Investing Billions - E134 How I Accidentally Started a Billion Dollar Tech Company w/Carta CEO Henry Ward

Episode Date: January 31, 2025

In this episode of How I Invest, I dive deep into a conversation with Henry Ward, CEO of Carta, to discuss his journey building one of the most transformative companies in private market infrastructure. From cap table management to fund administration and beyond, Henry shares his insights on entrepreneurship, innovation, and the future of private equity. We delve into Carta's strategic pivots, its playbook for turning services into scalable software, and Henry's contrarian views on AI and leadership. This episode is packed with lessons for founders, investors, and operators navigating the evolving landscape of private capital.

How did you get this idea? I'm different. I fell in love with being a founder and I didn't care what I had to do to become a founder. I fell in love with being a founder and the problem was the vehicle for me to become a founder, which is a strength and a weakness. The strength, the weaknesses, I'm not committed one particular vision. I'm just committed to the founder journey.

The strength is that means I'm agnostic, which problem I solved, which is you see it in the DNA of Cardiff, like we'll do anything. Right? We'll have tables for nine a fund account. Like the stuff nobody would ever, nobody wakes up and goes, you know what? It just, nobody does that. When you started Carta over a decade ago, you mentioned you started with cap table management as a wedge. How did you get this idea? Was this inspired from your previous experience?

And I thought it was a very novel strategy, but why didn't other people have this idea? You know, it's a great question. I had a different company that failed. One of the investors I worked with on that company, uh, when I failed, he, he took me to lunch at, um, Typhoon. His name is Manu Kumar. He says, Henry, you know, K9. And he said, Henry, that company didn't work. It wasn't a good idea. But I think you're pretty good. This cap table problem is a crazy problem. I just don't

understand how the industry is so bad at it. If you'll start the company, I'll invest in it. Like I think this is an important company to build. And I'm maybe a unique entrepreneur. Most entrepreneurs, the conventional wisdom is you fall in love with a problem and entrepreneurship is a vehicle with which to solve that problem.

I'm different. I fell in love with being a founder and I didn't care what I had to do to solve that problem. I'm different. I fell in love with being a founder and I didn't care what I had to do to become a founder. I fell in love with being a founder and the problem was the vehicle for me to become a founder, which is a strength and a weakness. The strength, the weakness is I'm not committed to one particular vision,

I'm just committed to the founder journey. The strength is that means I'm agnostic of which problem I solve, which is you see it in the DNA of Cardinal. We'll do anything. We'll have tables for 49A, fund accounting, this stuff nobody would ever, nobody wakes up and goes, you know what? I want to do cap tables for 10 years. Nobody does that. And so that's my gift is I'll do anything to continue the journey. And so it's like, why don't you start this company? And I said, I don't have any better ideas.

And that's how we started. But then it just became this incredibly exciting thing because once we got this tiny little wedge with a seed stage startup, we can start doing everything for these companies and funds. And that's what made this the ride really special. I spoke to a lot of people in the industry and they said, Henry has really big ideas, but he's sometimes pursuing multiple different areas.

How is that a strength and how is that a weakness? I talk a lot about, um, innovation companies, uh, versus execution companies. So, you know, back in the day, you know, we were recruiting, you know, I guess like Rippling or MongoDB or Zoom, you know, and people would say, you know, why should I come to Carta instead of one of those companies? And I said, well, it depends on the kind of company

you wanna be a part of. I would call those execution companies, you know, if you're Parker, if you build a better HR system than anybody else in the world, you have line of sight to a billion, 10 billion in revenue. No problem. You build a better database, MongoDB, line of sight to billions in revenue. You build a better Zoom, a video conferencing system,

line of sight to billions in revenue. You build a better cap table, line of sight to 50 million, you know, 100 million maybe, right? And so we, I would describe as an innovation company, we never had clear line of sight to any large outcome. We were always, oh, you know, we have to innovate our way out of every market or product that we started. You know, the way I described it is like, if you were going to work for one of these companies, do you want to be part of a super well-defined team, execution, operationally efficient team, which is a clear strategy and line of sight to where they're going? Or do you come to Carta, where we're a bunch of misfit, ragtag guys and gals with a machete,

