This Korean startup wants to take on Carta in cap table management
Reading Time: 4 minutesA South Korean startup called QuotaLab is on a quest to follow in the footsteps of Carta, the cap table management company that’s used by a host of startups and investors in the U.S.
Carta started life as ‘eShares’ in 2012 as a cap table management service that startups could use to issue equity to their investors and employees. Today, its stable of offerings has expanded to include everything from valuation and equity management, to bookkeeping, risk assessment and brokerage services. It also ran a secondary share marketplace that investors could use to trade shares in startups, but shut down that service earlier this year after a bit of controversy.
A Y Combinator alum, QuotaLab also started off as an equity management service (called QuotaBook) for startups and investors in South Korea. Now, with the post-merger integration of investor-facing fund management service LogosSystem heading to a close, it is now aiming to become a one-stop shop that the Korean startup and investor community can use to manage their funds, equity, investments, LP relations and more.
QuotaLab was founded by three former venture capitalists — Choi, Dan Hong and Pilseon Jun. Familiar with the problems GPs have to deal with, they saw the opportunity for a vertical SaaS solution in the space: Streamlining old tools and spreadsheets into a platform that investors could use to manage their portfolio companies and share data with limited partners.
Choi said the company’s decision to acquire LogosSystem last year for $23 million (KRW 30 billion) was meant to help QuotaLab cover the entire venture market in South Korea: ‘Before the acquisition, our service only dealt with startups and investors (GPs). Now, we can connect the whole startup-to-investor-to-LP ecosystem, which is the first time ever in South Korea’s venture history,’ he said. The acquisition came slightly more than a year after QuotaLab raised a $11 million round.
‘For GPs, the [LogosSystem] platform provides functionalities for managing their funds, including LP management, like LP info, contact points, commitments, capital calls, distributions, reporting, etc. It also offers investment management such as investments, returns, asset changes, markdowns, valuations, accounting, e-approvals and risk management,’ Choi added.
LogosSystem also enables LPs to manage their fund of funds and related assets (data on funds they’ve invested in). Choi noted that BlackRock’s eFront is similar in terms of the functionalities offered.
According to Choi, the equity management market has many sides you can tackle. ‘One is the issued securities side, which normally deals with already issued equity such as shares, bonds, convertibles, etc.,’ he said. ‘Within this area, if it is just going to be about back-office data management, then a general Excel or enterprise resource planning-like solution can work. Early solutions used to be like this,’ Choi said.
But equity management platforms need a deeper understanding of the relationship between startups and their investors, and those relationships vary depending on the market because of different VC dynamics, culture, fund LP structures, etc.
‘For example, an equity management platform that only covers startup needs but doesn’t cover investor needs can’t be sold in a market where investors are also key decision makers. On the other side are equity awards. This normally deals with stock options, RSU (Restricted Stock Unit), etc. This is way more local, as it is closer to HR and there are many different laws governing the [type of rewards possible, taxes, appraisals, etc].’
In a nutshell, greater emphasis on stakeholder relations, specialized services for in-depth securities data management, and different equity award markets are all new and different business opportunities that the company is hoping to tackle, he added. Choi said the plan has not yet been finalized, but it could be a stock brokerage company or a transfer agent, and the startup plans to register with the Korean financial authorities shortly.
Post-merger plans
QuotaLab has already started integrating LogosSystem’s investor fund management service within QuotaBook, Choi said.
‘For functionalities, mainly for interacting with LPs, there were previously overlaps between the [QuotaLab and LogosSystem]. We are unifying the affected functionalities of QuotaBook with LogosSystem, since [the latter] has way more sophisticated functions,’ Choi explained. ‘For functionalities that are mainly for interacting with portfolio companies, LogosSystem barely had any of it. Thus, we are enhancing the relevant functionality in QuotaBook, and are integrating the two products so that portfolio data can be easily synced to LogosSystem’s platform.’
Both platforms will benefit each other’s network, according to Choi. ‘QuotaBook can utilize LogosSystem’s investor customer pool for more upselling opportunities and cross-sell to their portfolio companies.’
LogosSystem’s CEO and founder left the company after the sale, but the next ranked person, who has been at LogosSystem for around 20 years, has been appointed the new CEO to lead the team. In Addition, LogosSystem’s 45 employees remained on the team. Now QuotaLab has 75 staff as of today.
‘There will be no changes to the current structure of LogosSystem, as its business has been solid,’ Choi noted.
The cap table management space has grown a tad crowded in recent years as startups have proliferated around the world, especially in Asia. Choi told me back in 2022 that QuotaLab planned to expand into Southeast Asia. He didn’t specify which countries the company was considering when I asked him recently, but if it is still targeting Southeast Asia, QuotaLab is likely to find itself competing in that region with Singapore-based Qapita and Hong Kong-based token and equity management startup Sprout. It will also have to fight for market share as it expands internationally with the bigger players in the space such as Carta and AngelList, as well as new entrants like Pulley and Deel (thanks to its recent acquisition of Capbase).
The company might even take the acquisition route to pursue its expansion plans. QuotaLab is open to making additional acquisitions, Choi said, adding that there is definitely potential to raise more funding to support those plans.
Last year was challenging for startups, but that didn’t impact QuotaLab much, because most of its revenue has been from mid-sized businesses, enterprise companies and investors, according to Choi. Today, QuotaLab has around 5,500 users on its platform, up from 3,500 in 2022.
Reference: https://techcrunch.com/2024/03/06/korean-startup-carta-cap-table-management/
Ref: techcrunch
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