francisco, the private equity asset class is enormous. **Ollie Forsyth** [39:57] And so for the private equity and credits, you are focused globally or? **Henry Ward** [40:02] Yeah. So we have 150-ish people in London. We've got 60, 70 people in Singapore. We just opened an office in Abu Dhabi, one in Hong Kong. I think next month we're opening in Luxembourg. So we're moving the chess piece, the global chess pieces, our risk map is starting to get filled out. **Ollie Forsyth** [40:22] Super interesting. I kind of, like, I remember using Carta seven, eight years ago. So you're, OK, maybe only five years in. And although, like, such an amazing rise so far, it kind of feels you still have so far to go. ### Future Plans **Ollie Forsyth** [40:34] But it's also a really exciting time,right? You raise a billion dollars, over a billion dollars in capital. You know, what comes next is the question, I guess. **Henry Ward** [40:44] Yeah. The thing that we've figured out is the playbook we brought to venture, which is, hey, you know, put the company on Carta platform to manage their cap table and then use that relationship to put the fund on Carta fund administration, fund accounting to manage the fund, and then use that relationship to put the LPs on Carta to manage their investments. That playbook worked really well in venture. What we figured out in the last couple of years is it actually works really well in other asset classes, anything alternatives, anything private. And so we're just stepping through private equity, now private credit. You know, who knows? We could go into energy, infrastructure, real estate. There's a lot of things that we're looking at. But private equity, private credit is the current focus. The other thing we learned is in 2021, '22, we decided to expand internationally. And so I, you know, I jumped on a plane and I flew around the world learning about venture ecosystems in all corners of the Earth. What we learned is venture is a pretty US-centric asset class. Like, if venture is a small asset class in the United States, it's tiny anywhere else. But private equity is not. Private credit is not. Most of the world runs on private equity and private credit, not on venture. San Francisco runs on venture. And so the kind of combination of taking down more asset classes and becoming a global platform kind of converged in the last couple of years. And that's what's been working really well for us. **Ollie Forsyth** [42:13] I mean, you've also got to the scale,right? It's a couple thousand people globally. What's the hardest part now of being the CEO? And what's a typical day for you? ### Leadership Challenges **Henry Ward** [42:26] I don't know if there's a hardest part. Like, it's all fun. **Ollie Forsyth** [42:30] All fun? **Henry Ward** [42:31] Yeah. Yeah. You know. **Ollie Forsyth** [42:33] There are days when it's hard. And it is surely, like. **Henry Ward** [42:38] You know, Marc Andreessen calls it, you know, being a founder is chewing glass till you like the taste of your own blood. And I think I just kind of like the taste now. So it doesn't, you know, there's no, like, one day is worse than the other. It's just the thing that you just, you do have to accept is I think a lot of people think, like, oh, you're 2,000 people. You've made it. It gets easier. It gets harder. It just, it's just, it's not, the problem is just bigger. But it's the same stuff. It's just one, every morning you walk in and there's, like, a huge set of problems. What does get easier is I expect it now. You know, when I was an early-stage founder, I'm like, another problem? Like, come on. Like, how many do I have to deal with today? You know, and, you know, you're like, Series A, like, another when does this stop? Series B, you know, and, like, and then you get to this point and you're like, I mean, if I don't have problems today, that's weird. Like, that's a weird day, you know? And so you just expect it. And so I think I will say maybe the better version is, like, the most fun part is working in small teams, whether it's my exact team and we're trying to wrestle with a problem, whether it's a handful of my AI engineers who are trying to try something new. It's like the best parts are when we get, like, the best and brightest at Carta. You know, I do this thing called Carta Business School once a year where I bring the top 30, you know, young managers to an undisclosed location and we spend three days together working on the hardest problems at Carta. Like, that's the stuff that just, you know, I still have to do legal and HR and compliance and finance and board meetings. Like, you know, that's just part of the job. But the funnest part is, like, a small team of super talented cartons together with me working on something fun. Like, that's the best part. Yeah. **Ollie Forsyth** [44:26] And how good does it feel when, or does it annoy you when, you know, current employees come to you and say, Henry, you know, I've had an amazing two years, five years, but I want to go start my own company? **Henry Ward** [44:36] Oh, it's the worst. I mean, it drives me crazy. It happened last week. And it happens all the time. And I always tell them how awful it is to be a founder and it's not fun at all and you just have problems after problems and they should never do it. But they do it anyway because good founders will not listen to advice. And, you know, if I talk them out of it, they weren't going to make it anyway. And it happens all the time. I think there's, like, another one. I remember when I was an early-stage founder, people would quit and I would take it so personally. It was so hard, emotionally hard. You know, 2,000, we have, you know, 2,000 people. We have, you know, 50 people a quarter quit. You know, we have a goodbye channel. They all say goodbye. And we have a kind of, they tell what it was like. And, you know, keep in touch and what they're going to go do and, you know, all those kinds of things. And now, like, I don't, I'm not hurt. I'm not upset. I look at that stuff really nostalgically. And it's like, it's special. And sometimes they come back. We have a lot of people that come back after they start a company that doesn't work and, you know, they'll come back or they go to a new job and they want to come back. And, you know, it's, I think once you accept it's miserable, it stops being miserable. **Ollie Forsyth** [45:52] Building a company is freaking hard, as we know. But if you could look five years ahead from now, where's Carta going to be and what are you most excited about next? ### Five Years **Henry Ward** [46:04] You know, I feel like I was an early inventor and technologist in 2012, '13 around the intersection of cloud, open source software, and legal tech. Like, that was cap tables for me. I invented new things. I felt like I was an inventor that because of technology and my understanding of technology, I could solve problems other people couldn't. Until the last couple of years with AI, last year with AI, I felt more like a business person. Like, I ran a business. Now with AI, I feel like an inventor again. You know, I'm learning, every day I'm learning. I'm like, to your point, AI is changing every day. Every day I'm learning and I'm trying new things and I'm inventing new things and I'm working with teams to invent new things. And that's super exciting. And my hope is, you know, five years from now, you'll see Carta. We will have invented many new things that the world has never seen before. You know, we will be able to do it because of the technology shift that's happening and we're on the forefront of it. And that's going to, you know, change the world in our way. You know, every founder is building a company that changes the world in some way. And I don't even mean some, like, you know, noble kind of newspaper thing. It's just if you make your customers' lives better, you're changing their world. You're changing their lives. And that's what we do every day is make our customers' lives a little better. **Ollie Forsyth** [47:35] Cool. Well, look, really excited for you. It's been probably a long 13, 14 years. Looking forward to see where you go next in the next, you know, 13, 14 years. And who knows,right? What's going to happen in a few years? **Henry Ward** [47:46] Super. Thank you, Ollie. **Ollie Forsyth** [47:47] Thank you so much. **Henry Ward** [47:48] Thank you for having me. --- This library is powered by PodHood (https://podhood.com), the podcast website platform.