Lyft’s imminent IPO could value the company at $23B

Ridehailing firm Lyft will make its Nasdaq debut as early as next week at a valuation of up to $23 billion, The Wall Street Journal reports. The business will reportedly price its shares at between $62 and $68 apiece, raising roughly $2 billion in the process.

With a $600 million financing, Lyft was valued at $15.1 billion in June.

Lyft filed paperwork for an initial public offering in December, mere hours before its competitor Uber did the same. The car-sharing behemoths have been in a race to the public markets, igniting a pricing war ahead of their respected IPOs in a big to impress investors.

Uber’s IPO may top $120 billion, though others have more modestly pegged its initial market cap at around $90 billion. Uber has not made its S-1 paperwork public but is expected to launch its IPO in April.

Lyft has not officially priced its shares. Its S-1 filing indicated a $100 million IPO fundraise, which is typically a placeholder amount for companies preparing for a float. Lyft’s IPO roadshow, or the final stage ahead of an IPO, begins Monday.

San Francisco-based Lyft has raised a total of $5.1 billion in venture capital funding from key stakeholders including the Japanese e-commerce giant Rakuten, which boasts a 13 percent pre-IPO stake, plus General Motors (7.76 percent), Fidelity (7.1 percent), Andreessen Horowitz (6.25 percent) and Alphabet (5.3 percent). Early investors, like seed-stage venture capital firm Floodgate, also stand to reap big returns.

Lyft will trade under the ticker symbol “LYFT.” JPMorgan Chase & Co., Credit Suisse Group AG and Jefferies Financial Group Inc. are leading the IPO.

Lyft recorded $2.2 billion in revenue in 2018 — more than double 2017’s revenue — on a net loss of $911 million.

Lyft declined to comment.

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Uber said to be raising $1B at a $10B valuation for its self-driving car unit

Uber is in negotiations with investors, including the SoftBank Vision Fund, to secure an investment as large as $1 billion for its autonomous vehicles unit. The deal would value the business at between $5 billion and $10 billion, according to a Tuesday report from The Wall Street Journal.

Uber declined to comment.

The news comes shortly after TechCrunch’s Mark Harris revealed the ridehailing firm was burning through $20 million a month on developing self-driving technologies, which means, according to our calculations, that Uber could have spent more than $900 million on automated vehicle research since early 2015.

According to the WSJ, the deal could close as soon as next month, shortly before Uber is expected to complete a highly-anticipated initial public offering. Uber, in December, filed the necessary paperwork with the US Securities and Exchange Commission to go public in 2019. The documents were submitted only hours after its competitor Lyft did the same; Lyft, for its part, unveiled its S-1 earlier this month and will debut on the Nasdaq shortly.

Uber, to date, has raised nearly $20 billion in a combination of debt and equity funding, reaching a valuation north of $70 billion. The business is said to be seeking funding for its self-driving business in order to tout the unit’s growth and valuation. After all, a $10 billion sticker price on its AV efforts may bandage its reputation, damaged by continued reports questioning its progress.

Alphabet-owned Waymo, meanwhile, is reportedly looking to raise capital, too. This would be the first infusion of outside funding for the autonomous vehicle business, rolled out of Alphabet’s Google X. According to The Information, which broke this news on Monday, Waymo would raise capital at a valuation “several times” that of Cruise, the AV company owned by General Motors.

Raising capital from outside investors would help limit costs and would allow Alphabet the opportunity to display Waymo’s valuation for the first time in several years. Alphabet, however, does not want to relinquish too much equity in the business, justifiably. Waymo, years ago, was valued at $4.5 billion, though analysts claim it could surpass a valuation as high as $175 billion based on future revenue estimates.

Waymo didn’t respond to a request for comment.

Other investors in Uber’s purported round include an “unnamed automaker,” per the WSJ. Uber’s existing backers include Toyota, SoftBank, T. Rowe Price, Fidelity and TPG Growth.

Uber’s net losses were up 32 percent quarter-over-quarter as of late last year to $939 million on a pro forma basis. On an EBITDA basis, Uber’s losses were $527 million, up about 21 percent. The company said revenue was up five percent QoQ sitting at $2.95 billion and up 38 percent year-over-year.

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Startups Weekly: Flexport, Clutter and SoftBank’s blood money

The Wall Street Journal published a thought-provoking story this week, highlighting limited partners’ concerns with the SoftBank Vision Fund’s investment strategy. The fund’s “decision-making process is chaotic,” it’s over-paying for equity in top tech startups and it’s encouraging inflated valuations, sources told the WSJ.

The report emerged during a particularly busy time for the Vision Fund, which this week led two notable VC deals in Clutter and Flexport, as well as participated in DoorDash’s $400 million round; more on all those below. So given all this SoftBank news, let us remind you that given its $45 billion commitment, Saudi Arabia’s Public Investment Fund (PIF) is the Vision Fund’s largest investor. Saudi Arabia is responsible for the planned killing of dissident journalist Jamal Khashoggi.

