Archives: Media Mentions

Hedge fund puts $550m into technology stock option financing

January 14, 2020

Privately held start-ups have typically not been keen to see employees enter contracts backed by their shares and options. But Andrea Walne, a partner at Manhattan Venture Partners, said with more than a dozen groups now offering financing tied to start-up stocks and options, she hoped a marketplace would develop.  “Companies have been leaning far too much on their inability to provide financial and tax advice as a cop out to supporting employees with their stock options,” Mrs Walne said.

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Phase I of Sino-US Trade trade pact a done deal, Phase II likely after the elections: Santosh Rao

January 13, 2020

Santosh Rao of Manhattan Venture Partners, says both China and the US need the trade deal and it will be a step in the right direction for the global economy. In an interview with ETNOW, he said nothing can derail the US markets in 2020 unless a huge macro event takes place.

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What does the ‘WeWork effect’ mean for IPOs in 2020?

December 31, 2019

Stripe surpassed Airbnb as the most valuable private company in 2019 thanks to a valuation of $35 billion as of a September 2019 funding round. The company sits in the hot intersection of payments and software, working with companies such as Lyft, Uber and Glossier on payment processing, payouts to contractors and card issuing. E-commerce sales are picking up, and Stripe “does the back end for those kinds of businesses,” riding the rising tide of the online economy, said Santosh Rao, head of research and a partner at Manhattan Venture Partners.

The company has been expanding geographically and adding new enterprise capabilities as it goes up against companies such as PayPal Holdings Inc. PYPL, -0.31% , Square Inc. SQ, +1.20% and Adyen NV ADYEN, +0.00% . Though co-founder John Collison told CNBC earlier this year that the company had “no plans” for an immediate IPO, the company still cracks Rao’s short list. A Stripe spokesman reiterated in an email that there are “no plans” for the company to go public.

There are two other fintech names on Rao’s list: Klarna, which powers installment-payment options and nabbed a $1.4 billion valuation on the private market back in 2014, and Toast, which makes payments products for restaurants and fetched a $2.7 billion private valuation in early 2019.

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Uber and other unicorns flopped on Wall Street this year. Will IPOs rebound in 2020?

December 16, 2019

Investors are also betting that food delivery service Postmates, trading app Robinhood and mattress seller Casper could make waves if they debut on Wall Street.

“2020 could be a good year for the IPO market. There is a tremendous pipeline. IPOs are not broken but the bar has changed. Before there was no bar,” said Santosh Rao, head of research at Manhattan Venture Partners, in an interview with CNN Business.

“Investors are now more demanding and want sustainable business models,” he added.

Rao is bullish on the prospects for Airbnb and Postmates if they go public next year. He’s also keeping a close eye on Postmates rival DoorDash, payments company Stripe, Big Data giant Palantir and Chinese ridesharing firm Didi.

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Several unicorns flopped in 2019, will IPOs rebound next year?

December 16, 2019

Stakeholders are also confident that Postmates, a food delivery company and mattress seller Casper are in an excellent position to hit the ground running if they make it to Wall Street.

“2020 could be a good year for the IPO market. There is a tremendous pipeline. IPOs are not broken, but the bar has changed. Before there was no bar. Investors are now more demanding and want sustainable business models,” Santosh Rao, head of research at Manhattan Venture Partners, told CNN in an interview.

According to Rao, the stocks of Airbnb and Postmates are likely to maintain a bullish position, if they go public in 2020. DoorDash, a close rival of Postmates is also on Mr Rao’s radar as he remains confident that it will also be one of the listings to look out for in the coming year.

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Snap Inc. Shares Close Up 44% In Stock Market Debut

December 16, 2019

Alibaba raised $21.8 billion in its initial offering, but that total rose to $25 billion after underwriters also sold the so-called green shoe, extra shares companies make available at IPO time. Snap offered its underwriters the option to purchase up to an additional 30 million shares in its green shoe, and will disclose at a later date if they were sold.

Despite the share pop, Santosh Rao, head of research at Manhattan Venture Partners, said the sentiment from investors has been largely negative due to Snap’s expensive valuation compared with its revenue. The app launched in 2011, but generated no revenue until 2015. While advertising efforts have ramped up since, with total revenue reaching $404.5 million in 2016, .

Still, Snapchat is the first major venture-backed technology IPO of 2017, after the number of such offerings plummeted in 2016, and investors wanted to get in on it, he said.

“I think people just want to get in and say, ‘Hey, what’s the worst that can happen?,’” Rao said.

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In the months following listings, the stocks of leading companies languished

December 13, 2019

In the absence of easy access to state markets, however, some companies are debating whether to revert for fresh financing to private market investors because many risk capital and private equity investors are looking for deals.

Rashaun Williams, the general partner of the All-Star Fund at Manhattan Venture Partners, said that the private sector market currently receives trillions of dollars in dry powder to further support private companies.