trying to hack our way through the jungle and find our path out. And that's really the two types of companies. And so for us, we just had to build a company that we knew we were paranoid and still are. Any market we're in will run out of oxygen. And so we have to keep constantly adding new products and ideas to the portfolio to see which ones will break out. And thank God we did, because if all we did was CardaX and didn't do all these

other ideas that we had, including fund accounting, we'd be dead. Right now we've got, you know, three main businesses that drive half a billion in revenue, but I got seven projects in the back that we're working on that will hopefully get us to the next billion. How do you decide when to start a project, when to close a project? There's two ways to start these projects, bottoms up and top down. Successful projects tend to be top down. Not necessarily because I have better ideas than the company or bottoms up ideas.

Um, but in part, because if I have an idea, it gets the whole weight of the CEO and the company around it. These days, like a good idea still needs a lot of muscle to get it out there. You can't just build an app now and it works. But there are cases where bottoms up ideas work. And so you want to build a function where I spend a lot of my time ideating and working with teams on ideas that I want to flush out with. We do hackathons, so that's a great way where people can, and I judge them and people will come and pitch.

And I go, that's amazing. You know, kill, kill, kill, kill. This one, come back to me. Let's like, let's pull this thread a little further. And then once a year I do Carta Business School, where I take sort of the 30 top young managers at Carta, and I take them to an offsite, using some secret location that's beautiful. And we spend three days together, and we just ideate. I do some teaching, we do some ideation, and at the end of the three days,

you know, they pitch their best ideas to me. And two of the products we work on today came out of a business school. You also have a very contrarian view on AI that many people in the tech ecosystem have. What's your view on AI and how does AI play a role at Carta? We spend a lot of time on AI. I'm obsessed. I find it so exciting. If you look at most CEOs of scale companies like ours, they're looking for AI to do two things.

One is reduce headcount, right? How do I, you know, reduce the number of people working on stuff because I've AI'd, you know, all the workflows and the work and I can, I can reduce headcount. And the second is they're trying to turn everything into a prompt. You know, how do I search better? How do I query something? How do I, you know, do I query something? How do I ask questions? Things like that.

And what I've directed our teams is to do exactly the opposite, which is on the first front is don't build AI to reduce headcount. I don't really care about reducing headcount right now. Use, find opportunities to use AI to unlock customer experiences that we couldn't do without AI. Uh, that's literally impossible. Like, even if I, you know, could have put a thousand people on this thing, we couldn't do it without AI.

What's, what's an example of that? One of the great examples is, um, uh, uh, we're now using agents on the backend to fix health checks that traditionally took a human to find. So like you're doing a capital call and then you find that there's a health check that will stop one of the LPs because they didn't pay enough on their last capital call, blah, blah, blah. There's all this stuff.

It takes a human to go in and fix that reactively when we find it. Now agents are modeling, hey, if we did a cap call today, what would that look like? It will find the error and then fix the error. So that when a human does have, when you are going to go do the cap call, it's already fixed and done. So that's like an example where we're using agents in the background effectively proactively do it. Typically humans only could do reactively. So we're doing that. The second thing is they're not allowed to use prompts.

And this example is a great one, which is our view or my view of prompts is like the static HTML page in 1996 that says, oh, that's the internet. And like, that wasn't the internet. The internet was something much more complex and exciting and powerful. The static HTML web page was UX version 0.01 of what the internet was. And that's what the prompt is. Chat2BT had to figure out what's the easiest way that we can expose LLMs to people, give them a prompt.

That's the easiest way. But that's actually not the right UX for LLMs. And so they're not only using prompts, they have to figure out how to access the LLM without using a prompt. And that really means that they're working on and thinking about how do we creatively embed LLMs behind the workflows of what we're doing.

