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Lyft Beats Uber to First Ride-Hail IPO

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Adam Augusiak-Boro   March 28, 2019

Lyft, Inc.’s public debut will kick off one of the most highly-anticipated IPO seasons in recent memory. As companies stay private longer and the number of public companies in the U.S. remains at an all-time low, blockbuster IPOs like Lyft are an increasingly rare occurrence. We cover some of the reasons behind the fall in IPO activity in EquityZen’s 2019 IPO Outlook, which predicts that Lyft and 15 other companies, including its larger, global competitor Uber, will finally go public in 2019 and reignite what has been a largely muted IPO calendar over the last several years compared to previous bull markets. With Uber on its heels, Lyft is set to begin trading on March 29 at a fully-diluted valuation of around $25 billion (Lyft’s latest S-1 filing indicates a price range of $70 to $72 per share), allowing public investors access to Lyft’s stock for the first time in its history. Previously, investors looking to purchase Lyft shares had to participate in private financing rounds with high minimum investment thresholds or seek secondary offerings on pre-IPO trading platforms like EquityZen.

Now that we finally have access to Lyft’s full financial statements and management commentary within Lyft’s Form S-1, we have prepared the below mentioned report with our thoughts on the company’s total addressable market (TAM), path to profitability, comparable companies, and a number of growth levers and downside risks. As Lyft cements its IPO pricing post-roadshow, we expect that institutional investors have asked Lyft’s management many of the same questions that we cover below.

Sector Overview: Transportation-as-a-Service

Ride-hail companies like Lyft identify as multimodal transportation networks operating within the burgeoning Transportation-as-a-Service (TaaS) industry—also referred to as Mobility-as-a-Service (MaaS). TaaS describes a shift away from personally-owned modes of transportation and towards mobility solutions that are consumed as a service, often on-demand, and tailored to the individual needs of a traveler through a variety of transportation options, like ride-hailing and carpooling.

This industry, born in the wake of the Great Recession, was made possible by the mass adoption of smartphones, which for the first time allowed millions of drivers and riders to connect via ride-hailing apps. As the industry developed, several modes of transportation have been incorporated into TaaS networks, including:
  • Ride-hail: Ride-hailing is a service that connects riders with local drivers, giving riders a door-to-door transportation option. Example: Lyft’s core, on-demand ride-hail offering.
  • Carpool: Carpooling connects drivers with other passengers looking to travel to the same long-distance destination, sharing the cost of the journey between the driver and passengers. Example: Paris-based BlaBlaCar’s long-distance service.
  • Shared rides: Shared rides are the intersection of ride-hailing and carpooling, where riders traveling similar routes share a trip, often for short distances. Examples: Via, UberPool and Lyft’s Shared rides
  • Bikes and Scooters: Bike and scooter rentals provide consumers with a first- and last-mile option, giving riders the option to pick up and drop off these rentals anywhere they are available. Examples: Bike and/or scooter rentals are now offered by a number of companies, including Uber, Lyft, Lime and Bird.
  • Autonomous Vehicles: Autonomous vehicle (AV) rides are still in their infancy, but ride-hail companies like Lyft and Uber hope AVs will eventually provide all of the rides on their respective networks. Examples: In addition to Uber and Lyft, a number of diverse companies are chasing AV ambitions, including General Motors, BMW, Tesla, Apple and Waymo.
So how large is this TaaS market? And where does Lyft fit in? Download our report to dive in.

EquityZen's 2018 Tech IPO Recap

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Adam Augusiak-Boro   January 17, 2019

2018 will be remembered as the year during which markets reached all-time highs (particularly tech stocks), and also as the worst year for stocks since the last financial crisis began in 2008. Last year we saw two American tech companies surpass $1 trillion in market cap—Apple and Amazon—only to proceed to lose over $300 billion in value each in a matter of months.

Despite a bit of a recovery at the end of the year, 2018 still finished with the Dow, S&P 500 and Nasdaq lower by 5.6%6.2% and 4%, respectively. Last year’s IPO market mimicked much of 2018’s volatility, with certain issuers weathering the storm and others bringing investors steep losses.

So how was 2018’s IPO performance? 

We break down last year’s tech IPOs below using information sourced from Crunchbase. Please note we excluded four issuers from our analysis that listed their shares through American depositary receipts (ADR).

Last year, nearly 45 tech companies debuted on U.S. exchanges, selling approximately $28 billion of company shares (note this includes Spotify’s direct listing, which resulted in over $9 billion going to prior Spotify shareholders instead of the company’s balance sheet). The average company raised nearly $650 million while the median amount raised was only $214 million, indicating there were a significant number of large IPOs.

So, which were the largest IPOs of 2018…

…and which sectors attracted the most public markets capital?

*Excludes Spotify’s direct listing
**Includes only 1 company in each of the following sectors: AdTech, Automotive, Car Sharing, Energy, Insurance, IoT, and Software Outsourcing

While Chinese and American companies dominated the IPO markets in 2018, with four companies each in the top 10 tech IPOs, Brazilian fintech company PagSeguro raised the most capital of any company. Although it didn’t actually raise any capital in its direct listing, Sweden’s Spotify sold by far the most equity, with existing shareholders dumping over $9 billion worth of stock onto the NYSE. Perhaps unsurprisingly, Media & Entertainment received the most public markets funding last year, even without counting Spotify’s IPO. Chinese music streaming giant Tencent Music raised over $1 billion in its IPO, while another Chinese entertainment company, IQIYI, raised $2.3 billion to support its television and movie portal. Closely following Media & Entertainment were the FinTech, SaaS and eCommerce sectors.

