We Love to Analyze Disastrous IPOs. Here’s What Actually Matters: Term Sheet for Monday, May 13

May 13, 2019, 1:33 PM UTC


We can’t help it — we love doom. A quick sampling of today’s headlines following Uber’s initial public offering that took place on Friday: “One of the Worst Performing IPOs Ever” and “Uber Bombed. Now What?

Before we dive into Uber, let’s take a stroll down memory lane to almost exactly seven years ago. It was May 18, 2012, and Facebook was making its public market debut on the Nasdaq. There was buzz and anticipation following reports that analysts were expecting it to reach a valuation of $100 billion. But then, the day came, and it wasn’t pretty.

Trading was delayed. There were numerous technical glitches on the exchange. CEO Mark Zuckerberg’s choice to wear a hoodie on IPO day “rankled” Wall Street.

The bumpy start got even bumpier when the stock struggled to stay above the IPO price, and shares closed basically flat and down $3.82 from the opening bell value. Then came the “hot takes.”

Across media outlets, it was called “an IPO disaster,” “a big bomb,” and “a huge Wall Street debacle with lots of confusion.” Just look at this Forbes column lede from May 20, 2012:

“They promised us the Big Bang. The Facebook initial public offering was the beginning of a new Wall Street universe. The end of the doldrums. Instead, we got tepid. If that. Spin it however you prefer but, for me, the Facebook IPO was a dud of a thud, barely closing at a premium on the first day of its aftermarket.”

Today, that “dud of a thud” company boasts a $540 billion market cap, and trades at more than three times its stock price from its first day on the Nasdaq. So let’s calm down and remember — first-day trading does not determine a company’s future.

Yes, Uber’s $69.7 billion market cap at Friday’s close was a far cry from the $120 billion prediction some were making, but it has certainly not been long enough for anyone to suggest that Uber’s debut will determine the entire direction of Silicon Valley unicorns for years to come.

You know what will determine that direction? A path to profitability. And there was one biiiig, notable difference between Facebook & Uber’s public offerings. In the year leading up to their IPOs, Facebook earned nearly $2 billion in operating profit while Uber lost almost $3 billion.

Investors today are willing to overlook profitability so long as there’s a promise for long-term growth. As one Term Sheet reader recently noted, Silicon Valley and Wall Street often don’t speak the same language. “Most in the Valley see themselves as optimistic futurists, able to create and/or predict the future, creating immense societal impact, which doesn't always translate to earnings,” he wrote. “Wall Street, as we know, is a less forgiving environment, valuing financial forecasting and predictability above all else. Societal implications are an afterthought.”

At some point, Uber and its ride-hailing counterparts will need to swing to profitability — or at least attempt to get closer. They’ll need to justify their value proposition to investors because it doesn’t make a whole lot of sense right now.

So we can sit around and speculate the causes behind Uber’s disastrous IPO, but in the end, it’s going to be profitability that matters. We all know there’s some sort of value — after all, we use the service every day — but Wall Street’s job is to put a number on it.

And that won’t be settled in a day.

...IN RELATED NEWS: Uber investor Bill Gurley (the VC who led the crusade to oust Travis Kalanick as CEO) received one of the biggest personal payouts in venture capital history: an amount estimated to be more than $600 million, according to Bloomberg.

THE RISE OF VISUAL TECH: More and more VCs are turning their attention to visual technologies such as businesses focused on visual sensors, computer vision, deep learning and artificial intelligence. On May 23, I’ll be moderating a panel titled “Where are the Next Visual Tech Unicorns?” at the LDV Vision Summit. There’s a 70% discount on tickets if you use the promo code TERMSHEET. Sign up here, and I’ll see you soon.


OneDegree, a Hong Kong-based insurance tech startup, raised more than $30 million in funding. BitRock Capital led the round, and was joined by investors including Cyberport Macro Fund and Cathay Venture.

Locus, an India-based supply chain optimization company, raised $22 million in Series B funding. Investors include Falcon Edge Capital, Tiger Global Management, Exfinity Venture Partners and Blume Ventures.

Grain, a Singapore-based online food company, raised $10 million in Series B funding. Singha Ventures led the round, and was joined by investors including Genesis Alternative Ventures, Sass Corp, K2 Global, FoodXervices, Majuven, Openspace Ventures, Raging Bull and Cento Ventures.

Integra Devices, a Newport Beach, Calif.-based next-generation micro-device company, raised more than $6 million in funding. Kairos Ventures led the round.

Rocean, a New York City-based connected water countertop device, raised more than $6 million in funding. Blue led the round.

Agile Analog, a Cambridge-based analog IP company, raised $5 million in pre-Series A funding. Investors include Delin Ventures, firstminute Capital and MMC Ventures.


TreeFrog Therapeutics, a France-based stem cell company, raised €7.1 million ($7.8 million) in Series A funding. XAnge (Siparex Group) led the round, and was joined by investors including Galia Gestion, Irdi Soridec, Aquiti Gestion and SATT Aquitaine.


Truck Hero, a portfolio company of CCMP Capital Advisors LP, acquired Lund, a Buford, Ga.-based provider of branded automotive accessories. Financial terms weren't disclosed.

BV Investment Partners made a minority investment in CivicPlus, a Manhattan, Kansas-based integrated technology platform for local government. Financial terms weren't disclosed.


Rattler Midstream Partners, a Midland, Texas-based provider of natural gas and water-midstream services in the Permian Basin, says it plans to raise $583 million in an offering of 33.3 million priced between $16 to $19 IPO. The firm posted revenue of $185.5 million in 2018 and income of $55.8 million. Diamondback backs the firm. Credit Suisse, BofA Merrill Lynch, and J.P. Morgan are underwriters. It plans to list on the Nasdaq as “RTLR.” Read more.

Loob Holdings, a Malaysian bubble tea chain, is planning a $72 million next year, Bloomberg reports citing sources. Read more.

Bicycle Therapeutics, a Cambridge, U.K.-based developer of oncology therapies based on bicyclic peptides, plans to raise $65 million in an offering of 4.3 million ADSs priced between $14 to $16. The firm posted revenue of $7.1 million in 2018. Atlas Venture (9%), Novartis (12.7%), and GlaxoSmithKline (12.2%) back the firm. Goldman Sachs, Jefferies and Piper Jaffray are underwriters.  It plans to list on the Nasdaq as “BCYC.” Read more.


BC Partners sold a majority stake in Acuris, a Germany-based provider of proprietary financial intelligence, data and analytics, to ION Investment Group. Financial terms weren't disclosed.


U.S. Venture Partners, a Menlo Park, Calif.-based firm, raised approximately $293 million for its 12th fund, according to an SEC filing. The fund’s target is $350 million.


Arjun Balaji joined Paradigm, a crypto asset investment firm, as an investor.

FTV Capital named Alex Mason as a partner. Previously, Mason was managing director at Carrick Capital Partners.


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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.

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