Lyft and Uber. Two unicorns valued at $15 billion and $120 billion, respectively. 2019 is the year where both of them could make their public debut with a forthcoming IPO. Through an initial public offering, the owners could sell a portion of the firm to public investors, essentially raising money that could help these two ride-sharing companies expand towards new markets, like autonomous cars and bike sharing. The process is more complex than it seems, though.
Prior to the IPO, the companies need to negotiate a sale of their stock to an investment bank that acts as an underwriter for the offering. We’ve seen this before, but given the fact that currently the volume of IPOs has soared to its highest level since the dotcom bubble in 2000, is it still the best option to make an investment in these giants (essentially a drop in the ocean), or should you look for other opportunities? For example, TapJets on-demand private jet app (Uber for private jets) already announced its security token offering (STO). Much like the giants of the Internet, the company is profitable, has a real business model, paying customers, growing sales, and the potential to become a unicorn in its space is going public, choosing cryptocurrency instead of stock. Do you want to find out why and if this could be a better deal than any upcoming IPO this year? I’m covering all of these in the following article. Keep reading!
Even if both companies showed their interest to go public, they still need to receive feedback from the US Securities and Exchange Commission (SEC) on their filings for IPOs.
Both companies are innovative and disrupt the space. There’s no doubt about that. But on the profit growth side, which defines if investors would make a profit too, there is a huge amount of skepticism. Uber had its up and downs recently: allegations of sexual harassment within the company, an exodus of C-level talent from the company, legal battles with Alphabet, Google’s parent company, and after years of activity it’s still showing a complete and utter lack of profits! Despite all of these facts, Uber received valuation proposals from Goldman Sachs and Morgan Stanley, which often happens before a company officially hires a bank to underwrite its offering.
On the other side, we can’t know for sure, but Alphabet (which was one of Uber’s first big investors) already made a big investment into Uber’s rival company, Lyft. It can be interpreted as “moving on” after a wrong financial decision in the first known ride-sharing app. Investors may now be tempted to leave Uber stock by the curb and buy into Lyft instead. That’s why 2019 could be seen as a race for these two private companies to go public.
Before you’re thinking about picking sides in this battle, you should know that you need to be an accredited investor and be able to make a minimum deposit of $100,000 to $500,000 just to get a seat at the table. Not really for everyone, right?
If history has taught us anything, it’s that those who adapt will survive, and those who fight tooth and nail for the status quo will flounder when the world inevitably changes. TapJets, which is as similar as it can be to Lyft and Uber, is not going for an IPO. The company elected to take an STO route, which involves the sale of tokens that represent common stock and records on the blockchain, as opposed to the traditional stock shares managed by banks or exchanges.
Just like Uber, Lyft, Airbnb,and eBay, TapJets is a two-sided marketplace built around network effects and transaction fees. The proof of their successful business model is a two-year-old product that attracted thousands of customers and millions in sales. And to stay competitive and innovative in a complex industry they utilize the blockchain as part of their commitment to transparency and safety for each booked flight.
The traditional way of building a two-sided marketplace business involves using equity financing to create a marketplace. Funds are raised from founders, accredited investors, and institutions with one goal: become profitable as soon as possible. With the huge amount of money, Uber and Lyft rewarded employees with equity and early marketplace participants with zero transactions fees with the hope that, at some point, they will be able to increase the fees as their marketplace increases in scale and monopoly power. The growth value was expected from the appreciation of the equity because of the future cash flows from these transaction fees. Which hasn’t happened after years of activity!
The process is completely different using crypto tokens. An STO financing model allows the company to accept money from anyone around the world. In the case of TapJets, investments are available to accredited investors in the US, while non-US investors are free to participate in strict compliance with Regulation S. Unlike the ICO (initial coin offering) model of the past, all these individual would become real shareholders of the company after making an investment, with either fiat or cryptocurrency, which will be marked as a blockchain recorded security. The growth value in this situation is expected from the increasing value of the token, which is tied to matching as many willing buyers and sellers as possible. Transaction fees are out of the equation. In the crypto token version of a two-sided business, the marketplace value is given by all its participants, not only from the ones willing to pay. “Power to the people!” is taken quite literally in this case.
Could Lyft or Uber have an STO, though? Well, the short answer is: it couldn’t happen even if they wanted to. Pretending that a token issuance (an STO) could happen. This action would dilute the current stock price or, even worse, force them to split the company into multiple entities, thereby damaging their reputation with the current shareholders. It’s hard to believe this would ever happen.
After more than three years of running their business and facing continued growth in sales and clients, TapJets is ready to offer investors a chance to invest in their success. While venture-funded startups are struggling to reach their revenue, product maturity, and financial history after their initial funding, TapJets is opening its gates at a more advanced stage of their business, which implies less risk for its investors. Would you put your money into an early-stage startup aiming towards an idea, or into a company with a proven team, supporters, and a working product?
“Our ability to book a private jet faster than you can get an Uber ride is simply revolutionary. We leverage Artificial Intelligence, data analytics, and predictive modeling to connect our clients to jets that are ready to take off,” from Eugene Kesselman, CEO of TapJets.
An idea is not enough anymore. Only the tech startups that have the right financials will be ripe for tokenization. ICOs might have been a revolution in non-dilutive capital formation, but most ICOs have not been successful in producing any general business benefits. STOs can enable innovative companies to expand to their true potential. Uber and Lyft’s early investing stages have been gone for a long time, and joining their IPO doesn’t look profitable for any type of investment. When looking for other opportunities in the future, STOs could be the right choice if you believe in a digital future!