Execution Insights in M&A

Discovering unbounded deal opportunities 

To bring unbounded ideas to the table, it’s about understanding the business and our network advantage. We have a unique network of companies, founders, employees, GPs, LPs—pretty much everyone in Silicon Valley uses Carta in some way. 

There are interesting opportunities that come from this. To bring those to the table, you need to understand both your business and the other businesses out there, finding where one plus one equals five or ten opportunities lie.

We’ve had some good discussions about larger unbounded opportunities, which have made us smarter as a business. It’s pushed us to think about where the larger TAMs (Total Addressable Markets) are and where we have a unique perspective or advantage because of our network, product, and distribution.

You need to start by talking to customers or understanding the industry, finding unique product points that fit together. 

Henry has mapped this out well. He talks about three types of network effects within Carta: relational, data, and liquidity. Relational network effects map relationships, like between a founder and an investor on our cap table. 

Data network effects give us better insights, like compensation trends, due to the data we track. The liquidity effect comes from facilitating transactions because everyone is on the platform.

Looking through those lenses lets you think about interesting combinations. Henry has been great at providing frameworks and guiding where we could go from here. My role is to brainstorm and find those opportunities.

Sourcing unbounded deals

Customers are one of the main sources of these ideas. A lot of people bring us deals, including our board of directors, who often feed us potential companies to look at. But the ideas usually come from talking to customers—whether it’s through sales, product, engineering, or customer success teams. 

Customers might ask, “Do you integrate with this software?” or “Have you seen this before?” Part of my job in corporate development is to have a pulse on these customer conversations, knowing where we might be losing business or where we should be integrating. Those places often become natural feeders for our corporate development strategy.

At the start, you need to activate the board, but then they naturally bring things up. The key is transparency—being clear with the board about your priorities and what you're evaluating. If they understand the speculative areas you’re looking at, they’ll be better partners, bringing more relevant deals to you. The more transparent and collaborative you are with them, the more value you can extract.

Bankers bring us these deals too. We work with bankers, but given the size of the deals we've pursued in the past, it hasn’t been a major channel for us. As we start moving toward larger deals, I imagine it will become more important. Once you go public, they’ll be calling you. 

We use special tools, but necessarily for leads. We have a great CRM; we use Affinity for mapping all of our deals and relationships. It’s been fantastic for tracking who has relationships where, even with the board. 

Affinity has helped us map our network and track different prospects. But in terms of discovery, a lot is still done through PitchBook and research. The key part is talking to our customers and internal teams about what they’re seeing on the ground and what customers are telling them. So, no special tools for that, unfortunately.

Deal execution lessons: Adapting M&A strategy based on business growth

We’ve learned a lot. We’ve done nine deals so far, and I feel like we’ve learned something new with everyone. The number one thing I’ve learned over the past couple of years is that you have to change your M&A strategy based on where the business is. 

The types of deals we’re interested in now that we’re a $400 million business are drastically different than when we were a $50 million or $100 million business. As the business grows, the spectrum and magnitude of M&A opportunities expand dramatically. 

You can’t focus on $5 or $10 million deals anymore. You have to start looking at larger businesses that could be future $100 million opportunities. 

That said, it’s not that we don’t look at smaller deals. Today, we’re adopting more of a barbell strategy—smaller deals that can be integrated quickly and larger deals that warrant a bigger integration effort.

Where M&A struggles, particularly with integration, is in those “messy middle” deals—big enough to require a decent integration effort, but not significant in terms of the overall revenue profile. It’s hard to prioritize those deals. 

So, the key learning is to be crystal clear on the strategy for each deal, the integration lift required from internal teams, and whether it fits with their overall priorities. It sounds obvious, but it’s something you really learn by doing multiple deals.

Driving accountability for successful integration

There’s been a lot of learning in the integration area. The biggest thing is driving accountability across the business. While integration technically rolls up through corporate development, it’s a cross-functional effort. 

That’s why corp dev reports through strategy and business operations here. The biz ops and strategy teams are in tune with the day-to-day pulse of the business, making them well-positioned to lead integrations.

We rely on them heavily. They’re often the ones leading the day-to-day of the integration, while corporate development is still responsible for the overall success. You want the people who led the deal to be accountable for its success, but you also need those who are more embedded in the business to drive the integration forward.

We don’t currently have a fully dedicated integration person. It’s something we’ve explored in the past, and as we start doing more frequent deals, we’ll probably look into it again. In the meantime, we’ve found that housing integration within strategy and biz ops works well, since they’re more in tune with the business’s day-to-day operations.

Building consistency and early integration

The biggest thing you learn is the need for consistency across deals, particularly in your integration strategy and deal structuring. How are you treating employees coming into the company? How are you thinking about retention and reps and warranties? 