Here’s what I’m wondering this week: Do CEOs of companies like Flexport and Clutter have a responsibility to address the source of their capital? Should they be more transparent to their customers about whose money they are spending to achieve rapid scale? Send me your thoughts. And thanks to those who wrote me last week re: At what point is a Y Combinator cohort too big? The general consensus was this: the size of the cohort is irrelevant, all that matters is the quality. We’ll have more to say on quality soon enough, as YC demo days begin on March 18.

Anyways…

Surprise! Sort of. Not really. Pinterest has joined a growing list of tech unicorns planning to go public in 2019. The visual search engine filed confidentially to go public on Thursday. Reports indicate the business will float at a $12 billion valuation by June. Pinterest’s key backers — which will make lots of money when it goes public — include Bessemer Venture Partners, Andreessen Horowitz, FirstMark Capital, Fidelity and SV Angel.

Ride-hailing company Lyft plans to go public on the Nasdaq in March, likely beating rival Uber to the milestone. Lyft’s S-1 will be made public as soon as next week; its roadshow will begin the week of March 18. The nuts and bolts: JPMorgan Chase has been hired to lead the offering; Lyft was last valued at more than $15 billion, while competitor Uber is valued north of $100 billion.

Despite scrutiny for subsidizing its drivers’ wages with customer tips, venture capitalists plowed another $400 million into food delivery platform DoorDash at a whopping $7.1 billion valuation, up considerably from a previous valuation of $3.75 billion. The round, led by Temasek and Dragoneer Investment Group, with participation from previous investors SoftBank Vision Fund, DST Global, Coatue Management, GIC, Sequoia Capital and Y Combinator, will help DoorDash compete with Uber Eats. The company is currently seeing 325 percent growth, year-over-year.

Here are some more details on those big Vision Fund Deals: Clutter, an LA-based on-demand storage startup, closed a $200 million SoftBank-led round this week at a valuation between $400 million and $500 million, according to TechCrunch’s Ingrid Lunden’s reporting. Meanwhile, Flexport, a five-year-old, San Francisco-based full-service air and ocean freight forwarder, raised $1 billion in fresh funding led by the SoftBank Vision Fund at a $3.2 billion valuation. Earlier backers of the company, including Founders Fund, DST Global, Cherubic Ventures, Susa Ventures and SF Express all participated in the round.

Here’s your weekly reminder to send me tips, suggestions and more to kate.clark@techcrunch.com or @KateClarkTweets

Menlo Ventures has a new $500 million late-stage fund. Dubbed its “inflection” fund, it will be investing between $20 million and $40 million in companies that are seeing at least $5 million in annual recurring revenue, growth of 100 percent year-over-year, early signs of retention and are operating in areas like cloud infrastructure, fintech, marketplaces, mobility and SaaS. Plus, Allianz X, the venture capital arm attached to German insurance giant Allianz, has increased the size of its fund to $1.1 billion and London’s Entrepreneur First brought in $115 million for what is one of the largest “pre-seed” funds ever raised.

Flipkart co-founder invests $92M in Ola
Redis Labs raises a $60M Series E round
Chinese startup Panda Selected nabs $50M from Tiger Global
Image recognition startup ViSenze raises $20M Series C
Circle raises $20M Series B to help even more parents limit screen time
Showfields announces $9M seed funding for a flexible approach to brick-and-mortar retail
Podcasting startup WaitWhat raises $4.3M
Zoba raises $3M to help mobility companies predict demand

Indian delivery men working with the food delivery apps Uber Eats and Swiggy wait to pick up an order outside a restaurant in Mumbai. ( INDRANIL MUKHERJEE/AFP/Getty Images)

According to Indian media reports, Uber is in the final stages of selling its Indian food delivery business to local player Swiggy, a food delivery service that recently raised $1 billion in venture capital funding. Uber Eats plans to sell its Indian food delivery unit in exchange for a 10 percent share of Swiggy’s business. Swiggy was most recently said to be valued at $3.3 billion following that billion-dollar round, which was led by Naspers and included new backers Tencent and Uber investor Coatue.

Lalamove, a Hong Kong-based on-demand logistics startup, is the latest venture-backed business to enter the unicorn club with the close of a $300 million Series D round this week. The latest round is split into two, with Hillhouse Capital leading the “D1” tranche and Sequoia China heading up the “D2” portion. New backers Eastern Bell Venture Capital and PV Capital and returning investors ShunWei Capital, Xiang He Capital and MindWorks Ventures also participated.

