“Ownership matters, because it compounds, it transcends borders, and it transcends time,” said Carta CEO Henry Ward as he opened the 2021 Carta Equity Summit. Ownership matters “in terms of who’s able to take risks to go and start new companies, to start new venture firms, to become angel investors. It also shapes politics, it shapes philanthropy, it shapes what products go out in the world,” said #ANGELS co-founder Jana Messerschmidt.
For four years, Carta has partnered with #ANGELS to study the distribution of equity. Each year, we use anonymized equity data from 800,000+ employees on Carta and 47,000+ founders who use Carta to manage their company equity.
We also share findings at our annual Carta Equity Summit. Together, we reflect on the state of equity ownership while unlocking information that people need to access positions with the highest ownership potential.
The 2021 Carta Equity Summit was held on December 8. Henry kicked off the event, joined Jana and her #ANGELS co-founder Jessica Verrilli. Then, Carta’s head of inclusion, equity, and impact, Mita Mallick, shared highlights from the 2012 Annual Equity Report. You can read the full report now.
This transcript has been edited and condensed for length and clarity.
Introduction to the Carta Equity Summit: Henry Ward
Henry Ward: Thank you, everyone, for joining us today at the Carta Equity Summit. Today, we’re here to talk about equity. Everything in our world is owned by a person or a group of people. Ownership matters, because it compounds, it transcends borders and it transcends time. It can be passed to children, transferred to family and even kept in an estate after one’s death.
Carta’s mission is to create more owners, to map and expand the ownership graph, democratizing ownership in the process. We’re here to talk about that, about expanding access to equity, which can fuel new generations of wealth and innovation. Before we kick off today’s panels, we have the privilege to hear from Jana and Jessica from #ANGELS, the group that originally called attention to the issue of equity on cap tables back in 2018. And after we hear from Jana and Jessica, Carta’s head of inclusion, equity, and impact, Mita, will join us to talk about the findings of our fourth Annual Equity Report. Jana and Jessica, thank you for being here today and all of the work you’re doing in this space.
#ANGELS on the call for more women on cap tables
Jessica Verrilli: Thank you so much, Henry. I’m Jessica Verrilli, and I’m here with…
Jana Messerschmidt: Hi, I’m Jana Messerschmidt.
Jessica: We are two of the six co-founders of #ANGELS, an investment collective we co-founded about six years ago. And amongst our whole group, we’ve invested in over a hundred companies like Carta, and Cameo, and Coinbase, and OpenSea, and Gusto, and Vanta, and many more. Alongside investing, the six of us have teamed up to host conversations and try to diversify networks in Silicon Valley. And as many of you may remember, years ago, as the conversation and efforts around diversity and inclusion began to pick up steam, there was a moment in the industry when finally we started to get some data to understand the benchmarks around diversity in our workforce.
Many people were calling for this data, Tracy Chou among them. She wrote a Medium post saying, “Where are the numbers? How do we know what the baseline is if we’re improving if we’re not measuring anything?” So, years ago we began to get some insight into the diversity of the employee groups and the workforce in Silicon Valley. But our group came together and said, “Hey, let’s keep pushing this conversation, because what we really think we need to start measuring is the diversity of the cap table.” It’s one thing to know the percentage of the employee group in terms of who works at a company, but it’s another important insight into who actually owns these companies. So, the six of us teamed up and wrote a blog post, which my colleague, Jana, is going to tell you a little bit more about.
Jana: Thanks, Jessica. So, back in 2018, we wrote this blog post that Jess mentioned, and we called it The Gap Table. And our hypothesis, as just outlined, was that even though we were making strides in representation in tech, we weren’t sure if we were making those same strides in ownership and tech. And that the one document at each company that would accurately be able to tell us the answer of ownership was the cap table.
In this blog post, we put our hypothesis out there, and we put a call to action for the industry out there. Founders and executives at companies needed to start really measuring what was happening on their cap table. Well, one of the beautiful things of the internet was that Henry Ward responded to us and he said, “Actually, I’m sitting on all the data that you could possibly want.”
So, at the time, there were about 6,000 companies that we analyzed and measured in partnership with Carta. And in the first iteration of the study, there were some limitations. We had to infer gender based off employee name. We weren’t able to take any cuts based off race, sexuality, or any other information. But the outcome of that work, we felt, was a watershed moment for the industry. It was a first-of-its-kind study.
The result of that first study was that, even though women were starting to make up about a third of the workforce at tech companies, they held less than 10% of the equity value. Our hypothesis, we felt, had been proven correctly.
