Founder Insights: IPOs, Evolving Roles and Liquidity with Carta’s CEO

“Founder mode” is this term that started going around Silicon Valley maybe six months or 12 months ago, and it was really set around this idea that founders managing a company is different than professional management managing a company, and that it meant going deep into every business and being a control person and knowing every detail and telling everybody what to do at the lowest level; not respecting the chain of command of your organization. 

It's kind of funny for me because this has gotten a lot of press, this “founder mode” concept, but for somebody in it, it's kind of obvious. I don't know that there's another way to manage the company. The other side of it is, well, professional management also does a good job. There's a lot of companies managed well with professional management, and I think it depends a lot on what kind of company you're trying to build.

If you're trying to build a company that steadily grows over time and has low volatility and high stability, you kind of want professional management, because they play within the rules. They sort of manage the business within the constraints of the business. And if you want nonlinear outcomes, you want a founder that doesn't really see the rules and doesn't play inside the rules of how you conventionally manage a company. 

You see kind of normal growth companies, or I think the best example is private equity companies: they have professional management, they're managing a stable, low volatility business, versus founders are high risk—a lot of founders don't make it— but high reward because you find the one that can color outside the lines, they can create discontinuous outcomes. 

100%. I would describe the founder job or journey from early to late, and probably even after late in public, as you're never good at your job because as soon as you get good at something, you hire somebody else to do it for you, and then you move on to the next thing. 

One of the acceptance criteria for being a founder that can really go the distance is to not just accept, but embrace you're just never going to be good at your job, and it's almost a problem when you are, because that means you're doing the thing you're good at versus doing the thing the company needs, which if really pushing the envelope for the company—it's always something new. 

If you're just doing the same thing over and over again, that you've gotten so good at it, that means you're not innovating, you're not pushing the company further. For me it's been, “I'm never good at my job, but how do I get good at the certain thing I'm doing today so that I can train somebody else to do it and then move on to the next thing?”

The dominant form of liquidity for private companies today is the tender offer, and how the tender offer works in the private markets is usually in conjunction with a primary financing. Let's say the company decides they're going to raise $100 million of Series D private capital, but they have $150 million of demand, so $150 million worth of investors wanting to invest, but they only want to raise $100 million for the business. 

What they'll often do is they'll take that $50 million and then allow employees and early investors to sell into that $50 million. That's the most dominant form of liquidity. I think that will continue to be the dominant form. We're seeing a huge pickup in Q1 of tenders. It slowed down in '22 and '23, but it's picked up considerably in the last year.

At Carta, I rely a lot on my CFO to do that, to do a lot of the education, to explain liquidity, explain the consequences of liquidity, explain tax. I think as this becomes more commonplace, you'll see not just finance teams, but people teams, HR teams, comp teams spending more time, because in the public markets it's easy to talk about equity compensation to employees.

In private, it's much harder and it's much more tightly tied to the performance of the company, which is not always obvious to your average private company employee. I think as the industry matures, it will move more towards the CFO and HR functions, but today employee equity compensation is so critical to the employee-employer relationship in private companies, it's still a CEO job.

There is a false narrative about going public. What keeps companies from doing it is the compliance and regulation around it. It's just too much regulation; and I don't think that's true. I think the reason why companies, including us, worry about going public is, it is increasingly competitive, and it is increasingly punishing companies that aren't ready.

There is a difference between an early-stage vision-oriented founder and a CEO that's going to take a company public. There's just a different way to think about the business, and I learned this the hard way because I have a lot of venture investors on my board, and I also have some private equity investors, and they just think about the world differently. The venture investors are where I came from: all vision, “we're going to change everything”—it's all about the upside. It doesn't matter how we run the business as long as we realize the vision growth solves everything. And then you get the [private equity] guys that come in and talk about things like gross margin and a beta and cash flow.

I think the best CEOs are able to keep the vision but then start to instill the rigor and discipline and structure around how to scalably build a business over time. And that's something I've been learning over the last few years, is how do I take a nugget of incredible vision and an incredible team, but then put the discipline and rigor around it so that people on the outside understand how we do this sustainably over a decade.

The Q&A has been edited for clarity and length.