A lot of money was raised, but how have 2018’s IPOs performed? Some have performed quite well…

…others, not so much.

2018 brought a mixed bag for the markets overall, and much of the same can be said about the top tech IPO winners and losers. Several companies have continued to perform strongly, posting 20% - 40%+ gains through yesterday. Of the nearly 45 tech companies that went public last year, 19 have generated positive returns. That, of course, implies that the majority of 2018 tech IPOs continue to have negative performance, some as high as (50%+). On the bright side, so far in Q1 2019, almost 40 of these companies are in the black with an average YTD gain of approximately 15%.

So what will 2019 bring?

As we look ahead to 2019, we’re reminded that 2018 was a year much like any other in terms of investing performance.

Some investments have performed poorly while others have performed well. For example, while unicorn IPOs from ADT (down 43% from IPO) and Dropbox (down 22% from IPO) have been followed by less than stellar market performance, companies like Zscaler (up 34% from IPO) and Eventbrite (up 36% from IPO) continue to provide strong returns to investors. As far as recent market performance is concerned, only time will tell if we’re at the beginning of a sustained downturn—but until then, we’re trying not to let recent market volatility cloud the big picture. Many tech companies continue to perform strongly, and as we kick off 2019, we still expect some blockbuster tech IPOs this year. For our list of 2019’s IPO predictions, check out our IPO Outlook here.


Unicorns, Donkeys, and Late Stage Valuations - Are You Managing Your Portfolio Well? (Part 2)

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Atish Davda   December 17, 2015

Remember Bob and Susan who walked into a bar? This article is part two of a two-part series on investing in growth technology given concerns over late stage valuations. Click here for part one.

Bob and Susan are still at the bar…

Private Secondary Market
Bob: “Aren’t private investments illiquid? How can you rebalance them?”
Susan: “Liquidity is a sliding scale. Google stock is liquid. Your late stage investment is less liquid. Your broken VCR is illiquid.”

Less liquid is not the same as illiquid. Many private market investors may not realize there are active secondary markets that could help them move into and out of investments with the company’s blessing. Secondary markets are a venue where investors can sell some of their investment, just like they can with their Facebook stock through Schwab, with the added step of getting the underlying company’s permission. Of course, as Susan points out, liquidity is a sliding scale, with private investments being less liquid than the public ones.

Just as with public markets, if you have seen investment appreciation that meets your target IRR, it might make sense to sell a portion of holdings in a given name to lock in a target return5. Rather than continuing to leave the investment capital and gains at risk, investors might consider re-deploying it into a different company. Here at EquityZen, we see savvy shareholders (employees and early investors) diversify themselves by selling some of their holdings and deploying the cash into other investments6.

Overthinking It
Bob: “Why isn’t everyone doing this?”
Susan: “More do it than you think. Private markets have only recently begun to mature rapidly. Don’t overthink it.”

There is currently, an irrational avoidance of portfolio rebalancing, primarily driven by two factors. First, as discussed above, many new investors are simply not aware of avenues to rebalance. Secondly, there is a misconception that selling private stock is equivalent to loss of confidence in the investment. That argument is like assuming the only reason Bob would sell his AMZN shares is because he believes the investment will tank. Couldn’t Bob have also hit his target return and wanted to sell some of his holdings? Couldn’t Bob simply see a better investment opportunity? Couldn’t Bob simply need cash to buy a new house?

As traditional modern portfolio management theory suggests, diversification is crucial. Benefits from diversification can be derived by diversifying across sub-sectors (e.g. hardware, Internet of things, cloud, etc.) as well as across stages of the company (pre-seed and seed, Series A-C, growth equity, etc.).

Portfolio Management
Private market investments are highly risky and therefore deserve a small, but non-zero portion of the total portfolio’s allocation. It is easy to see there is a big difference between a company that has been in existence for 3 months, one that has raised $30M in VC financing, and one that generates $30M of annual revenue. There is a place in Bob’s portfolio for each of them. It is a little harder to see that if there is uncertainty about the market cycle, the relatively safer investment is in the company that generates $30M in revenue7. Given uncertainty in the market, should Bob keep investing in 3 month-old businesses, or take some of that capital and put in in a business generating tens of millions in revenue?

Since venture capital industry have had a consistent shortlist of top-decile performing money-managers, tracking portfolios of these proven VCs is another strategy that private investors find fruitful. As discussed in part one of this series, getting access to those investments (that is, getting into the exclusive country club) used to be nearly impossible, but can now be performed online. Simply Google search “invest in [your desired company]” to see what options you have available to invest on the secondary market.

Warren Buffett famously said “if you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.” No one is suggesting Bob attempt to trade private investments every six months or even every couple of years. But, from time to time, even Warren Buffett is rumored to have rebalanced his portfolio and re-invest.

This article is part two of a two-part series on investing in growth technology given concerns over late stage valuations. Click here for part one.

Disclaimer: This article does not a) constitute investment, financial, or tax advice, b) intend to purport an offer to engage into a securities or similar transaction, nor c) reflect the views of EquityZen. It represents simply my personal opinion.

3: Since these high reward investments, obviously come with high risks, only accredited investors are qualified to invest. Take a qualification test here to see whether you qualify as an accredited investor