WSJ Uber and Eight Other Once-Small Startups Are Now Worth a Combined $250 Billion
lunes, 13 de mayo de 2019

The ride-hailing firm and other ‘unicorns’ such as Airbnb and Pinterest were growing at the same time as the economy was rocked by the financial crisis

  • WSJ

It may have been one of the worst times for the American economy, but the years right after the financial crisis were among the best ever for startup investments.

Uber Technologies Inc. UBER -1.11% is set on Friday to make its public-market debut after pricing its shares at $45 apiece, according to people familiar with the matter, giving it a valuation of about $82 billion. The IPO ends a decadelong run as a privately held company that began in the recession.

It is one of a number of so-called “unicorns”-startups valued at over $1 billion-that were founded when the economy was reeling and that together make up perhaps the most lucrative startup vintage since the dot-com boom days.

Uber and the forerunner of group-messaging company Slack Technologies Inc. were founded in 2009, along with mobile-payments firm Square Inc. The year prior birthed home-sharing service Airbnb Inc. and cloud platform Twilio Inc. In 2010, as the financial crisis ebbed, came another payments firm, Stripe Inc., image search company Pinterest Inc. and office-sharing startup WeWork Cos., while Uber rival Lyft Inc. raised its first institutional capital.

Those nine companies alone are valued together at over $250 billion now, using their most recent private or public valuation. They have either made their public debuts or are expected to do so in the next year, delivering their earliest investors and founders once-in-a-lifetime returns.

Investors who made early bets on some of those companies say the era’s startups were fueled by the rise of the smartphone, which put small computers in billions of people’s pockets, and the advent of cloud computing, which made it cheaper to start companies. Ultralow interest rates drove capital into riskier assets. And the recession also washed away “wantrepreneurs,” the status-seekers who aspire to be entrepreneurs but aren’t as dedicated to their startups.

“When the tide rolls out, all that’s left are the batshit crazy people that want to start a company under any circumstances, and those are the people you want to invest in,” said Rob Hayes, a venture capitalist at First Round Capital who invested $510,000 in Uber’s seed financing round for shares that would be worth $2.5 billion at the IPO price. First Round sold some shares last year to a group of investors led by SoftBank Group Corp.

Mr. Hayes met Uber co-founder Garrett Camp and then-Chief Executive Ryan Graves in 2010 and negotiated the investment deal while vacationing with his family on the Oregon coast over the July 4th holiday weekend. At the time, the company was called UberCab and was only a service for hailing limousines and other “black cars,” but Mr. Hayes said he had a hunch it would do bigger things.

Rick Heitzmann, who leads venture firm FirstMark Capital, said he got lucky when he met the co-founders of Pinterest while judging a New York University business-plan competition in 2009. He was impressed that one of them, Pinterest’s current CEO Ben Silbermann, had left a stable job at Google two months after the Lehman Brothers bankruptcy plunged the banking system into chaos.

“Only the true believers were out there quitting their jobs to pursue their dreams,” Mr. Heitzmann said. The shares he received from his first $250,000 check in Pinterest’s seed round were worth $399 million at Pinterest’s April IPO price, he said.

The entrepreneurs during that era had quite the tailwind, said Naval Ravikant, co-founder of funding platform AngelList, who invested $25,000 in Uber’s seed round. Apple Inc. introduced the iPhone in 2007, and the App Store the following year. Smartphones featuring broadband speeds, GPS chips for location and an endless library of apps revolutionized how consumers interact with technology. That wave was too big to be broken by the recession, he said, and the companies riding it benefited tremendously.

Without such technology, Uber wouldn’t be possible. Pressing a button on a smartphone to call a car to an exact location, following the driver on a map, paying automatically-these features are easy to take for granted now, Mr. Hayes said. But he said when he tried Uber it was a magical experience, especially in San Francisco where it can be hard to hail a cab.

Twilio helped make that experience possible by powering Uber’s text notifications and driver-to-passenger calls. Handling communications for the explosion of apps created by the smartphone revolution, Twilio itself has risen to a $16 billion market capitalization.

Jeff Lawson, its chief executive, said he and his two co-founders needed lots of conviction to believe in their company when they launched it in 2008. No investors would give them capital that summer and the three co-founders had to rely on $10,000 each from their parents, he said.

A far bigger cloud service was also catching on with startups: Amazon Web Services, which was launched by Amazon.com Inc. in 2006. Suddenly tech founders no longer needed capital to buy expensive servers and rent their own space inside data centers.

Using Amazon’s servers instead made it quicker and easier for tech startups to turn ideas into reality, said Michael Seibel, who today runs the startup accelerator Y Combinator. He met Airbnb’s co-founders early on when they sought his advice, later introducing them to YC, where Airbnb was incubated. Airbnb, which used Amazon’s cloud servers early on, focused on a key feature that Mr. Seibel said separated it from rivals at the time: facilitating payments between guests and hosts.

The recession also spawned Bitcoin in 2009 and the cryptocurrency boom, leading to a whole class of startups, including Coinbase, which was last valued at $8 billion. Bitcoin’s market value is around $100 billion.

For venture investors, that period was also fruitful. With fewer firms and less capital competing for deals, valuations were significantly lower and investors had the upper hand compared with today. In the years since, near-zero interest rates have encouraged investors including pension and mutual funds to pour more capital into riskier asset classes like venture capital and even directly into startups, fueling higher valuations.

Uber was valued at roughly $5 million in its seed round including the investment. A seed deal today might value a tech startup at three times that price, said Alfred Lin, a partner at Sequoia Capital who made a personal investment in Uber’s seed round and who sits on Airbnb’s board. Three times the price means one third the return.

At the IPO price, the shares from Mr. Lin’s $30,000 Uber seed investment would be worth about $150 million.

By Rolfe Winkler


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