One way to look at Uber’s upcoming mega-IPO this week is by comparing the two largest investors in Uber with top holders of other unicorn IPOs. With an aggregate position of roughly $18 billion at the upper range of Uber’s current price target, the combined Uber holdings of SoftBank and Benchmark Capital could be worth more than the combined holdings of the largest holders of Lyft, Pinterest, and Zoom Video. In fact, Uber executives could hold nearly 2x more in equity than executives of Lyft, Pinterest and Zoom. SoftBank, the titan investor in the unicorn asset class, should benefit as the demand for ridesharing/mobility services continues to grow. In fact, a successful Uber IPO could validate the significant position SoftBank has taken in ridesharing/mobility companies around the world. No matter how you slice it, Uber’s IPO should be a big one of for VC investors, company founders and the innovation economy as a whole.
Many investors besides SoftBank gained access to Uber during its life in the private market. While the Japanese conglomerate is the single-largest individual holder of Uber, other investors have significant stakes in the ridesharing pioneer. As of the most recent pricing range, the largest Uber investors by ownership could exit with nearly $30 billion. Note, that figure only includes investors who were required to disclose positions. Over 30 percent of the company’s value is held by other, non-disclosing participants.
Going forward, a key question is whether these large investors will reinvest in other promising private companies once they sell their positions once the lock-up period expires. We won’t know that answer for a while, but what we do know is that the Uber IPO could replenish VCs dry powder and set the stage for another round of blockbuster companies in the innovation economy. As we have said, the IPOs so far this year equate to roughly 10 percent of the global unicorn collective valuation. In 2018, the median multiple on invested capital (MOIC) for newly minted unicorns was 5.3x. When taken together, if the $30 billion is reinvested at a similar MOIC, then the private tech market would see a significant net gain in valuation 12 months down the road, all else equal.
SoftBank has made headlines with the immense amount of capital it raised over the last few years. Despite gathering nearly $100 billion for its Vision Fund in 2017, SoftBank has already deployed over 70 percent of this capital, according to CEO Masayoshi Son. In the process, SoftBank has clearly set a new threshold in VC funding. Based on disclosed capital deployments, the Vision Fund currently is investing in some of the world’s most exciting companies at a rate of $2.7 billion per month. This pace even accelerated in 2019, with $20 billion committed during the course of Q1.
SoftBank sees a future in which ridesharing, last-mile delivery, and autonomous vehicles dominate transportation. Leading up to the Uber IPO, SoftBank participated in an additional $1.2 billion round for Uber’s Autonomous Vehicle division. Just Tuesday this week, the company joined Honda and T. Rowe in a $1.15 billion follow-on round in GM’s Cruise, valuing the unit at $19 billion. In April, the company committed $1 billion to Rappi, a South American on-demand delivery service. SoftBank also has investments in Grab, DiDi Chuxing, Ola, Doordash, Nuro, Flexport, and Getaround, – to name a few in transportation. SoftBank embodies the abundance of capital that private tech companies have increasingly benefitted from over the past few years. The company is reportedly in the process of raising a second Vision Fund.
With the upcoming exits and the potential reinvestment of IPO gains, the innovation economy and private markets seem well-positioned to continue the exciting trajectory of the past few years. Uber may be the first Vision Fund company to hit public markets on Friday. Will it be a bellwether of events to come?
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