For example, my case of like proactively finding these workflow issues is a way of feeding the LLM and the user never knows it. My view on AI is everybody is going like AI this, you know, they're putting powered by AI, AI everywhere, look at all the AI. And what I told my product managers is if you really get the AI this, you know, they're putting powered by AI AI everywhere. Look at all the AI and my, what I saw my product managers is if you really get the AI right, I'll never know it'll just work. It's the Turing test.

I can't tell. The capital call just comes out and it's right. It just seems like a extremely competent human. Totally, totally. And, and you know, it just works, right? That's the Apple thing, right? Why do we all love Apple? It just works, you know?

But there is so much complexity that goes around making something just work. And that's what we talk a lot about. You know, Henry, I don't envy you because you went after a space that everybody hates fund admins because nobody realizes how difficult it is to do it well. So everybody blames kind of the service providers, not necessarily the process. Thank you for listening to join our community and to make sure you do not miss any future episodes, please click the follow button above to subscribe. Yeah, a hundred percent.

And, and this is another thing to go full circle about this services and software. Software industries tend to have high NPS, services industries tend to have low NPS. nobody loves legal services. Nobody loves accounting services, right? Expensive mistakes, variability and outcomes. So you're not always getting consistency. That's exactly right. And it's exactly right. You nailed it, David.

It's consistency. Why do chains win in restaurants? It's consistent. You would think of anything food, but should be a boutique business, right? Like you win by having the better chef. And it turns out no chains when it's because people it people even take a lesser experience for a consistent one. And that's why services industries are tough because it's so hard to do services

consistently. That's why you know, we talked a lot about this. Why does everybody love in and out? Because it's so hard to do services consistently. That's why, you know, we talk a lot about this. Why does everybody love In-N-Out? Because it's the same. And the internet I go to, I know exactly what I'm getting. That's a good quality product, not great, but good. But the service is so consistent. And that's why software businesses win. The problem, of course, is if you are consistently bad,

they hate, everybody hates you. And so it's one of these things that software is love and hate. If we have a bug in our system, if you're a service industry and you have one team that's not good, it just affects the customers of that team. Everybody else is fine. The blast radius is small. We have one bug in our software.

It affects everybody. Blast radius is enormous. Uh, and they yell at us and they hate us and you know, Henry, you're so stupid. You can't run a software company, but then we fix it and it's amazing. Everybody loves us. Uh, so it's much higher beta, uh, but much, much higher ROI. You're also an angel investor yourself. You're in a lot of great companies.

Tell me about your angel portfolio. Also an angel investor yourself. You're in a lot of great companies. Tell me about your angel portfolio. 80% of my angel portfolio is just former Cardiff people. Cardiff has been an amazing place, unfortunately, to create a ton of founders. I've had so many amazing Cardiff employees go start their own company.

It's driving me nuts. And then I, you know, and they're always the best, of course, that go do this. And then I have to call them, and then they hire all the best people out of Carta, and I have to call and yell at them and tell them stop recruiting my people. You know, we don't really lose people to other companies. We lose people to starting their own companies. It drives me crazy. And so now I tell all employees at Carta, don't be a founder. It's terrible.

Nobody should ever do this. You should have a badge and come to work every day, uh, nine to five, uh, and grind it out for somebody else being a founder is overrated is now my pitch to the card. So you have this unfair advantage where you know exactly how good they are at execution, how smart they are, how good they are recruiting, all these risk factors for typical angel investors are de-risked. Yeah, totally. I mean, they're so good.

I know that most of them, 98, 99% of the people that I left, I worked with directly. So I know how good they are. And they learned so much from doing Carta because you know, I put, I did a post a while ago called, um, uh, founders wanted a Carta. We love hiring former founders, uh, future founders, just people with founder DNA. Uh, because they build shit, uh, and they're relentless. Uh, and so we were, we attract those types of people. And then of course, when they're ready to hang out there

in a shingle, we lose them. I know you say it facetiously, you hate that they got and starts companies, but it's a significant recruiting tool to show these successes, right? Come work here, give three years of your life, work hard. And then, you know, maybe I'll even blip back here in your next company. It's great yeah it's we call it the card of cartel you know it's our version of

