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How the tech unicorns of 2019 are doing on the stock market

By Vox

Check our IPO tracker for a glimpse at the performance of some of the biggest new public companies in techRead full story

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  • Some startups spend $0.40 of every $1 of venture capital they receive on paid acquisition. Cheap debt is fueling a bubble in VC and many LP's are putting money into venture funds because they can give much bigger returns than the stock market.

    I think the growth for growth sake makes sense if you have

    Some startups spend $0.40 of every $1 of venture capital they receive on paid acquisition. Cheap debt is fueling a bubble in VC and many LP's are putting money into venture funds because they can give much bigger returns than the stock market.

    I think the growth for growth sake makes sense if you have solid unit economics and strong product-market fit (PMF). In Lyft and Uber's cases they have PMF but not solid unit economics like Zoom. Zoom is profitable and that explains their IPO doing better than Lyft and Uber. The thing about paid acquisition and paid growth is it's still debt that you have to repay later down the round--it'll come due.

    Uber, once they IPO'ed, immediately offered me 20% discounts on my next 10 rides then 40%!!! discount once I binge on 10 rides @ 20% discount. So their marketing team probably pushed more rides to show # of rides growing, but that's not organic. What's worst is their unit economics are out of whack and something both companies need to fix towards profitability and they have conditioned users like me to crave cheap Uber rides...but when the prices calibrate without all that cheap capital subsidizing the true price and costs, I won't be binge on Uber rides as much.

    The other issue is because they are IPO-ing later, the VC's are getting ALL the gains (which stinks for investors who wait to buy such hot companies on the public market). When companies IPO sooner (like Whole Foods did), they are forced to push for sustainable profitability or already are profitable--which a lot of companies in the past achieved before going public. John Mackey (Founder Whole Foods) said no to his VC's who wanted him to take on more venture capital (and hence more control and profits) instead of going to the public markets. And he said that was the best decision ever was to go straight to IPO instead of binging on easy and cheap capital from VC's who just wanted to make more money and get more control (which you can't blame them).

  • The dot-com bubble burst made people reluctant to tech IPO investment.

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