Charly Kevers: An IPO is just another milestone. It is not an outcome. It is just a liquidity event. It's a fundraising and liquidity event. And to me, it's like the only difference is the level of scrutiny. You're going from playing in front of a stadium in person to now you're on national television. Now a whole country will talk if you make a mistake.
Narrator: From Morgan Stanley, this is Invested at Work, conversations with the people reshaping the modern workforce. We explore how innovative equity compensation and workplace benefits help keep that 'Day One' fire burning as companies scale into global powerhouses.
Today on the show, Charly Kevers, CFO of Carta - the financial infrastructure platform for private capital. Charly joins host Rodney Bolden, Head of Workplace Benefits Insights at Morgan Stanley at Work, to discuss:
Developing an “investor mindset” in your company, why an IPO is not the final destination, and the surprising benefits of private liquidity events, prior to an IPO.
Rodney Bolden: Charly, thank you so much for joining me today on Invested at Work.
Charly Kevers: Thanks for having me. Excited for the discussion.
Rodney Bolden: So you are CFO of Carta. Now, CFO, chief financial officer, that can mean a lot of things at a lot of different companies.
Charly Kevers: You are right.
Rodney Bolden: What does it mean at Carta? What is your remit, I'll say.
Charly Kevers: It's changed a lot over... So I've been at Carta nine years. And I joined the company when it was about a hundred people. We’re closer to two thousand now.
Rodney Bolden: Wow.
Charly Kevers: So lots of changes, which means over time... The CFO tends to be the person who takes the things others don't want. But today my remit is the typical finance remit, which is accounting, strategic finance, treasury, and deal desk and these types of functions.
I also oversee compliance and risk, and I oversee go-to-market strategy and operations, which means I'll also have kind of oversight of different systems. And so lots of different things that of course support our G&A teams, but also our go-to-market teams quite actively.
Rodney Bolden: So you're not busy at all.
Charly Kevers: Not at all. Not at all. No problems. It’s super easy.
Rodney Bolden: Exactly. No problems, no issues. It's all easy-peasy.
Charly Kevers: It's super easy. Yes.
Rodney Bolden: So you're the right person I need to talk to because I wanna talk about that private-to-public journey.
Charly Kevers: Right.
Rodney Bolden: And in your experience, uh, with that particular journey, what are some learnings about navigating the human side of liquidity?
Charly Kevers: Yeah, I think, a lot of it is not looking at liquidity as one event, right? There's a lot of preparation that goes on before liquidity is even possible. And so to me, it's really thinking about this continuum. The way I've always thought about it, and obviously very influenced by my days at public companies, is, ‘What is the infrastructure you have to put in place to be ready to sustain the scrutiny public markets – or even investors broadly – will bring when you're trying to get some form of liquidity?’
And so a lot of it starts with that first. And then second is, have you explained to the people what it is they own? Do they understand, right? And, and, and I say this working at a company that, that deals with equity every day. 24/7, all we think about is the capital structure and equity, and even we have to spend a good amount of time explaining to our employees how you think about an option, how do you think about an RSU, how you think about the potential tax implications.
And so that piece is, to me, like very, very connected to broadly what the company needs to put in place to make liquidity possible. But also, if you don't prepare your employees for that, that's also where potential challenges can happen.
Rodney Bolden: Let's talk about one form of liquidity, which is initial public offering, IPO. My only experience in wealth management with IPO is taking indications of interest from clients. So that's why I'm glad I'm talking to you today. Um, down the stretch, a lot to do in an IPO.
Charly Kevers: Yep.
Rodney Bolden: But what is there to do earlier, and how early should companies who are thinking about that start preparing?
Charly Kevers: I come back to my earlier point. I don't think it's like one event, like the IPO prep doesn't really start, for example, when you, you pick a banker, right? It absolutely should have started way before. But what I mean by that is think of, as you build your business, how do you build that infrastructure over time?
It can be things as simple as think about equity. Is everything well documented? Can you find all the documentation and the approvals of why you should, Rodney, grant me a specific grant of options, right? And that early on, people don't think about this.
Rodney Bolden: Mm.
Charly Kevers: Those are certain things that you do it early, it pays dividends many, many times over when it matters, which is at the time of liquidity. Again, whether private or IPO, and at the IPO, there is a ton of diligence that goes into, is the capital structure actually what the company says it is?
