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How ordinary investors can grab their slice of the burgeoning shadow market for private tech companies

on October 28, 2019

“If you turned back the clock 15 years, and you wanted to invest in a high-growth business, you would go to the Nasdaq,” says Jared Carmel, co-founder of Manhattan Venture Partners, an investment fund that negotiates private stock sales.

“Today, that hyperbolic growth that you would normally see within the first 10  years of the company is behind them [when they go public].

For the traditional public market investor, whether you’re an institution or a retail investor, there has been little opportunity.

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The Big Money in Startups Comes From Investing Before the IPO

on October 23, 2019

“The overall level of interest in doing investments ahead of IPOs is insane—it’s through the roof,” says Andrea Walne, a partner at Manhattan Venture Partners LLC, which focuses on this market. “People feel as though they can lock in the same value as the VCs they admire and respect.” Her business card reads “Tomorrow’s IPOs Today,” with a trademark symbol above the phrase.

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Why is Boeing investing in Richard Branson’s rocket plane?

on October 10, 2019

Still, some analysts say the market is out there. Santosh Rao, the head of research at Manhattan Venture Partners, says that airline passengers already spend $407 billion on flights lasting more than 10 hours each year. If space companies can win 5% of that business, there’s a $20 billion market. But average fares for those flights are $2,500, so a ticket to ride on a spacecraft will need to fall drastically from current levels.

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SoftBank’s plans for second mega-fund hit by WeWork debacle

on October 7, 2019

“I think that it’s incredibly likely that they’ll postpone their plans for … fundraising efforts around Vision Fund 2,” said Andrea Lamari Walne, a Silicon Valley-based partner at Manhattan Venture Partners, which facilitates secondary transactions.

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The IPO market is rebelling against many of 2019’s money-losing unicorns. Here’s what’s scaring investors away — and what it means for the future.

on October 3, 2019

Slack and Spotify directly listed on the New York Stock Exchange in recent years, and the home-share company could inspire more unicorns to copy the tactic.

No matter the path to markets, firms are seeing greater public scrutiny toward their financial figures. The “honeymoon phase” of post-IPO pops “is going to go away,” Manhattan Venture Partners head of research Santosh Rao said.

Companies will need “a clear path to profitability” if they want to transition from private funding to public markets, he added, stating that private funding rounds will hinge more on bottom-line performance and projected public performance.

“Toward the later rounds, private investors will have to be more rational in what they’re willing to pay,” Rao said in an interview. “The company has to be able to withstand public market scrutiny, which will only get more intense after this round of IPOs.”

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WeWork IPO Filing Withdrawn as Roadshow Leads to a Dead End

on October 1, 2019

And for others like Santosh Rao, head of research at Manhattan Venture Partners, We Co. will likely have to start from scratch with their filing. He suggests the way the prospectus is set up currently is “absolutely a no-go.”

Indeed, for others like Manhattan Venture Partners’ Rao, the major investors in We (like JP Morgan and SoftBank) are somewhat stuck.

“I’m sure [the financing] can be renegotiated,” Rao told Fortune. “At this point, … I think that the bankers have invested a lot already, so they’re not going to abandon ship at this point, they will stay the course. It may be renegotiated, maybe on different terms, and maybe they have to pay a higher rate … but it’ll get done. It’s in the best interest of the banks.”

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‘The Cheap Money Era’: 2019’s IPOs Have Delivered Some Harsh Lessons to Venture Capital

on September 30, 2019

Indeed, those like Aggarwal believe many of these unicorns were “given a little bit of a free hand.” She maintains investors are going to be keeping a closer eye on private companies’ business plans and losses—and Santosh Rao, head of research at Manhattan Venture Partners, suggests that, especially after Uber’s and Lyft’s “hype and then bust,” investors have become very cautious. “Now they’re reading the fine print, they’re not just looking at the revenues,” he says.

“I think [private investors are] going to realize that there’s not going to be that big bump that you get at the IPO, there’s no guarantee,” Rao says. “Because some people come in late, either they should have a very long time horizon, or they think they’re going to get a big pop at the IPO, … but I think now you’ll see that the incremental investor in the later rounds will be more cautious, will know that the exits may not be rewarding, or the upside may be limited when they go out, so they’ll have to either wait or make sure that the company has a solid business model [and] that it can withstand the scrutiny of the public market that is going to be very intense.”

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Investors push back on IPOs with high valuations, murky path to profitability

on September 27, 2019

“The valuations are broken,” Santosh Rao, Managing Partner at IPO research firm Manhattan Venture Research told me. “What are the bankers thinking? Private valuations are way out of sync with what the public is willing to pay.”

The other major issue that is resurfacing: lack of profitability. Peloton, for example, lost $296 million on $915 million in revenues. It’s not clear how many years it will take to become profitable, part of a long string of companies that are very good at burning cash but not great at generating profits any time in the near future.

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Fitness startup Peloton’s shares fall 7% in market debut

on September 27, 2019

Investors and experts tracking recent IPOs said several startups thinking of going public in the next 12-18 months would be extremely wary of the recent backlash against loss-making firms and may end up staying private longer.

“Companies will start prioritizing what the market is telling them they’re worth in the secondary market,” said Andrea Lamari Walne, a Silicon Valley-based partner at merchant bank Manhattan Venture Partners.

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Fitness startup Peloton’s shares fall 7% in market debut

on September 27, 2019

“Companies will start prioritizing what the market is telling them they’re worth in the secondary market,” said Andrea Lamari Walne, a Silicon Valley-based partner at merchant bank Manhattan Venture Partners.

In secondary markets, investors buy and sell shares of a private company among themselves.

“Companies are taking a very hard look at secondary transactions as an indicator of the possible performance leading into whatever form of public company they’re going to be,” she added.

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