Phil Haslett - Lyft’s Doing $2 Billion Dollars A Year In Revenue, And It’s Growing That Revenue 105% A Year. There Are Only 8 Companies Listed On The Stock Exchange In The U.S. With That Kind Of Profile | #149

Episode Summary

Executive Summary: The episode centers on Lyft’s IPO as a lens into how modern tech companies go public, why IPOs cluster in calm markets, and how private-market funding, dilution, lockups, and direct listings reshape investor outcomes. Phil Hazlitt argues that today’s unicorns stay private longer, raise far more capital, and often list with large losses but meaningful revenue growth, making traditional media criticism incomplete. The discussion broadens to alternative investments and the future of quasi-public private markets.

Main Topics: Lyft IPO and the 2019 tech IPO wave (Priority: 5/5): The conversation opens with Lyft’s public debut as a major tech-market event, with Phil arguing it could kick off a broader wave of IPOs, including Uber and Pinterest, as markets remained receptive. How IPOs work: process, pricing, and institutional allocation (Priority: 5/5): Phil explains the IPO as two linked events: issuing new shares to institutional investors, then beginning public trading. He walks through how companies prepare for up to two years, work with banks, and navigate quarterly scrutiny after listing. Direct listings versus traditional IPOs (Priority: 4/5): The episode compares the traditional underwritten IPO model to newer approaches such as Google’s auction-style attempt and Spotify’s direct listing, which reduce fees and limit banker control. Why modern unicorns are different from late-90s IPOs (Priority: 5/5): Phil emphasizes that today’s public offerings involve much larger, older companies that often have significant revenue but also large losses because they have raised far more private capital than prior generations. Dilution, ownership, and lockup periods (Priority: 5/5): The hosts discuss how repeated funding rounds dilute founders and early investors, and how 180-day lockups create artificial scarcity and volatility after an IPO by preventing insiders from selling immediately. Alternative investments and liquidity access (Priority: 4/5): The final third explores the growth of platforms like EquityZen, the importance of fee awareness and diversification, and the likely evolution toward more liquid private-market exchanges accessible to broader investors. EquityZen’s strategy and the future of private markets (Priority: 4/5): Phil outlines EquityZen’s next steps: expanding access beyond accredited investors, lowering minimums through automation, and offering diversified baskets of private-company exposure, plus possible expansion into other illiquid asset classes.

Key Arguments: IPOs cluster when volatility is low; calm markets make it easier for companies to price and launch successfully. A traditional IPO is not just a listing event but also a capital-raising event where new shares are sold mainly to institutions before public trading begins. Direct listings can eliminate much of the banker fee burden and are especially viable when a company already has brand awareness and does not need fresh capital. Modern unicorns are public later, at much higher valuations, with more revenue and growth but also larger losses because private capital markets have funded them extensively. Media focus on losses can be misleading if it ignores revenue growth and the scarcity of public companies with similar profiles. Dilution meaningfully reduces founders’ and early investors’ ownership even when their paper wealth rises. Lockups create short-term volatility because only a small fraction of shares is tradable initially. Private investments require investors to think hard about liquidity, fees, and diversification because access is improving but resale remains constrained. The private-markets industry is moving toward quasi-public exchanges where shares can trade more freely, but with stronger regulation than today. EquityZen believes the long-term opportunity lies in making illiquid assets easier to access, trade, and diversify for both accredited and eventually non-accredited investors.

Data Points: Lyft IPO valuation: $30 billion - Phil describes Lyft’s IPO as the biggest iconic tech IPO of 2019 and a culmination of private-market trends. Lyft capital raised in IPO: Over $2 billion - Used as an example of the scale of late-stage tech IPO financing. Banker fees: 5% to 7% - Typical underwriting fees cited as a key reason companies consider direct listings. Lyft pre-IPO R&D spending: $300 million in 2018 - Illustrates how much Lyft was investing in future technology such as autonomous vehicles. Lyft prior R&D spending: About $50 million to $60 million two years earlier - Shows rapid increase in spending ahead of the IPO. Lyft revenue growth: 105% annually - Phil uses this to argue Lyft’s high losses should be viewed alongside exceptional top-line growth. Lyft revenue: $2 billion a year - Frames Lyft as a meaningful revenue-generating business, not just a startup. Lyft total private capital raised: $7 billion - Used to explain why losses can be so large before going public. Public companies with similar profile: 8 - Phil says only eight U.S.-listed companies match Lyft-like revenue growth and profile. Lockup period: 180 days - Standard period during which insiders cannot sell post-IPO. EquityZen coverage: About 140 private tech companies - Phil describes the platform’s breadth of private-company coverage. Accredited investor threshold: $200,000 annual income or $1 million net worth - Defines the investor base currently eligible for EquityZen offerings. Box founder ownership example: 4.8% - Used to illustrate how dilution can leave founders with surprisingly small ownership stakes. Spotify direct listing timing: 2018 - Referenced as the recent high-profile example of a direct listing. DocuSign private tenure: 13 to 15 years - Example of how long modern companies can remain private before listing. Potential post-IPO downside example: 10% of shares tradable initially - Phil notes that in Lyft’s case only about one-tenth of the shares were actually trading at first, amplifying volatility.

Pivotal Quotes: "I kind of like to think about a bunch of boats leaving the harbor when the water's really flat." — Phil Hazlitt: Explaining why IPOs tend to cluster in low-volatility market environments. "The IPO is when Lyft, as a company, issues a bunch of new shares... and then... the stock that's now in the hands of the institutional traders actually starts trading." — Phil Hazlitt: Clarifying the distinction between the capital-raising issuance and the public market debut. "You want the cannibals, so reducing share count because you own more." — Meb Faber: Describing why buybacks and falling share count can be attractive for public-market investors.

Implications: The episode suggests modern investing is increasingly shaped by late-stage private capital, dilution, and liquidity engineering. For listeners, the key takeaway is to evaluate growth, ownership, and access to liquidity together, not just headline valuations or losses.