And you can imagine the implications if it isn't, because that's what investors look at, right? What are the things that investors are more focused on? Of course, is the performance of the business. There's no IPO if the business doesn't perform well. But then it's capital structure. Like what am I-- when I'm buying a share, what am I really buying? What is the full share count? Simple things like the share count sounds easy. Not so much if you haven't tracked everything really accurately, and you have everything really well documented, and all the controls have been in place where you can-- you know, the board approves, you know, issuance of stock.
Stock, by the way, gets issued not just to employees. You do an M&A transaction, you know, the acquired company oftentimes will get potentially part stock, but also those employees get stock to be incentivized and, and really align with the business. So there's many, many ways your capital structure changes and liquidity in the private space. And so that's where just doing that early is, to me, critical. And in our world, that matters greatly.
Second is, to my earlier point, do you have the processes that capture all the things you need to capture to be ready for an IPO, right? Is everything documented? The systems that kind of enable these processes is very important. Doing things manually in this day and age, it just, it just blows my mind how people still think that doing things on spreadsheets is safe because mistakes is almost, you know, unavoidable. And again, this is from an equity standpoint, but from a finance standpoint, more broadly, the expectations as you get closer to be a public company is you close your books really fast and, and you can make decisions really fast. You have a really good understanding of what I call the physics of your business, like all the moving pieces.
Rodney Bolden: I like that expression.
Charly Kevers: The only way you can do it is by having good systems and data. And that takes work early on. So I think all these pieces come together. So you're right, lots of work to do. And in all of these, you can make progress, progress on quite early to be able to make sure you're ready.
Rodney Bolden: Now, you talked a lot about data and systems, but let's talk about people. So how early should you help people assume the IPO mindset?
And follow-up question, is that IPO mindset that you're creating gonna be different for different people within the organization? So different for the CFO office, different from the legal compliance folks, and different from the employee base.
Charly Kevers: I actually don't think -- I don't think there's necessarily an IPO mindset. I'll tell you why.
Rodney Bolden: Okay.
Charly Kevers: First is because in the end, an IPO is only successful if you're building a good business. So the first mindset is, “Are we all aligned that we wanna build the best business possible?” Does it solve a big problem in the world, right? Is it making customers happy and solve their problems? And can you grow fast enough? Can you become profitable? All these pieces come together like, can you even talk about an IPO? So to me that's, that's the mindset.
Rodney Bolden: Okay.
Charly Kevers: Can you build the best possible business? And then for the teams you mentioned – legal, finance, HR, who are, you know, the big actors in how to prepare for an IPO, I think this is just understanding some of the aspects I mentioned earlier.
Do you know the trajectory you need to take to be ready? And that's the mindset to me is like pushing yourself to... Nobody, until the IPO, nobody's telling you what to do.
Rodney Bolden: Yeah.
Charly Kevers: Like you don't have the advisors, the bankers, the others telling you, "Oh yeah, here, here's the list of things you need to do to be ready. Here are the controls you need to have in place. And you know, here's what public investors will expect."
You need to put this pressure on yourself to get better every quarter, every month, every day. And where I believe strongly that that's something you need to start very early to just, just have that mindset of just get better every month.
Like, just your close process, you often start with 10 to 15 days. When I got there, it was 30 days. Now we're at like four or five days. But that's because you just keep making progress every year. And, to me, this applies to how do you think about your equity, I mean, your equity plan and how you incentivize employees. Do you have a clear plan? Can you explain it very clearly to your employees how it works, how refresh grants work? Like, of course, there's the initial grant everybody's focused on. But do you have a very clear view on what, what does that equity compensation look like over time?
Another one I'm always surprised people don't think about as much is, do you have a clear view on expected dilution for your business? Like what, what are a number of shares we have available to go hire the talent that we need to build our business? So I think all these pieces together are, you know, are really critical to making sure you've got that mindset, if you will, to be ready.
Rodney Bolden: Without naming names, what are some companies that are doing that well today, where they are being transparent with the employees, getting the employees to understand what is the mindset that we need to have to build the best company that we can so that maybe one day we do either go through an M&A or an IPO?
