006 – Expectations vs. Reality
DoorDash, Honey, and 1Password serve as the backdrop for a conversation about how late-stage investor expectations will shift as direct listings become more popular, why themes matter in investing, and how bootstrapped companies can raise demand for secondary markets.
Top 3 Takeaways:
- Traditionally, investors look for an IPO “pop” to compensate for the risk of participating. As direct listings become more popular, the expectations for investors that invest in the round ahead of a direct listing will need to change.
- Theme matters in investing. Sometimes just being in the right theme at the right time can produce favorable outcomes. Currently, fintech is on fire.
- If companies can self-fund and become profitable without raising outside money, investor demand to get access will still remain and may increase the popularity of the secondary markets.
- [0:50] Is DoorDash a good candidate for a direct listing?
- [5:30] Companies that opt for direct listings may still need to raise outside capital to sustain their business, especially in the case of DoorDash.
- [6:09] Traditionally, investors are looking for an IPO “pop,” but expectations will have to change if direct listings become more popular. So, what type of return should late-stage investors expect?
- [11:30] Companies that approach a direct listing will need to build research support to inform the public markets. More on this in a future episode of Liquidity.
- [12:25] Paypal buys Honey for $4b. They had 17m MAUs ($235/user), WhatsApp had ~45M users, and Facebook generates $25-$30 per user per year.
- [15:00] Themes matter in investing, and fintech is currently on fire.
- [16:09] 1Password took outside money ($200M from Accel) after being self-funded for 14 years.