It seems 2019 is going to be the year of the billion plus valued but still unprofitable tech IPO from Lyft, Uber, Pinterest... In fact, the unprofitable IPOs are doing better than profitable ones. What are people see in these companies that maybe I failed to see? What is going on?
Because people want to cash out. Expect the market to ha e a downturn later this year or next.
This is the correct answer
You might be too young to remember 1999-2002, but basically investors are trying to cash out before history repeats itself.
Dot com bubble called
Fuck. They want their money back
venture capital funds typically have ten year life spans. after that, the fund needs to start divesting its holdings and distribution the profits to its own investors, the limited partners. LPs are often pension funds, life insurance funds, and other institutional investors (eg the SoftBank vision fund’s largest LP is the Saudi sovereign wealth fund). if you examine the companies IPOing this year, many are about ten years old. the VCs who funded these startups need their money back, and an IPO is usually the best way to turn their illiquid stake in a company into cash.
Going public is a means of raising capital, they wouldn't have to raise money if they were profitable. They also need to cash out early investors and employees.
By definition. Because they are unprofitable they want someone to invest more 💰 into them.
For example Lyft made 375M rides in 2017 and double the revenue every year. The potential is huge. Not profitable at the start is not a big deal as far as you have investors and yearly revenue growth.
Because they realised they remained bachelor for too long waiting to become sexier and now in desperation to get married.