In 2021 and 2022, we did about four or five deals. If each deal has a variety of different terms, it becomes hard to track internally. It’s a huge lift for platform teams like HR, legal, and finance to manage across the company.

Whether or not you're doing concurrent deals, if you want to be efficient, especially with multiple deals, you need a playbook, and you need to stick to it. That's something we've learned over the past few years, and we've begun implementing a more consistent process for structuring and integration.

The other major lesson is to bring integration into the process as early as possible. Have someone involved who understands the potential pitfalls of integration while you're structuring the deal and forming the thesis. Involving them early is crucial to avoiding issues later.

Typically, I bring integration in pre-LOI. We have an initial perspective on integration before signing an LOI. We've never had an LOI that didn’t result in a completed deal. So, when we sign a term sheet, we know we want to move forward. We like to have a more complete integration plan in place, so we usually front-load a lot of our diligence.

If it’s a banked process, there might be a two-stage approach where we submit an LOI without knowing if it’ll get signed. But in a buyer-led process where we have more control, if we’re signing an LOI and entering exclusivity, we’re fully intending to close the deal.

Early on, we had a high-level strategy but hadn’t scoped out a proper integration function or developed a specific playbook. We learned that after the first couple of deals. After those, we focused on putting a more robust process in place. 

Now, when we enter an LOI, we have a detailed integration plan ready. We do integration readouts where every team presents their plan for the first 30, 60, and 90 days—even up to a year later. 

We track metrics, outline what we’ll do to make the acquisition successful, and figure out what’s needed to bolster the deal. It’s about bringing more process and rigor to integration.

So, this is buyer-led M&A, really bringing integration upfront. That’s been one of the biggest learnings for us, along with right-sizing deals with the strategy. Those have been the two key lessons over the past five years.

Working with the CEO

The good thing is that your CEO is probably your best closer in M&A, especially in founder-to-founder deals. Henry, being a founder CEO himself, brings empathy and thoughtfulness to the other side, making him our best closer. The key learning I’ve had is knowing when to deploy him.

You need to involve the CEO early in the process and then again at the very end. The middle part is where corp dev and the deal team should take over. 

You want the CEO to build a friendly relationship with the other founder, but not get involved in negotiating reps and warranties—that’s not the best use of his time, nor does it create a great experience for the other founder.

So, I bring Henry in at the beginning to talk about strategy and the relationship between the companies. Then, at the end, if there are one or two critical items to finalize, he comes in to close the deal and make the final judgment call.

First impressions and then closing the deal. Keeping him out of the middle prevents getting too caught up in the details. And it’s not a good use of his time. That’s what the corp dev team is for. If he wanted to negotiate every rep and warranty, I wouldn’t have a job here.

Advice on building a collaborative relationship with your CEO

Building relationships really depends on the CEO, but with Henry, a few things stand out. First, he wants to talk to interesting companies. I always try to put a couple of companies on his radar each quarter or month, whether they are potential acquisitions or just businesses outside or adjacent to Carta. 

It’s about expanding his learning and knowledge through these meetings, even if we don’t acquire them.

The key pitfall I try to avoid is wasting a founder’s time. Henry is very focused on ensuring that founders have a good experience during the M&A process. He knows that many founders have had bad experiences with corp dev teams or investors. 

So, we focus on transparency and honesty. If a deal isn't realistic, we call it like it is. Henry really cares about maintaining a high "founder NPS" during M&A—meaning founders should leave with a positive experience, even if the deal doesn’t go through.

So, keep a healthy pipeline, get your CEO in front of other CEOs, and ensure a good experience for founder CEOs.

Regardless of whether the deal goes through, you want the founder to feel they were treated with integrity and respect. Most deals won’t go through, but we want founders to walk away saying, “At least they were honest about their intentions, and I had a good experience.” 

Our business revolves around working with founders, so that should be at the forefront of all our interactions.

Cultural challenges of international deals

Late nights and early mornings are steps one and two in international deals. We've had the pleasure of doing two deals in the UK, one in Canada, one in Australia, and one in India. So, we’ve been all over the place and learned a lot along the way. What can I tell you about it?

No specific cultural stereotypes, but it’s fascinating how companies approach M&A differently. Learning about the local provider ecosystem—like finding the right M&A lawyer or accountant in Australia or India—has been crucial for facilitating a good deal experience. We’ve learned a lot from being on the ground in these places.

Broad Strokes was doing international deals. The biggest thing there is figuring out the operating cadence with the companies. Are they going to remain more standalone, or will they function under a GM model? Getting the org structure right and establishing how they’ll interact with the mothership is critical. 

Then, cross-pollination between teams is also key. For example, after our UK acquisitions, we had some of their employees come to the U.S. offices in San Francisco or New York. In turn, we sent some of our U.S. team to London for stints. This helped bring Carta’s culture and best practices to the acquired teams, ensuring they didn’t feel isolated.

