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Postmates’ new IPO delay indicates Wall Street is turning against Silicon Valley (vox.com)
48 points by danso 14 days ago | hide | past | web | favorite | 33 comments



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.


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.)


The VC fund can sell in the DPO as well. A DPO is literally exactly the type of event that would allow a VC firm to generate a return on their fund without a new fundraising event.

> 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?


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.


Makes sense, thanks for the clarification!

No. A Ponzi scheme uses money from new investors to pay returns to old ones. Generating liquidity for investors to sell equity is not at all similar.

DPOs do not preclude company from raising money. Slack did.

No that is exactly what a DPO means. Slack did not issue new shares or raise any money when it went public.

No, it doesn't. Companies can still issue and sell new shares during a DPO. Where did people get this silly idea that companies do not raise capital during a DPO?

Slack simply chose not to do so.


I thought it was more but Slack did issue at least 1.2m new shares in the offering.

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


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.


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.


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!

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?


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


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

> retail investors

I don't think the target is retail investors, at least not directly.

This is an unprecedented time when it comes to two things:

* The amount of money flowing into index ETFs that don't really discriminate what they buy

* The globally low interest rates leaving huge funds seeking returns anywhere they can find them

All they need to do to get a ton of interest is fit the criteria of some of the broad index ETFs (e.g. be listed within the S&P 500) or be more attractive than the competition.

I also don't think it's the assets/companies that are worth as much, but rather that currency has lost a ton of value - exponentially more than any of the reported inflation measures.


There's limited upside because most of the growth is gone, but there's still value in the same way Unilever has value. The problem is they're priced for hypergrowth. That said, Uber's still experiencing some growth.

Ugh, old data, but https://s3.amazonaws.com/cbi-research-portal-uploads/2019/05...

A successful company will have a trajectory like a sigmoid function (see above). The problem is IPO investors want in when growth still looks exponential.


Or you know, many companies are based on private valuations that are often gamed to boost the books of investors but don't match reality.


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.


Looks like they're buying their bankers' bullshit.

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.


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.


Investment banks (i.e. "Wall Street) underwrite and manage the IPO.


How does that make sense? A DPO for a company that doesn't need more capital to give employees liquidity doesn't imply a bomb at all.


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.


Two examples is a trend.


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

The physical services provided by these startups are fronts for erecting a mass surveillance infrastructure that collects user data. When you reach a certain point, you become a data company regardless of what particular service you started out providing.

Amazon sold books. They collected enough personal data and built out their infrastructure enough that it allowed them to branch out into...everything. Facebook was a glorified online forum. Now they are minting a new currency and working on the frontier of VR. Uber was a taxi company. Now they are into computer vision, AI, robots, mapping, etcetera.

That's the model that these companies are trying to follow.


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.


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.




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