Charly Kevers: Right. The clients that we work with, it's the ones that are most transparent, or as transparent as they can be with their employees, we tend to see be most successful. Because then they have everyone aligned on, "Oh, that's what we're doing. And that's why, you know, my equity is working this way, or that's why we're making them.” Sometimes these are hard decisions, right?
Like, reflecting on my own experience, coming from public companies, I was very much like, "Well, we can't disclose all these things. This is just way too dangerous. People are gonna go talk." And, Henry, our CEO, is very, very transparent. Which of course will have to adjust if we ever go down the public route. But, but I think it's the right bias because when you do that, and it's very true for the companies we support, we see they're very successful through these processes. If you arm employees with the right information, they do the right thing.
It's when they're not given the right context. And I found it because even when sometimes times are hard, and I mean, in 2022, for example, we saw private markets was in post '21 in a tougher, tougher environment. We were very transparent with our employees, "Here are the challenges. Here is what's not going well. And here is why we need to make some hard decisions." And I was surprised how positive the reaction was to that. And people saying, "You know what? Thank you for telling us what's actually happening," versus standing up there and saying, "We're fine. Everything's great." Or, or you know, "Everything's amazing. Don't worry." And then certain decisions don't reconcile with that.
So, consistently, when we see people be successful around this process, it does start with how transparent are they.
Rodney Bolden: Mm-hmm.
Charly Kevers: When we tell them, "Oh, you probably should talk about these things with your employees." Like, "Oh yeah, we already do that."
Like, it still absolutely really surprises me when I see folks that get a new job at a private company, and the company does not want to tell them the fully diluted share count. 'Cause if I tell you, "Hey, Rodney, welcome. Here are, you know, 2,000 options." What does that mean, right? And oftentimes people will be, "Oh, that's great." But you don't know if the share count is 2 million shares, 10,000 shares. That completely changes your level of ownership in the business.
Rodney Bolden: Mm-hmm.
Charly Kevers: And then sometimes companies don't share the 409A. I mean, there's so many things, and to me, that is a critical piece to get ready is like do – yes, certain teams will drive the process, but have they broadly educated everyone and be transparent enough that you've got everybody kind of on the same boat and maturing at the same time? So that's where we see people do this really well in terms of going down the maturity cycle is really bring everybody along.
Rodney Bolden: So it sounds like one of the biggest mistakes companies make is lack of transparency.
Charly Kevers: Yeah.
Rodney Bolden: Is there any other things that you think companies aren't doing or that they're doing that they shouldn't be doing when navigating that path to liquidity? Especially, I'll, qualify, on the human side, that is.
Charly Kevers: Yeah. I think one good one is taxes. Like this is what tends to really surprise everyone. It's always hard because every employee comes with a different situation. You don't know their family situation in detail. You can't give them specific advice. But it doesn't mean you can't give them resources to go understand, "Oh, here is what happens with an option, and if I exercise, this happens. And if it's an ISO, this happens. And an ISO is this, and RSUs work this way."
And that to me is foundational. And so the companies that do it well have all this available, have sessions where people can ask questions on broadly the mechanics of, you know, the tax implications of all these instruments. The ones that don't do it well tend to be like, "Well, you know, go talk to your personal tax advisor."
Rodney Bolden: Right.
Charly Kevers: It’s a bit of a cop-out when people are like, "Yeah, just go do that. I don't wanna deal with it." And again, we've seen people or customers and companies get much better about this. But this is where, interestingly, as private companies, if you do private liquidity events…
Rodney Bolden: Mm-hmm.
Charly Kevers:[AR1] This is a great training ground, right? Like, because once you're public, everything now is public, and tax implications can be significant. On the private side, you have more control on, like, well, how do you design the tender offer, for example, right? Employees generally won't sell – you won't let them sell a big chunk of their equity 'cause you still want them tied to the success of the business longer term – but, you know, it'll be between 10 and 20% of their vested shares, which after many years can be significant amounts. But that's a great training ground to talk about taxes.
'Cause now it's real, right? We found companies who do that tend to be way more ready for the big liquidity event, be it M&A or IPO, right? Because people are – at least a portion of their employee base – has already gone through it.
So it just is not just on the management team to explain all this. Now you have other employees who can be like, "Oh yeah, I can explain to you how this works." Right? And that's what you want. Right. And that's where we see, like, people do things that are really, really helpful.
