Uber's Terrible, Horrible, No Good, Very Bad IPOBy Rebecca Morrison, published on May 20, 2019
In this installment of Lola.com's Weekly Financial Digest, we share articles about the 2019 fundraising environment, spend analysis, Uber's IPO and more
Welcome to another weekly corporate finance rundown!
Each week, we find the best content in corporate finance -- the things you may have missed -- and give you a quick summary of what’s happening.
This week, the content we’ve found covers Uber’s terrible, horrible, no good, very bad IPO. We also found content that you’ll want to read about fundraising, company valuations, spend analyses, and so much more.
Get to it!
How Uber Makes — And Loses — Money
Uber’s recent IPO didn’t go so well. It was one of the worst performing IPOs in history. That’s partially because of the crazy amount of money they burn through, but it’s also partially because the data from their S-1, which was filed prior to their IPO, wasn’t great.
CB Insights dug into that S-1 to try and figure out how Uber loses money, and why that’s affecting their IPO. The biggest drivers of loss for them aren’t easy to fix, which might suggest that profitability is a pipe dream.
Selecting the Right Valuation Method for Pre-IPO Startups
Figuring out your company’s valuation is an incredibly complex process. Even for early stage companies, the process is rarely simple. Ultimately, it’s going to come down to whatever your investors value you at, but you have to give them a starting point for negotiations.
When you’re a late stage startup, the valuation process can become even more difficult. To figure it out, there are three areas you need to focus on:
- Comparable public companies: are there any post-IPO companies who are competitors of yours?
- Comparable precedent transactions: what past acquisitions fit your company’s profile?
- Discounted cash flow: forecast your cash flow for the next 5 years, then discount it based on the cost of capital.
This is one of the most in-depth pieces we’ve found on pre-IPO valuation. Don’t miss it.
The Fundraising Environment in 2019 - Three Major Shifts
Anytime Tom Tunguz writes something, we usually listen. In this piece, he talks about how venture has changed over the years. It comes down to changes along three dimensions: diversity of product offering, pricing sophistication, and efficiency of investment processes.
This has lead to a huge amount of fundraising opportunities for startups. Even a seed round can have at least five different options for founders: friends & family, angel, pre-seed, seed, and post-seed.
If you think that’s a lot, take a look at the fundraising options for startups who have figured out product-market fit. It’s endless.
How to Do Spend Analysis in 6 Steps
Do you know where your company’s money goes? You might have a rough idea, but really nailing it down is a tougher task. Spendesk has a good way to help you figure it out: conduct a spend analysis.
A spend analysis is about more than just figuring out where your company’s money is being spent. You also have to be able to make actionable decisions based on what you uncover.
This task is a pretty big undertaking so I won’t summarize it here. Read the full piece from Spendesk if it sounds like this is something your company needs.
Boosting the Strategic Value of Your Data
I’m going to take a guess here and say that 99.9% of the people reading this are already using data and know the value of it. But, did you know there’s ways you can boost the strategic value of your financial data? Financial Management Magazine has a few ways to do this.
First, start by looking forward, instead of backward at your data. Most people look at past data and make future decisions based on it. A better approach is to look at your most recent data (even real time data) and make decisions based on that.
There’s a lot to learn from this article.
Companies That Do Well Also Do Good
Is there a correlation between high performing companies and companies that have a powerful social mission? CFO.com says yes.
To come to this conclusion, the author of this piece looked at public companies that pay workers fairly, treat customers well and protect their privacy, produce quality products, minimize their environmental impact, give back to the community, and commit to ethical and diverse leadership.
The result? Companies that matched that description outperformed other public companies by 12.6% cumulative TSR.
This just proves that if your company hasn’t jumped on the “do good” train, it might be time to start.
When ROI Isn't So Cut & Dry
Pop-quiz: What’s the ROI equation? If you had an answer for that, great. But, it was actually a trick question. Finding your ROI isn’t always an easy task to accomplish.
It comes down to the fact that not all benefits can easily be measured. For example, how can you measure efficiency gains? Or, what about turnover reduction? Those are much more difficult to measure with a strict ROI approach.
A strict ROI approach risks missing the full business value of acquiring tools and services. This is why some finance execs also think of ROI as “return on initiative.”
If ROI is your thing (it should be) take some time to read this.
That’s everything I’ve got for you this week. But I’m curious, what did you read last week? Find Lola on Twitter and let us know!