Big tech startups bewitched private investors, but have left Wall Street bothered and bewildered
By Eliot Brown May 25, 2019 12:00 a.m. ET Illustration: Daria Kirpach Silicon Valley is pumping out giant startups with expansive visions, but Wall Street isn’t sold.
Uber investors paid an average of $48.77 a share between December 2015 and October 2018 for a total of $8.6 billion—one of the largest fundraising hauls ever for a startup. Uber, which went public two weeks ago, now trades at about $40 a share. With Uber and Lyft, “there’s no profitability within sight even with binoculars and that’s been a tough pill for investors to swallow,” said Daniel Ives, a tech analyst at Wedbush Securities.Over the past half-decade, venture investors have pumped tens of billions of dollars into the largest startups, betting that stock-market investors would look beyond companies’ heavy losses and embrace their visions of industry disruption—a position that so far looks increasingly dissonant.
Public investors tend to look at projections for cash and earnings. They’re more inclined to fill their portfolio with financially healthy companies that will perform well in the foreseeable future. Despite the rough market debuts of some startups, venture capitalists point out that many of the companies are still wild successes for early investors.
“One of the hardest concepts for people in a public-company realm is where startup valuations come from,” said Eric Ries, a Bay Area entrepreneur who is CEO of the Long Term Stock Exchange. Mr. Ries has positioned his venture-capital-backed exchange—approved by the Securities and Exchange Commission the morning of the Uber IPO—as a way to let companies’ visions play a greater role, as longer-term investors would be more amenable to spending on experiments and new business lines.
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