Cue the Sun
I have a tiny correction for my Substack subscribers: yesterday, I made a typo in Live Nation’s ticker symbol, which should have read $LYV instead of $LYN.
Speaking of the public markets, the carsharing company Turo announced last week that it wouldn’t be moving forward with IPO plans:
Turo’s decision to end its IPO plans comes just one day after peer-to-peer car-sharing company Getaround shut down its U.S. operations. Like Turo, Getaround began life as a venture-backed company. Unlike Turo, Getaround made the leap back onto the public market in 2022 via a merger with a special purpose acquisition company.
Turo is still operating in the United States — and elsewhere. As of September 2024, the company reported it had 150,000 active hosts globally, with 350,000 active vehicle listings and 3.5 million active guests. The company also operates in Canada, Australia, and France.
Turo CEO Andre Haddad said in an emailed statement the board “decided now is not the right time for Turo to pursue a public offering.”
Haddad noted Turo’s strong performance with revenue growing $150 million in 2020 to $958 million in 2024 and hinted at the company’s investment plans for the future.
I happened to be in New Orleans on New Year’s Eve/Day when a Turo-rented Ford F-150 Lightning pickup truck killed and injured people on Bourbon Street in a terrorist attack.
Of course, the “any press is good press” saying didn’t apply there for Turo.
Crunchbase today asked, “Who’s Next?” after Turo’s about-face:
With Turo’s departure from the IPO pipeline, market watchers face a dismally thin pipeline of venture-backed tech companies that actually have filed an IPO prospectus.
True, there are several that have disclosed confidential filings for a public offering. This includes AI chip company Cerebras and business travel and expense platform Navan. These are both high-valuation private companies currently, and would generate plenty of buzz with their debuts.
What we aren’t seeing, however, are public filings from IPO candidates, laying out their financial performance, risk factors and visions for growth.
On a lighter note, Matt Levine introduced me to the terms “zombie unicorn” and “unicorpse” by directing me to Katie Roof’s Bloomberg article:
Many startups, though, were built to chase growth with little concern for near-term profitability in their early years, assuming they could continue fundraising at increasing valuations. In many cases, that formula no longer works. Fewer than 30% of the unicorns from 2021 have raised financing in the past three years, according to data provided by Carta Inc., a financial technology company working with startups. Of those, almost half have done so-called down rounds, where investors value their companies at lower levels than they’d received in the past.
Celebrity video greeting service Cameo, for example, once had a valuation of $1 billion, but it raised money last year at a 90% discount, according to a person familiar with the matter who asked not to be named when discussing confidential information. Financial tech company Ramp has raised two sizable rounds since early 2022 at valuations below the $8 billion it got three years ago.
In the best-case scenarios, startups can use capital from down rounds to recover their footing. Contractor software business ServiceTitan Inc., for example, raised money with unfavorable financial terms in 2022, only to exceed that value when it went public in 2024. It now has a market cap of $9.4 billion, in line with its peak private valuation of $9.5 billion in 2021.
But job cuts and down rounds can also kick off a vicious cycle. Startups are generally selling investors on stories about momentum, which becomes harder to do once they’ve decided to trade their ambition for fiscal discipline. For employees, a major financial upside of a startup gig is the chance to earn equity; once a company’s value starts dropping, workers with other options tend to start leaving.
A company that is public and whose ticket symbol I won’t mess up is AppLovin ($APP).
I own zero shares of AppLovin, and because of that, I am pretty stupid.
Okay, I’m not stupid, but I’m at least lazy.
I meant to learn more about the company for at least a year.
The company name sounds silly, but its business is anything but.
Meanwhile, I have owned many shares of The Trade Desk ($TTD) since May 2019.
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And then last Wednesday late afternoon happened:
Investors in The Trade Desk were seeing red on Thursday as the stock plunged, but they were also green with envy.
As shares of The Trade Desk tumbled more than 30%, fellow adtech titan AppLovin was soaring on its earnings report, jumping more than 20% on its fourth-quarter results as it smashed estimates once again.
For The Trade Desk shareholders, it was clearly a disappointing turn of events, and seeing AppLovin’s shares soar only added insult to injury, as AppLovin has surpassed The Trade Desk as the largest adtech company by market cap.
From this month’s AppLovin earnings call:
Where we once focused on gaming, we’re now positioning ourselves to serve the entire global advertising economy. Importantly, the users engaging with our network aren’t just shifting existing purchases. They’re discovering new products while playing the games they love, generating truly incremental demand. By enabling these discoveries, we’re expanding the global economy for consumers and advertisers alike.
Demand from advertisers wanting to join our platform is high. Currently, our systems are still being fully developed and lack the full self-service capabilities needed to handle growth at scale. Our priority this year is to develop and roll out more automated tools to allow countless new businesses to tap into our platform. In line with this expanding focus on advertising, we’ve been assessing how best to invest our resources to serve the needs of a global client base.
Seven years ago, we began acquiring gaming studios to help train our earliest machine learning models, an invaluable step in shaping the AI that underpins our AXON platform. However, we’ve never been a game developer at heart. We have immense respect for the creativity it takes to build games, including from teams in our studios. Today, we’re announcing we’ve signed an exclusive term sheet to sell all of our apps business.
Matt will share further details, but I want to emphasize to our teams, you’ll soon be part of a company that specializes in and champions game development. While it’s bittersweet to part ways, we’re excited for your future and immensely grateful for your role in getting us to where we are today. Finally, I’d like to highlight our favorite metric going forward, adjusted EBITDA per employee. As we’re transitioning to a pure advertising platform, our focus will be on productivity, automation, and building lean, high-impact teams.
In Q4, we had approximately $3 million in run rate adjusted EBITDA per employee in our advertising business, and we expect that number to rise as we refine processes and scale our business. This metric underscores our commitment to operational excellence. Thank you for your continued support and partnership as we enter this next phase of growth. I’m more confident than ever that we’re building a platform with the potential to transform global marketing.
I’m no adtech expert, but repositioning a company’s mission to “serve the entire global advertising economy” sounds fascinating.
I still own zero AppLovin shares, but at least $APP is an easy ticker symbol to remember if and when I buy them.
Watch “The Truman Show” (1998):
[In the control room, Christof grabs a headset and a monitor to see Truman standing in front of the door to the real world]
Christof: Truman.
[Truman hears Christof’s booming voice coming from the sky]
Christof: You can speak. I can hear you.
Truman Burbank: Who are you?
Christof: I am the creator… of a television show that gives hope and joy and inspiration to millions.
Truman Burbank: Then who am I?
Christof: You’re the star.
Truman Burbank: Was nothing real?
Christof: *You* were real. That’s what made you so good to watch.
[Truman turns back to face the door]
Christof: Listen to me, Truman. There’s no more truth out there than there is in the world I created for you. The same lies. The same deceit. But in my world, you have nothing to fear. I know you better than you know yourself.
Truman Burbank: [insulted] You never had a camera in my head!
Christof: You’re afraid. That’s why you can’t leave. It’s okay, Truman. I understand. I have been watching you your whole life. I was watching when you were born. I was watching when you took your first step. I watched you on your first day of school.
[chuckles]
Christof: The episode where you lost your first tooth.
[smiles]
Christof: You can’t leave, Truman. You belong here… with me.