the PayPal mafia bring them all over to my house for dinner once a year type of thing to meet with them I invest in they all bleed card of blue they all keep in touch and support each other end up hiring each other I mean that's also what happens you know one company goes out of business, they go, they all go work at the other company that's doing better. And, you know, we have one startup drives me crazy, but 90%, you know, it's not that big, I think it's like 15 or 20 people, but I think 90% of the employees are Carta. So they just, they just go in groups. I actually have a view that this is kind of the new thing of angel investing, which is like alumni invest,

alumni ventures, you know, you invest sort of in your university, right? All the MIT people invest and support other, like I think what's happening is you're getting the Uber cohorts, the Stripe cohorts, you know, the CARTA cohorts, where they all just invest and support each other because they know each other. And that's how angel investing is going to start to coalesce.

Very meta idea. You should start a Carta fund, that investment to Carta spin-outs. A hundred percent. We actually do this, but it's balance sheet capital. We call it Carta Ventures. There's three theses. One is very conventional corporate VC, which is we invest in strategic companies that we think are strategic to our ecosystem and potential

corporate candidates in the future. The second is we invest in, um, uh, emerging managers that are starting funds. The best way to create more founders is to create more GPs that can go and find and mentor and cultivate and invest in these founders. So that's a big part of our fund administration. way to create more founders is to create more TPs that can go and find and mentor and cultivate and invest in these founders. So that's a big part of our fund administration thesis was how do we reduce the cost of running a fund, starting and running a fund. And I think we were a big contributor to the boom in emerging managers in the United States is because we took the cost of starting

and running a fund from $150,000 to about 20 to 30. Um, and so, um, so we spent a lot of time on that, uh, helping emerging managers get going and then the third last bucket is really investing in things that have card interest, uh, like card employees, the things that we think will make the world a better place for founders. Does being an investor make you a better CEO? And if so, how? I'll take the controversial opinion of this, um, which is, I think investing

and CEOing are two very different disciplines, uh, and very few people can do both well, uh, the ones that can, I think, are the great operators, maybe like Ben Horowitz and Mark Andreessen and those guys. But they're the exception, to me, that proves the rule. And I actually think, controversial opinion again, I actually think when they try to conflate that is when people get into trouble. When investors are like, hey, I

I'll give advice to the founder on how to run the company, that has never worked for me. Minus a handful of people like Mark Andreessen. You know, when Mark tells me how to run the company, I listen. But his story, you know, in general, when most investors are telling me how to run the company. It'll sound facetious, but I actually say this seriously, typically doing the opposite has worked out much better for me. And I actually have a theory. I'm not just trying to be cheeky.

I actually have a theory about it. Most investors are pattern matchers. Henry, do this because I saw that work over there. And that's where the advice comes from. The best companies don't pattern match. Like they just, if you did, you're not a generational company. You're not an outlier by definition because you're just doing everything everybody else does.

And so my advice for founders and investors is, founders are, or sorry, investors are deal makers. They, and they're pattern matchers and deal makers, as they should be. And that's what you use them for. Hey, what are they doing over there? Tell me about this, what have you seen? Like, that's what I, like, give me information, because they see way more companies than I do.

That's valuable to me, but telling me what I should do with that information is not valuable. When investors try to tell CEOs how to run the company, I think that's a real problem. And I would say the same. If I told investors, don't invest in that company, invest in that other company, they'd be like, what? You're just a CEO, as they should. It's really funny.

My last joke about this is, in the earliest days, I, in the earliest days, I used to get investors that gave me books, um, basically like how to be a better CEO book. And, and you're supposed to say, thank you. I appreciate it. I'd always found it like kind of insulting because like, what if I gave them a, Hey, how to be a better investor book? Uh, you know, uh, so anyway, but that's my contrarian take. Do you believe in founder mode and basically essentially micromanaging

and coming in and is there, is there space for that, or do you believe in kind of more of a managerial strategy? When that thing came out, I was like, I didn't even know there was an alternative, like, like when they go, Oh, it's founder mode. I was like, well, what was the other one? Like, of course. It makes zero sense. Like, what else would I do?