Longtime investor Keith Rabois is joining Founders Fund as a general partner. Here’s more from TechCrunch’s Connie Loizos: “The move is wholly unsurprising in ways, though the timing seems to suggest that another big fund from Founders Fund is around the corner, as the firm is also bringing aboard a new principal at the same time — Delian Asparouhov — and firms tend to bulk up as they’re meeting with investors. It’s also kind of time, as these things go. Founders Fund closed its last flagship fund with $1.3 billion in 2016.”

If you enjoy this newsletter, be sure to check out TechCrunch’s venture capital-focused podcast, Equity. In this week’s episode, available here, Crunchbase News editor-in-chief Alex Wilhelm and I discuss Pinterest’s IPO, DoorDash’s big round and SoftBank’s upset LPs.

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Apple is offering interest-free financing to boost iPhone sales in China

Apple is looking to get over its sales woes in China but offering prospective customers interest-free financing with a little help from Alibaba.

Apple’s China website now offers financing packages for iPhones that include zero percent interest packages provided in association with several banks and Huabei, a consumer credit company operated by Alibaba’s Ant Financial unit, as first noted by Reuters.

The Reuters report further explains the packages on offer:

On its China website, Apple is promoting the new scheme, under which customers can pay 271 yuan ($40.31) each month to purchase an iPhone XR, and 362 yuan each month for an iPhone XS. Customers trading in old models can get cheaper installments.

Users buying products worth a minimum of 4,000 yuan worth from Apple would qualify for interest-free financing that can be paid over three, six, nine, 12 or 24 months, the website shows.

Apple is also offering discounts for customers who trade in devices from the likes of Huawei, Xiaomi and others.

The deals are an interesting development that comes just weeks after Apple cut revenue guidance for its upcoming Q1 earnings. The firm trimmed its revenue from the $89 billion-$93 billion range to $84 billion on account of unexpected “economic deceleration, particularly in Greater China.”

Offering attractive packages may convince some consumers to buy an iPhone, but there’s a lingering sense that Apple’s current design isn’t sparking interest from Chinese consumers. Traditionally, it has seen a sales uptick around the launch of iPhones that offer a fresh design and the current iPhone XR, XS and XS Max line-up bears a strong resemblance to the one-year-old iPhone X.

The first quarter of a new product launch results in a sales spike in China, but Q2 sales — the quarter after the launch — are where devices can underwhelm.

It’ll be interesting to see if Apple offers similar financing in India, where it saw sales drop by 40 percent in 2018 according to The Wall Street Journal. Apple’s market share, which has never been significant, is said to have halved from two percent to one percent over the year.

Finance is a huge issue for consumers in India, where aggressively priced by capable phones from Chinese companies like Xiaomi or OnePlus dominate the market in terms of sales volume. With the iPhone costing multiples more than top Android phones, flexible financing could help unlock more sales in India.

China, however, has long been a key revenue market for Apple so it figures that this strategy is happening there first.

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How to prepare for an investment apocalypse

Unlike 2000 and 2008, everyone in the startup world is expecting a crash to come at any moment, but few are taking concrete steps to prepare for it.

If you’re running a venture-backed startup, you should probably get on that. First, go read RIP Good Times from Sequoia to get a sense for how bad it can get, quickly. Then take a look at the checklist below. You don’t need to build a bomb shelter, yet, but adopting a bit of the prepper mentality now will pay dividends down the road.

Don’t wait, prepare

The first step in preparing for a coming downturn is making a plan for how you’d get to a point of sustainability. Many startups have been lulled into a false sense of confidence that profit is something they can figure out “later.” Keep in mind, it has to be done eventually and it’s easier to do when the broader economy isn’t crashing around you. There are two complicating factors to keep in mind.

You’ll have to do it with less revenue

In a downturn, business customers skip investing in capital equipment and new software. Likewise, consumer discretionary spending goes way down. The result is you’ll likely have less revenue than you do now. Wargame a variety of scenarios — what you’d do if you lost 20%, 50%, or 80% of your revenue, and what decisions would have to be taken to survive.

Sometimes capital can’t be had at any valuation

When a downturn comes, capital markets don’t soften, they seize. Depending on how bad a hypothetical financial crisis got, there’s a good chance that investors would close up their checkbooks and triage. If you aren’t one of your investor’s favorite portfolio companies, there’s a decent chance you may be left in the cold. Don’t even assume you’ll be able to close a down round. Fortunately, showing a plan with a clear path to profitability will allay investors concerns that you’ll need their capital indefinitely and make it more likely you’ll be able to raise.

Planning around these three realities — the need for profits, while experiencing dropping revenue, in a world where capital can’t be had at any valuation — is going to lead to unpleasant conclusions. A dramatically diminished business, major layoffs, and a decisive drop in morale are likely outcomes. Thankfully, you can take steps now to help soften the landing, or if you’re really successful, avoid it entirely.