Rodney Bolden: You're the first person I know to talk about tender offers as a dress rehearsal for essentially. I love that concept.
Charly Kevers: I really believe in it.
Rodney Bolden: Sometimes I hear after that big liquidity event, whether it's an M&A, whether it's an IPO, folks become a little disengaged afterwards. What are ways companies can get ahead of that and make sure that, okay, we've been out here, we've been doing things and working towards this, always becoming a better company to get us to this point.
We have our liquidity event, we have the IPO, we've gotten the shares. Okay, now we can sit back and rest.
Charly Kevers: Yeah, I think it's, it's something everybody struggles with. To me it, it does come back to what is the company you're building? Yes, people are at the company, they wanna be well compensated.
Rodney Bolden: Mm-hmm.
Charly Kevers: But the single most important thing that people care about is are they working on a big and interesting problem? That’s number one.
Second is, have you educated your employees enough on how to think about the value of their equity, right? And connecting the performance of the business to how valuation could evolve.
I believe strongly in – whether private or public, frankly, but of course more important when it's public – is explain it to everyone: "Here, here is how public investors think. Here's what they look at when they value a business." And why I think that's important is because instead of just being focused on the stock price itself, you know the performance of the business. You know what you're working on. You know the potential of the business, and you can yourself understand, “Oh, if we deliver on these goals” – and it's more a question do you believe what the business sets out to do – then, “I think here's what the value of the business could be.”
And so to me, that's even more important once you become public is really tying the two. Because then the employees can make an informed decision on what it means for the value and then for them. And that tends, I think, to keep them more engaged on the longer term. And especially if you remind everyone that an IPO is just another milestone. It is not an outcome.
Rodney Bolden: Mm.
Charly Kevers: It's actually always funny to me when people say, "This is, this is the exit." It is not an exit. Right? M&A is an exit.
Rodney Bolden: Right.
Charly Kevers: An IPO is not. It is just a liquidity event. It's a fundraising and liquidity event. Over time, it's not necessarily liquidity at the point of IPO, right? It's oftentimes six months after. And so in a way, it's just like another fundraising event. And to me, it's like the only difference is the level of scrutiny. You're going from playing in front of a stadium in person to now you're on national television. That's the way I think about it, right?
Rodney Bolden: I like that.
Charly Kevers: You're on a sports team and, you know, you play locally. People locally in town will talk if you make a mistake. Not a whole country will talk if you make a mistake. And so I think it's just that, that explaining all these things, but it's just one more milestone. And if you believe in the business, it shouldn't change how you think about the business.
Rodney Bolden: You said something important before that I want folks to be clear on. So oftentimes we talk about creating an ownership culture within a company, but it sounds like you're also saying you need to create an investor culture –
Charly Kevers: Yeah.
Rodney Bolden: …among your employees. How, how are the two different? Or are they any different?
Charly Kevers: [AR2] To me it's one and the same, okay? And I oftentimes tell our employees, and my team for sure, that you all are investors. You should ask questions about how the business is doing. You should understand. If you don't understand it, just ask. Because you own shares in the business, you're entitled, like everyone else, to actually understand why we're doing what we're doing. And then you should understand how the performance ties to the value. To me it's, it's tightly connected. If you're an owner, you're also an investor.
You're deciding with your time whether to invest in the business. That is the trade-off you're making as an employee. Like, I oftentimes encourage people who look at new jobs as you should have an investor mindset, especially a private company. You are betting your time on the equity of that business, which is why, to me, it's just – it's fundamental to just looking at, like, the employee experience is like you should have an investor mindset to be able to evaluate if that's the right thing for you.
Rodney Bolden: Do you hear any stories of how the way IPOs or liquidity events have changed the lives of employees? Do you have some examples that you can share?
Charly Kevers: I mean, I can tell you what, what we've gone through. We were lucky enough to do a sizable liquidity event about five years ago. And I mean, the notes that you get from people who just are like, "You don't realize what you've solved for me." People being able to pay off mortgages for their parents, people now finally feeling just some financial freedom, people with families just, feel a lot of pressure – especially when you're at a startup – like, generally, you just don't get necessarily paid as much, and all this equity is just, it's paper wealth. And when it actually becomes real, I did not expect just the level of impact it can have on people's lives. Yeah, 'cause you don't know what people deal with, right? You don't know, or healthcare expenses, like certain things that are just really, really personal. I remember so many of the messages we would get from, from employees, early employees who…
Rodney Bolden: Mm-hmm.
