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Private investors are sucking up all the value: Uber, Lyft and Pinterest prove

by Iyzklez
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It’s been a rough two years for consumer IPOs, from Snap in 2017 to Uber and Lyft this year.

Private market investors are generating all the returns, which is exactly what the experts have predicted for years.
Enterprise IPOs have performed much better, but even business software companies are starting to stay private longer.
Nobody in Silicon Valley should be surprised by Uber’s disappointing IPO. Or Lyft’s.

Experts have been predicting this type of performance for years.

Marc Andreessen called “the effective death of the IPO” in 2014 and said that with high-flying tech companies staying private longer, “gains from the growth accrue to the private investor, not the public investor.”

Fred Wilson of Union Square Ventures told CNBC the following year that these late-stage IPOs mean “all of the gains are captured among a very small cohort of people.”

In 2016, Alex Mittal of FundersClub wrote that today’s top tech companies are raising gobs of private cash, “leaving the bulk of returns out of public investors’ reach.”

These are the very people that benefit from companies who stay private longer while their valuations skyrocket, because they’re the early investors. They get to ride the valuation up from the millions to $10 billion, $20 billion or $50 billion and then sell their shares to the masses of public market investors who are thirsting for the next Amazon or Google.

They were the ones warning us about the emerging Uber-Lyft problem. And they were right.

Over the last two-plus years, public investors have gotten consumer brands with big names but few gains. Snap has lost about one-third of its value since its 2017 IPO, while Dropbox and Spotify are up just slightly from their debuts last year. Uber and Lyft have dropped. After falling 13% on Friday on a bad earnings report, Pinterest is back to where it was trading in its first few days in April.

“Maybe we made a mistake in having these unicorns sucking in huge amounts of private capital and delaying their IPOs,” said Duncan Davidson, a partner at venture firm Bullpen Capital, in an interview this week. “Maybe we’d be better off having these puppies go public earlier like we used to.”

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