And you might ask, “Why does this matter?” Well, at the end of the day, as tech companies are becoming more and more powerful in the broader economy, the top five to 10 companies in the world are all tech companies. The impact when companies are going public or getting acquired is that there’s significant wealth generation.
And when that impact disproportionately falls to men, women literally do not have a voice or a seat at the table. This matters in terms of who’s able to take risks to go and start new companies, to start new venture firms, to become angel investors. It also shapes politics, it shapes philanthropy, it shapes what products go out in the world. So, it really shapes our entire society. We would like to be able to really make progress and move the needle on this number. In continued partnership with Carta, we’ve continued to work together and release studies each year. And the team at Carta is excited to share some of the results from the latest study.
Highlights from the Annual Equity Report 2021: Mita Mallick
Mita Mallick: Thank you both for that introduction and for the background. In so many ways, we wouldn’t be here without you and the work of #ANGELS. Welcome again, everyone, who’s here with us today. I’m Mita Mallick, and I have the privilege of leading Diversity, Equity and Inclusion here at Carta. Like you just heard from Henry, equity ownership is one of the most powerful tools for wealth creation in existence. It’s a powerful way of recycling capital. It’s why we’re all here today.
Before we dive into the incredible programming we have planned for all of you, we wanted to give you a preview of Carta’s Annual Equity Report. This year, we’re looking at two main questions. First, how much equity do employees hold by gender, race and ethnicity, and the intersection of the two? And second, who is founding companies? Let’s go ahead and take a look at our data.
Together, Black and Latinx people make up 29% of the U.S. labor force, that is, Americans who are working or available to work. But they make up only 16% of employees who hold equity. What’s more, these 16% of employees collectively hold only 9% of the total value of employee equity.
Some of the disparity that we’re seeing for underrepresented groups is because equity-holding Black and Latinx employees are less likely to hold roles in job areas where equity amounts tend to be larger. For example, Black and Latinx employees are more likely to hold junior positions that come with lower levels of equity. Whereas these two groups comprise 16% of equity-holding employees, they make up 25% at the entry level and only 7% in the C-suite. White employees, in contrast, make up 58% of equity-holding employees and only 49% of entry-level workers and occupy 76% of the C-suite.
Moving on to equity by gender. On this slide, we’re comparing women as a percentage of the labor force to the percentage of equity-owning employees, to the value of equity granted to women. You can see here that while women make up 47% of the labor force, only 35% of the employees on the Carta platform who hold equity are women. And the value of their equity grants in 2021 is only 27% of the total value of employee equity on Carta. Meaning that 73% of total equity went to men.
So, why are we seeing these kinds of gaps? Largely because men hold more highly compensated roles than women do. This chart shows the value of equity held by employees by ethnicity, race, and gender. You can see from this chart that Latinx women hold the least equity among all groups. Their median amount of equity held is $4,400, compared with $12,500 for South Asian men, the group that held the most.
And now, on to data on founders. We know that white founders still make up the majority of founders, but interesting that on this slide is the progress that we’re seeing for Black founders. As a percentage of all companies started each year on Carta, the number of companies started by Black founders more than doubled between 2016 and 2021. Now, this is good news, and we hope to continue to see that number grow. And we all know that we play a role in ensuring this progress for Black founders continues.
Now, if you look at who is founding companies by gender, not much has changed since 2016. This year though, there was more gender equity in the C-suite, 24% women than among founders, 14% women. There are two bright spots, though. The total amount of U.S. venture capital raised by women-founded companies has increased over the past decade, with a sharp increase in 2021. And the number of women investors intentionally looking for women-led companies to fund has also grown in the past few years.
So, to read the report in full—and I promise you, there’s so much amazing data to read and understand—please go to our website, cartaequitysummit.com. We’ll also be sharing the report with all of you who RSVP’d by the end of today.
Changing these numbers will take all of us. We hope that by sharing this data, we can help unpack what leads to these gaps so that we can help drive the change together. We also want to thank our users in particular for choosing to opt in and self-identify into the Carta app. This makes it possible for us to produce this report based on anonymized and aggregated data.
We also need to know where our data is still insufficient. We don’t yet have enough data to speak with confidence about the experience of every ethnicity or non-binary people or people with disabilities. We hope that we can change that in the future. Thank you, everyone, for joining us and a big thank you to this whole ecosystem that I know is so committed to making change. I hope you enjoy the day.