
Postmates’ new IPO delay indicates Wall Street is turning against Silicon Valley - danso
https://www.vox.com/recode/2019/10/8/20903393/postmates-ipo-market-wall-street-silicon-valley-direct-listing-wework-uber-unicorns
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the_watcher
Comparing direct listings to IPOs always seemed odd to me. An IPO is a
_fundraising event_. A DPO does not raise any money for the actual business,
but it gives liquidity to existing shareholders. The reason we're seeing them
now is that there are companies who don't need an IPO to raise money, but have
shareholders who have waited 10 years for liquidity.

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ProfessorLayton
While yes indeed some employees have waited many years for a liquidity event
and want a payout for their hard work, the other shareholders are LPs with a
venture capital target date on their funds.

This means that the company will either need to keep raising money to buy out
earlier investors that need to hit their fund target dates (Rather than raise
it all for themselves), or they'll need to go public at some point, even if
they don't need the money per se. Keep in mind that investors get lot's of
sway via their board seats.

If you're in the business of losing money, this game of hot potato becomes
harder and harder to play over time.

(Someone correct me if I'm wrong.)

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dvt
> This means that the company will either need to keep raising money to buy
> out earlier investors ...

Isn't this the literal definition of a Ponzi scheme? Isn't using new money to
pay old investors technically illegal?

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jrumbut
In a Ponzi scheme there isn't an actual business occurring, or only the facade
of one. If they make money, they can stop raising from investors.

The line can be a little fuzzy, since some Ponzi schemers pretend to be an
honest business and some real businesses end up being, functionally, a Ponzi
scheme.

~~~
dvt
Makes sense, thanks for the clarification!

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Spooky23
Or turning against bullshit business models. The growth for taking egregious
commissions on takeout and losing money while doing it is a finite market.

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phkahler
20 years ago we had the dotcom craze it was all bullshit business models. F'ed
company and all that. Wall street never really cared about any of the tech, it
was always about the money. In most cases anyway.

Some of the companies that have IPOed recently can only be destroyed by
massive investment. Uber for example, should be sized like Craig's list
connecting drivers and riders, not 20,000 employees with billions in valuation
doing autonomous car bullshit.

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Spooky23
In that era I worked for a company that pivoted from a software developer to
what we’d call a SaaS. They had incredible margins but had to spend some
capital to expand... and they had the ability to take big share in some
lucrative areas.

But they had a hard time raising money because they were too big and were
profitable. They ended up being acquired by some big dumb dotcom conglomerate
and the spun back out at a 5x return to a big evil company who was smart,
invested in the platform and makes a lot of money.

IMO it’s an example of the “bulls run, pigs get slaughtered” idea... these
funds have to swing for home runs, then panic when rough times loom.

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simplebuilder
This is some hit-piece reflecting anxieties in the Bay Area in the wake of the
WeWork fiasco, rather than a meaningful appraisal of value that you’d see from
a publication with credibility from Wall Street’s point of view. Don’t buy the
hype!

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dopamean
Might it have something to do with the fact that so many companies have waited
so long to go public that there's basically no realistic upside left for
retail investors?

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AznHisoka
that is 1 huge difference between the IPOs of now and even 10 years ago. you
could buy stock in companies like Google or Salesforce that were still nowhere
close to their maturation stage. sure it was hard to find that 50x bagger but
at least it was possible. Now I doubt those exist

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wbl
Markets are efficient. You could also have bought Pets.com.

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anon1m0us
Craft.io says they have raised $900 Million. They want to IPO at a valuation
just barely _double_ that amount after 8 years of trying. That seems very
desperate to me, especially considering the onslaught of competition,
declining revenue growth.

There's no moat. It's easy to create hyperlocal competitors. There are many.
This market is saturated.

I can't see how postmates can continue to grow wealth for investors. Neither
can the public markets. They are barely better than index funds with _way_
more risk.

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lallysingh
Looks like they're buying their bankers' bullshit.

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diego
What would Wall Street care? All that matters is that a company goes public
while there is still some (perceived, at least) upside for retail investors.
If the main company of going public is to give investors / employees
liquidity, then of course they are going to bomb. If the company has real
upside, then it will be fine.

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streetcat1
Retail investors represent at most 5% of trading, most likely 1%. And even
then most of them are in index funds. The game today was consolidated into
huge players, almost all are institutions.

The problem here is that of pricing (and nothing more).

Wallstreet wants to pay X, but VC wants 5X. This is why the "window" is
closing.

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tempsy
I think the most fascinating thing about Postmates is how they are behind is
almost every market but for some reason have an abnormally high market share
in Los Angeles.

Apparently they had early partnerships with celebrities like Kylie Jenner and
it created a loyal following that stuck?

I guess I assumed in the age of the internet you wouldn't see something like a
delivery app only "work" like that in one city, primarily due to local
marketing efforts.

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dmix
Two examples is a trend.

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xeeeeeeeeeeenu
I don't understand why "food-delivery startup" counts as a "tech company".

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twblalock
Delivery of this kind is a three-agent problem: the company needs to
coordinate between the restaurant, the driver, and the customer to make the
whole thing work. This includes matching the customer to a driver who is in a
good position to deliver on time. Keep in mind that the dispatcher,
restaurant, driver, and customer may have no prior relationship.

You can do that at a small to medium scale without a lot of technology, e.g.
taxi dispatch in a city can be operated by a small group of people in an
office. But to scale such a service across an entire country, or the world,
operating 24/7, is a massive coordination problem where technology can have a
huge impact.

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yesplorer
Well, you can watch 100km from point A to point B. Or you can ride a horse. If
you're rich enough, you can get someone to carry you on their back or you can
buy a car to make the whole thing easier because of the technology
breakthrough in transport.

That doesn't make Ford or Honda a tech company. They're automobile companies
and Postmate is a delivery company.