Charly Kevers: …who poured, you know, many, many years into the business and now were rewarded. It's just, it's difficult to explain. It's just like how special it feels when you can do that. And I know, I mean, Henry, our CEO, that's probably one of the things he feels proudest about, is that he could, you know, generate something like this for the folks who early on believed in him.
Rodney Bolden: Mm. Now, earlier you mentioned how folks are – some folks are still entering things manually, spreadsheets, that's outdated. But I want you to look into the future and what will be outdated, say, five years from now that's standard practice?
Charly Kevers: I think some of the transparency is still not there, and I think in five years, like, I don't think employees will go and first, I don't think they'll join a business if they don't have a stake in it.
'Cause even today it's not... Yes, in technology where we evolve a lot, it is quite common. But, you know, I'm originally from Europe, and I talk to all my friends who are in Europe. I'd say less than half of them have equity in the business they work with.
Rodney Bolden: Mm-hmm.
Charly Kevers: The ones who are senior tend to.
Rodney Bolden: Right.
Charly Kevers: But more broadly, if I look at family and friends, it is not as common. And so if I think worldwide, I think just, just equity being more broadly available is one thing that, that I fundamentally believe will change. Because employees more and more will be like, "Hey, like, that's, that's important to me, and that is what a job is. Like, I wanna be part of the growth of the business." I think that's one.
The other one is liquidity is already becoming accepted in the private space, and I think it will continue. I think the tools are available today to do this easily. There are very common structures to make this, you know, very clean for both investors and employees. And I think that's, is becoming an expectation from employees if you stay private longer, and that's the trend, right? Like, companies, you know, used to take four to five years to go public; now it's seven to 10. Right? So, invariably these things will change.
And then on the transparency, I think it's… This is where, like, you do it manually. Where does the employee go to know what they have and how it's vesting and what the current, you know, 409A is and all these things? And if they don't have a way to easily access this personally to then do all their planning and understand what that might mean, I think that that will go away as well. And just, you know, spreadsheet in the finance team, on the finance team's computers where they have to be like, "Hey, can you remind me how much I own and what it's worth?" It's just that, that, that's gotta change.
Rodney Bolden: What has been your biggest challenges as a CFO?
Charly Kevers: Well, where do I start? I think the hardest thing is always – especially when you work at a business that launches a lot of new products, innovates a lot, grows fast – is just how do you continue to stay relevant to the business in terms of how do you best support the business as it continues to change?
Rodney Bolden: Mm.
Charly Kevers: And, as a finance leader, but also having all the infrastructure that your team supports to make sure you're never slowing down the business. I think if I have to pick, like, one thing that's the hardest is how to do that.
Rodney Bolden: Excellent. One more question for you. What makes you invested at work?
Charly Kevers: So one of the things that, I mean, nine years in, so you know, obviously still having fun. What's really been unique for me is I work at a company that's solving finance problems, and I'm the finance guy. And that is so unique because what we do for our customers, I understand what we're solving. Like, there are many tech companies, as a CFO, you get the financial and business aspects, but if you're, if it's a really technical product, you don't really know what it does, right?
Here, I strongly have a sense of what it solves, and it's so rewarding to see what we can solve for customers, and how we've been able to solve more and more problems and completely change, with technology, real problems that they're having in managing their businesses and operating their funds, their companies. And so that, that continues to be kind of the most rewarding piece of being in this job and doing what we're doing for customers.
Rodney Bolden: Excellent. Charly, I really hope that people watching and listening to this episode had a notepad because you dropped a lot of important insights. I wanna thank you so much for joining me today.
Charly Kevers: Thanks for having me. It was great.
Rodney Bolden: Thanks.
Charly Kevers: Thank you.
Narrator: For more conversations on the future of workplace financial benefits, please follow or subscribe to the show. If you hear something you like, share it with a colleague or a friend. And to discover new ways to unlock the power of your organization's benefits, visit us at morganstanley.com/atwork.