Avoid “Growth at all Costs” Mentality

Getting acquisition costs under control will help you in two ways. First, it’ll lower your burn rate. Chasing growth for growth’s sake is always a short-sighted decision, but especially during the late part of the business cycle. Avoid this even if you’re VC is encouraging it. Second, by carefully analyzing the inputs to your acquisition cost, it will force you to examine the dynamics of your business. It gives you an opportunity to decide if a poorly performing channel or lackluster sales reps are actually smart investments. Even cutting your payback period from 12 months to nine will provide an increased measure of visibility and control.

Increase the hiring bar

Instagram took over the web with a team of a dozen. Craigslist is a pillar of the internet with a staff of 40 employees. WhatsApp supported hundreds of millions of daily users with fewer than 50 people. Chances are you need fewer people than you think.

In his new book, Scott Belsky shares an algorithm he used building Behance into a $100M company — automate, automate, then hire. His point was that founders should encourage teams to push hard on improving processes and other labor-saving tools before adding more FTEs.

Don’t institute a hiring freeze or take other actions that might spook the staff, but do send the message that new hires should be the last resort, not the first response to a challenge.

Preach discipline – build it into the culture

Founders often try to change spending habits, and in turn culture, when it’s too late. Is there a fair bit of business class flying among the executive team? Do your employees stretch your free dinner policy by staying just past the dinner hour to take advantage of free food? At most tech ventures, everyone is truly an owner. Try to help the entire team to internalize that they are spending their own money.

Get to know your potential acquirers

The week the market drops 50% is not the week to start a M&A conversation. You should be getting to know the five most likely buyers of your company, now. Find out who the decision makers at each of the companies are and build relationships. Make it a point to catch up with these people at conferences and even consider sending them regular updates about your company’s progress (but not too much data). You’re not running a formal sales process, but helping build up the internal desire to buy your company if the opportunity presents itself. It may not be the exit of your dreams, but it’s nice to have options if you need them.

Jettison expensive office space

If you’re coming to a T-juncture regarding office space, you may want to prioritize price and lease flexibility over quality and location. I remember one of our offices at my start-up was a twelve month lease with 6 months free. The landlords were desperate, and so were we!

Front-load revenue

If you’re in the kind of business that will support annual contracts, figure out a way to offer them. Pre-sell credits to consumers at a discount. More fundamentally, think about how you might be able to adjust your business model so you can get paid before you deliver services. Plenty of viable businesses are asphyxiated by delays in accounts receivable, don’t allow your ambitions to be thwarted by accounting.

Diversify your customer base

One lesson learned in the 2000 bubble was that startups that serve other startups tend to be hit hardest. It’s important to think about how a downturn will impact your customer base. If more than 30% of your revenue comes from one industry (perhaps start-ups!), or heaven help you, a single customer, start thinking about managing risk by diversifying your customer base.

Raise a pre-emptive round (AND DON’T SPEND IT)

Topping up your balance sheet at this point isn’t a bad idea, provided you have the discipline to treat it as a rainy day fund. Communicate this rationale to your investors. It’s also important to use this moment to reflect on valuation. An eye-popping valuation will feel good when you sign the term sheet, but it’s going to feel like a millstone if the economy turns, and the market for blue-chip tech stocks drops precipitously.

Consider venture debt

Many VCs discourage venture debt. They’ll say “if you need more money, we’ll backstop you.” The problem is when things ugly, they may not be there. Debt providers are a good way to extend the runway. The thing is that it’s best to raise debt capital when you don’t need it. Venture debt can add ⅓ to ½ of additional capital to some funding rounds with minimal dilution and relatively modest interest rates. Do note that when things get bad, some debt funds can get aggressive so do your homework before taking the notes.

Don’t Panic

It’s tough to predict the top of the market. CNN, Time, The Atlantic, The Wall Street Journal, and many others argued Facebook paying $1B for Instagram was a sure sign of a bubble — in 2012. Reputable commentators have claimed that we’re in a bubble every year since, see 2013, 2014, 2015, 2016, 2017, and 2018. Going into survival mode in any of those years would have been a serious mistake for most startups.

Still, we’re only two quarters away from marking the longest economic expansion in US history. The good times have got to end at some point. Venture capital is a hell of a drug and withdrawal can be painful. Keep in mind that there’s no correlation between how much a company raised and how well they did on the public markets. If you’re struggling to make your startup’s economics work, read up on dozens of “invisible unicorns” who show that you can get big without relying on outsized amounts of venture capital.

If your house is in order when the downturn hits, you may actually be able to grow through it. As unprepared competitors go out of business, you’ll find that talent is more plentiful and customer acquisition costs plummet. Some of the best companies have been founded and thrived in the worst of times — if you’re prepared.

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