From a cultural perspective, it’s essential to align executives on the commitment to these international teams. It’s not just about closing the deal—it requires ongoing time and effort. You need to visit the teams, send executives regularly, and tailor products for international markets. 

Becoming a global company involves challenges, but it also opens up huge opportunities. Companies like Deel have thrived by mastering these international nuances, and we believe we have a similar opportunity.

We focus on the people's experience and leave the tax and operational complexities to the experts. We have a fantastic finance and legal team that works with local partners to handle operational aspects like compliance and tax. 

Some regions are easier to navigate than others. For example, the UK was much smoother compared to India, where regulatory challenges and compliance took more effort than we initially expected. But overall, we've learned to adapt and build presence in each geography efficiently.

Creating a positive people experience in M&A

The approach to creating a positive people experience really depends on the size of the company. What’s worked well for us is forming a strong CEO-to-CEO relationship early on. If Henry isn’t the one sponsoring the deal, we ensure that whoever is—whether it’s our chief product officer or chief strategy officer—also builds a solid relationship with the other CEO.

As the deal progresses, more leaders from their side get looped in. That's when we focus on forming strong relationships across the broader executive team. We ensure that the touchpoints between their go-to-market teams and ours are well-established. 

Once we’ve built those connections at the executive level, and we’re nearing deal closure, we focus on getting the entire team excited about joining Carta.

At that point, Henry will often fly out and give a full strategy presentation. He’ll show them who Carta is, our financials, and why we’re excited about the partnership. 

We explain the integration thesis—where they’ll fit in the organization, how we’ll measure success, and what this means for their jobs and teams. Answering those questions upfront is key.

This typically happens toward the end of confirmatory due diligence, though for smaller companies, we might do it earlier. For larger companies, it usually happens post-close, but for smaller, tight-knit teams, founders may want their teams to feel involved earlier.

The magic is in the transparency. We frame this as reverse diligence. We brief the incoming company about the organization and integration thesis. The acquired teams appreciate this because it makes them feel part of Carta even before the deal closes. 

While we won’t always be able to do this pre-close, we’ve developed playbooks to ensure that after close, we bring cultural leaders in to explain what it means to work at Carta—what our go-to-market and product strategies look like. 

It’s important to help new teams understand the company they’re joining and the people they’ll be working with. It’s about exposing them to the culture as much as anything else.

Where people lose it usually comes down to alignment with the executive team, particularly around the product vision. The friction often arises from balancing the standalone company’s roadmap with what’s needed for a strong integration with Carta. 

Acquired founders may be excited about their standalone product roadmap, but we often need to pivot that to focus on creating a seamless integration so that customers feel like they’re using one unified platform, not two separate products. That’s where we see the biggest friction.

Even with the effort you put in early on, wouldn’t we have already flushed some of that out before signing the deal? You’d think so, but even with the best strategy and saying all the right things, when it comes down to it, asking a founder to pivot their roadmap in a significant way can be really difficult. 

We’ve generally done a good job, but there have been situations where we could’ve set expectations better. Sometimes founders don’t fully appreciate—or even we don’t fully appreciate—just how big the integration lift will be. That’s why upfront scoping and setting expectations on both sides are crucial. 

At the end of the day, it’s about ensuring we’re working toward the same goals. People really are the biggest challenges in these deals. People make the company, so alignment across the board is key.

How to maintain a consistent people experience

It’s challenging across the board. You’re not only trying to find the right cultural balance—deciding how much of the acquired company’s culture you want to preserve versus how much you want to integrate into Carta’s culture. The magic is finding a way to maintain the velocity and speed of smaller teams while bringing them under the Carta umbrella.

This becomes even harder in international deals, especially where Carta might not have a strong brand presence. It’s tough to create a consistent employee experience when you’re not physically bringing people into the same office. 

That’s why cross-pollination is critical—having a strong operating cadence with people visiting offices, being on the ground, and getting a pulse check on how things are operating. The hardest part is visibility. If you don’t have a good sense of what’s happening on the ground, things can go wrong.

We typically send people there for that purpose. We’re fortunate to be a high-growth company, so many people see it as a good career opportunity. 

If you’re an employee at the Carta mothership, you may see the chance to work with an acquired company as a way to grow your career and take on more leadership responsibility. We’ve had success sending mid-career employees who are strong carriers of Carta’s culture. 

For some, the idea of moving to London for a year doesn’t take much convincing—it’s an exciting opportunity. I’ve even thought about it myself. There are lots of interesting opportunities from that perspective.

Balancing cultural integration 

In terms of culture, we break it down into a few areas. We look at the org structure of the acquired company, their reporting and operating cadences, how they like to get work done. 