You know, I'm the founder. I'm supposed to go in and go, why did we put the button there? What color is the brand marketing? Wait, why did we spend money on, you know, this event? All right. Like if I didn't do that, what else would I do? It was just, I, the funniest thing for me on founder mode was I, I didn't know there was an alternative. Uh, so, so yeah, I, I mean, I don't even call it founder mode.

I call it building a company. I see this virtually in every top CEO. I don't see a laid back CEO that's successful. At least I've never seen it. Another way of thinking about it is, um, uh, how much the CEO is involved in the company is, is correlated how much the CEO cares. And so do you, do you want a CEO that cares or not? Uh, and you know, the whole thing about founders is they probably care

more than professional CEOs. Uh, and we care a lot. Uh, Mark talks about Mark Andreessen talks a lot about this with Musk, right? Like Musk has a question. He doesn't ask the chain of command. He goes straight to the, to the guy putting the tire, you know, on the Tesla goes, how come the tires fall off? You know, he doesn't mess around and I'm the same.

And you know, my, my feedback to the team is, do you want, if they don't like it, I'm like, do you want me to not care? Uh, if the website goes down, like if you don't want me to care that the website goes down, this is the wrong company, uh, to be at, I was watching a Mark Andreessen interview, talk about Elon and about his five minute meetings. He goes to every single person in the company and asks, what is your number one issue for the week? In five minutes, they talk about it and then he helps them solve that.

And he does this over and over hundreds of times a week. So the ultimate founder mode, when will fund admin achieve full self driving or be fully automated? What year? Uh, I like to say definitely before 2030. Like we're three to five years out. One of the key metrics we track is how quickly we can get quarterly financials out to LPs. Our first year of doing this was 2021.

It took us months before we got everything out. Each year got better and better. And now this year, it's January 24th today. Uh, we're, you know, halfway through our customers, like we're, we're moving super, super quickly. So I think two to three years from now, uh, it will basically be one click fun reporting. Carter has a really interesting playbook in that you make acquisitions,

you buy services in companies, you turn it into software. Walk me through how you go about doing that and what have been the strengths and weaknesses of the strategy? Started count tables in 2014, 49A in 2016, then fund administration in 2020. Uh, now that we're in the fund admin business, it's exactly the same. It's a, it's a services industry with accountants emailing back and forth that you call and talk to. That, that playbook is, I would say the, the guiding principle of Carta. We look at everywhere where humans are doing work, usually with spreadsheets.

And we say, Hey, I think a computer could do this better. It's, it's a super powerful approach because, you know, labor is an inflationary expense, like it, it just goes up over time, but software is deflationary. Software gets cheaper and cheaper. To do this well, you almost always have to enter as a services business first. 2014, we hired a bunch of paralegals to manage cap tables. And then we built the software around them. Uh, 498, we hired a bunch of valuation analysts, and then we

built the 498 around them. Fund admin, you know, I flew to New Jersey, interviewed a bunch of fund accountants and we hired a bunch and they were using spreadsheets and zero and PDFs and Word docs and then over time we started building software behind them and so you have to have an investor base and an executive team that's comfortable with, hey, we're gonna constantly manage this portfolio that's comfortable with, hey, we're going to constantly manage this portfolio of software margins, software finance, you know, software financial type business with services type businesses. But if you look at our cap table business, it's almost 90%.

It's like 87, 88%. I mean, it's, it's just a hemorrhage in cash. Um, and then you look at some of the newer businesses that aren't as mature yet that are more services. I mean, you know, they're running at much lower margins. And so you just have to be able to understand that and have an investor base that's that has the confidence that you can enter these lower margin services businesses, but turn them over time in the software businesses.

And that's the playbook. Why is the fun admin business so much harder to turn from services to software than, than the previous businesses? It's incredibly complex. One of the advantages of being an entrepreneur, uh, that doesn't come from the industry is you have naivete bias. You're like, how hard could it be? And I thought that about cap tables and that was pretty hard.