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Uber, other unicorns flopped on Wall Street

December 13, 2019

Investors are also betting that food delivery service Postmates, trading app Robinhood and mattress seller Casper could make waves if they debut on Wall Street.

“2020 could be a good year for the IPO market. There is a tremendous pipeline. IPOs are not broken but the bar has changed. Before there was no bar,” said Santosh Rao, head of research at Manhattan Venture Partners, in an interview with CNN Business.

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Shelved 2019 US listings create a crowded field for next year

December 10, 2019

But in the absence of easy access to public markets, some companies are debating whether to go back to private market investors for fresh funding, given that many venture capital and private equity investors are searching for deals. “The private market is currently flushed with trillions of dollars of dry powder to continue funding private companies,” said Rashaun Williams, general partner of the All-Star Fund at Manhattan Venture Partners.

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Swelling U.S. IPO backlog points to crowded 2020 field

December 10, 2019

“The private market is currently flushed with trillions of dollars of dry powder to continue funding private companies,” said Rashaun Williams, general partner of the All-Star Fund at Manhattan Venture Partners.

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As Lyft IPO nears, traders wonder whether the numbers match the hype

December 3, 2019

Have the fundamentals improved that much in a few months? Santosh Rao, who evaluates IPOs at Manhattan Venture Partners, says the improvements have been only marginal. “Fundamentals did pick up in the fourth quarter. They are getting more efficient with the drivers and the incentives. But there is a little bit of hype too. You see the squeeze, demand is way above supply.”

Like many on the Street, Rao is trying to justify the nose-bleed prices Lyft is likely to command.

The biggest problem are the huge losses. The company had $2.2 billion in revenue last year with losses of $911 million.

And this is where the Wall Street guys really get into “magical thinking.” Rao explained the reasoning: “Revenues grew 100 percent in 2018, but losses only grew about 40 percent. In that sense, the margins are improving. The sequential progression is improving.”

Rao doesn‘t know when Lyft will make money, but he insists they have bought themselves a lot of time. “The cash burn was $350 million in 2018, but they have $2 billion in the bank, and they are going to raise another $2.5 billion or so in the IPO. So they have a little room. $4.5 billion divided by $350 million implies they have 10 years.”

When pressed on all this “magical thinking,” Rao admits, “A lot of investors just want growth at any price.”

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Lyft steering smoother ride to profitability by 2021 than Uber: analysts

November 28, 2019

Lyft and Uber have two distinct business models that will impact the way forward, industry experts said. Lyft is focusing on ride-hailing in North America, whereas Uber is a global company with several businesses including food delivery and services for truck drivers.

“Lyft has a clear, defined path to profitability,” Santosh Rao, head of research at Manhattan Venture Partners, said in an interview.

Uber, on the other hand, has “too many moving parts,” he said, adding that the ride-hailing business is profitable but the other ventures are weighing Uber down.

Even so, Rao said he thinks both companies will reach their profitability goals around 2021.

“As long as there is a path to profitability, a few months here and there does not matter,” he said.

Fourth-quarter earnings will be key for Lyft since stock compensation and IPO lockup period expenses will be behind them, Rao said. While Lyft’s lockup period expired Aug. 19, Uber’s ended Nov. 6.

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Alibaba’s Hong Kong Debut Off To A Strong Start According To Pros

November 28, 2019

Alibaba’s successful debut in Hong Kong “validates” not only its business model but validates the ability of the Hong Kong exchange to offer sufficient liquidity, early Alibaba investor Santosh Rao of Manhattan Venture Partners said Tuesday on CNBC’s “Worldwide Exchange.”

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Fitness Startup Peloton‘s Shares Fall in Market Debut

November 26, 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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Today is investing in a startup before it goes public.

November 11, 2019

“The general level of interest in making investments before the IPOs is crazy, it’s in the clouds,” says Andrea Walne, a partner at Manhattan Venture Partners.

Entering before an IPO helps an investor build a large stake more easily In a traditional IPO, companies usually sell a limited amount of shares and investment banks decide who gets it. 

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Lyft offers up new perk-driven membership called Lyft Pink

November 1, 2019

As most ConsumerAffairs readers know, ridesharing services have been on a rollercoaster ride for the last few years. One market observer thinks that this move might be just the thing Lyft needs to get it off that roller coaster.

“This is in line with the company’s original mission to replace car ownership with car renting/sharing,” Santosh Rao, Head of Research at Manhattan Venture Partners, told ConsumerAffairs.

“With a ubiquitous, end-to-end inter modal transportation offering, Lyft believes that it can usher in a world where people will not need to own a car and all the hassles that go with it — cost being the biggest one — and focus more on living their lives more fully.”

It’s too early to tell if and how much Pink might affect Lyft’s bottom line, but the signs are pointing in a positive direction for the company.

“With three strong sequential quarters right off the gate, a rational pricing environment, strong unit economics in its core market, and compelling operating leverage in the model with a clear path to profitability, we remain bullish on the Lyft story,” Rao said.

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

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

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?

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

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.

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

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

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

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

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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