For example, are they a Slack culture, a meetings culture, or a Notion documentation culture? We try to get a sense of what’s critical to the DNA and functioning of the company that we shouldn't change.

One example is a company we acquired in the UK. They’re big Notion users and document everything there, trying to minimize meetings. Carta, on the other hand, leans more toward a meeting-heavy culture. 

So, the challenge is bridging the two. In this case, we let them keep operating in their Notion-heavy style but explained they’d probably have more meetings as they engage with the larger Carta organization.

More transparency. And in terms of values, it’s not so much about pushing our values as it is diligencing them. We assess whether the acquired company and team fit our values. 

In successful deals, Henry will often walk through the office and say something like, “This reminds me of Carta when we were a Series A or Series B company.” That’s usually a good indicator of cultural fit. Having Henry there really helps in these situations.

Mapping international growth in venture markets

Thinking about international expansion is essentially a mapping of the world. A key part of that process is figuring out where venture capital dollars are flowing. If you look at the past few years, outside of the U.S. and China, most venture dollars have gone to India, Europe, and Australia. We didn’t have much presence in those regions before, but now we do.

Our goal is to create a global company. We firmly believe that venture capital, at scale, is a global business. Great companies are formed in every major geography, so if we’re going to be the map of where capital flows in the venture ecosystem, we need to have a presence in each of those regions and play a part in the growth of major companies worldwide.

During those deals, there were a lot of international flights. We’ve got the operating cadence down now, but there was a year where I flew twice to Australia and six times to Europe. It was a busy year.

It was a lot, but it was fun. In one case, I flew to Sydney for just 36 hours with my chief strategy officer to put pressure on getting a term sheet signed. We flew out, made it clear that if we left without a signed term sheet, we wouldn’t know where the deal stood. It worked, and we got the deal signed, but those kinds of trips can be exhausting.

Key tips for transitioning from domestic to international M&A

Having great partners on the ground is essential when you transition from domestic to international M&A. That’s the biggest thing—having good partners from a law firm and tax perspective to help you navigate the complexities. That was key for us.

We usually rely on our U.S. counsel, who has partner networks internationally. For global M&A, you often need two sets of counsel—your U.S. counsel for broader aspects of the deal and local counsel for country-specific issues. It’s important to figure out the division of labor between them. 

That’s why it’s helpful to have trusted, competent people on the ground who can collaborate with your U.S. partners.

The biggest challenge is figuring out the cultural and operating cadence. You often underestimate how much it changes the DNA of the company. 

For example, scheduling all-hands meetings at 3 or 4 p.m. Pacific can shut out much of the world. You need to think about how you're adjusting your operating cadence and communications to support an international presence.

So it’s less about doing international M&A and more about becoming an international company. That’s really what it comes down to at the end of the day.

Navigating valuations and stakeholder interests in deal negotiations

Negotiating a deal is challenging. Valuations are constantly changing. You saw what happened in the stock market yesterday—valuations can shift dramatically. 

One meme can change the whole market, so you need to have a consistent view on not just valuation but also strategy. You need a strong synergies case and a pro forma model that shows what you can do with the company internally.

When structuring a deal, there are several tools you can use—price, consideration mix, founder retention bonuses. But the key to structuring a good deal is understanding what everyone is solving for. 

You need to know where the founders are at, emotionally, and what they want from the transaction. That’s where Henry is invaluable. Selling a company is such a personal experience for a founder, and Henry engages with them one-on-one to understand their motivations.

It’s also important to know what the board is solving for. Early on, we didn’t engage the board until the transaction itself, but now, for bigger deals, we engage the board six months to a year before the transaction. 

You need to understand where they are in their fund life cycle and what they’re optimizing for. Knowing the different incentives around the table helps you structure a deal that meets as many stakeholders’ needs as possible, especially the key decision-makers.

So it’s about digging into the real drivers for different stakeholders, which can vary. In many cases, there are competing priorities, and the challenge is figuring out how to balance those effectively.

Aligning non-price factors in M&A

Besides product distribution, culture is a huge factor. If a founder has a company with 50, 100, or more employees, they want to ensure they’re putting their people in a good place. It’s not just about the product—it’s about whether their employees will be in a positive environment after the acquisition.

That’s where understanding each other’s cultures is key. It’s just as important for the acquired company’s founder and executive team to understand who we are as a company. Having a strong brand as an acquirer is crucial—showing that we’ll take care of the company, the people, and the product they built.

At the end of the day, it all comes back to transparency. What are you doing with the product, the company, and the people? You need to be crystal clear and aligned on those points, and the founders need to trust that you’ll execute on that. That’s what’s really important for them.

So it’s about understanding the underlying drivers, the cultural match, and creating transparency to get everyone excited about the deal.

‍