Fund accounting. Uh, if I had known what I know now, I'm not sure I would have done it. Uh, it's really, really hard. Um, but the good news is something that's really, really hard. It becomes very defensible. This is just a much more complex mechanism than a cap table. Cap table, stock options is about it. Fund accounting, you're investing, you're raising capital, you're,

you're doing quarterly reporting, you're doing valuations. There's just so much that goes into operating a fund. You make the argument that Carta could be a strategic tool for CFOs. Why is Carta and why is fund admin strategic for a CFO? We talked to GPs. They don't care what accounting solution there is. They're like CFO and they don't really spend a lot of time with the CFO. They view it as, you know, CFO in private equity, BC, I think more so in BC than private equity.

It's like, that's the back office. If I called my CFO the back office, he would quit. My CFO sits next to me. And his whole team is outside my office. They're not the back office at all. You know, the CFO is the number two at most companies. I can't make a decision about Carta, a material decision about Carta, without consulting my CFO. Just can't because they run the business. That's happened in operating companies. Like over the last

30 years, that's really, you know, CFOs. There's two people on earnings call, the CEO and the CFO. But for funds, that hasn't been the case. It's like, CFO back office, you know, I don't care. Let me deal with it. And there's this question, like, why is that? Why don't CFOs in private equity and VC have the same level that they have in operating companies? And my explanation is because they don't have good software. You know, before

at NetSuite and SAP financials and Anaplan and Pigment and all these tools that CFOs used to run the business, they were basically glorified accountants. But then they built all these tools that CFOs used to run the business, they were basically glorified accountants. But then they built all these software tools for these CFOs that turned them from bookkeepers to alpha creators. And I think that will be true over the next 10 years. I think the amount of data that we're collecting about private capital and investing and running a fund and raising money and tracking and doing portfolio monitoring, all the tooling

and data that we're starting to pull together that the CFO is responsible on these funds, uh, if used well, and we do a good job of building it, it will elevate the CFO to be a strategic partner. And that's really the mission of CARDA is to, is to put the CFO in the room. Uh, uh, when they make big decisions. Speaking of mission, you had a pretty big strategic pivot two years ago. is to put the CFO in the room when they make big decisions. Speaking of mission, you had a pretty big strategic pivot two years ago, tell me about that. CART has been operating for about 11 years.

We opened the doors for business in January, 2014. And the thesis back then had always been cap tables, win cap tables, and then create a stock market, private stock market. We called it NASDAQ for private markets. And we thought the cap table business was gonna be a small business, but it was the wedge to building the bigger business, which was the stock exchange.

Turns out we're both, we're wrong on both fronts. The cap table business turned out to be way bigger than anybody, including me, thought. And then the stock market business turned out to be zero for us. We could not, we could not figure it out and happy to share a ton of reasons why I don't think, why I don't think it worked out or I actually believe it's an intractable problem. It's unsolvable at this point. And so then we spent the last two years figuring out, well, what's next?

The whole thesis of this company was cap tables plus stock market. And now what do we do? And we're very, very lucky, so fortunate, that a small group of Carta employees believed in this fund admin or fund accounting business in 2019 and 20 and convinced me to start it or to allow them to start it more specifically. And then that took off.

You know, the venture fund admin business went from zero to 100 million in 52 months. And so that gave us a new lease on what we can do outside of cap tables. Um, and then that was over the last two years, we spent time with the whole company figuring out is, Hey, when you put cap tables plus fund accounting together, you're now building what I call software for the office of the fund CFO. Uh, and that's what we're, we're, we're spending the next decade working on. How big is the fund admin business today? This summer, spring, summer, we'll cross about half a billion, uh, in ARR.

Uh, of that half billion, um, about 60% of it is our startup cap table business that we're best known for. About 30% is our fund accounting, uh, business. Uh, and then the last 10% is our newer private equity business. And the captive business is about 10 years old, it's 11 years old. The fund admin business is about five years old, and the private equity business is about two years old.

And so the problem we have, the existential crisis that CARTA has, is we're a victim of success. We've run out of oxygen in venture. We have 70-80% of the startups cap tables. We've got 50-60% of the venture funds. There's not enough companies and venture funds to sell to. So for CARTA to continue growing, we have to get out of venture. We have to be able to expand our market. And the good news about that is the products we built for cap tables and fund accounting and fund administration seem to be very horizontally transferable.

We started in the last couple of years, taking these products to the private equity, private credit, even real estate, you know, energy, we're getting a lot of traction on those other fronts. And so the real question for Carta is, can we take this playbook that was so successful in venture, take it to private equity, take it to private credit, and expand the market pretty dramatically? And if we can't, we'll be the startup that never could.

We just never got out of venture. And those, I think, are two very binary outcomes. So the next, you know, 2025, 2026 are critical years for us to see if we can cross the chasm. If you're so synonymous with venture, how do you go into private equity with a new identity or a new brand strategy? Yeah, it's hard. So you know, if I walk into a venture fund today and I'm like, hey, I'm Henry with Carta, you know, they're like, we know you. you you know we know what you do we know it you

know I walk into a private equity firm and I go hey I'm Henry I'm with Carta and I'm the new fund admin on the block they call security and escort me out the last thing the world needs is another fund administrator. There's too many of them. But if I walk in, I said, hey, I'm Henry with Carta. You may have heard of us, because we do this cap table thing in venture. So you may have done a few minority investments and seen it.

Like, yeah, yeah, that looks familiar. I've heard of you guys. You do cap tables. Exactly. Well, now what we do for cap tables in venture, we do in private equity now. And let me show you how we solve for cap tables in venture, we do in private equity now. And let me show you how we solve the cap table problem for you and the waterfall problem,

which is the biggest problem in private equity. It's not managing the cap table like in venture, where the hard part about cap tables in venture is the employee option pool. The hard part about cap tables in private equity is the waterfall. We built a very good waterfall product that manages the waterfalls of these very complex capital structures in these PE firms. And I said, let me show you that. And they're like, you have my attention, right?

If you can solve this cap table waterfall problem for me, I will spend time with you. And that's our wedge. That's how we get in. Because nobody does cap tables better than we do. And so once we get them on our cap table platform in Waterfall, they go, oh, this is great. We love it, all this stuff. But you know what's really weird, Henry,

is we take all of the cap table Waterfall outputs that you generate, and then we manually type it in our accounting system. That's such a pain. And they go, I know. Guess what? I also have an accounting system for you. And it's totally integrated into that cap table thing you bought. And if you buy our accounting system and plug it

into your cap table system that you already got, we can seamlessly move all those numbers through the cap table, the general ledger, and then to the LP reporting. And then they go, you have my attention again. Uh, and that's how we start talking about fund administration for them. And so it's, it's so similar to venture. That was our playbook and venture, uh, when the portfolio company be a cap

table and then you leverage that relationship to win the fund accounting through the venture fund, we're taking that same playbook to PE. You go in with such a dominant product that they know that you could do that. It's an easy sell. It's an easy solve. And then you basically upsell once you have the relationship and they know that you're highly competent that you could execute on the vision. Yeah, that's right.

But I also think, um, what's exciting is nobody has tried to solve this capital problem for private equity. Just like 10 years ago, nobody tried to solve the capital problem for venture. Uh, and so when we come in and we say, Hey, we're going to solve this capital problem for you, it's like water to a person in the desert. They're just like, I, if you're successful, what will Carta look like in 2030? Uh, I think we will look, uh, like we do today in venture.

You know, Ocarta is the brand for cap tables and funds and you know, what I would like humbly hopefully, but say like the what is becoming the operating system for venture capital. I think I hope and think people in 2030 will say the same thing, but about private capital. This is how private equity runs. this is how private equity runs. This is how private credit runs. This is how, um, uh, real estate energy runs that everything that we do in venture is now cross, uh, horizontal to, to all private asset, asset classes and alternative investments.

Well, Henry, we've known each other for quite a while. It's great to have, have this conversation. Look forward to sitting down soon. So much fun, David. Thanks for having me.