Peloton—providers of Silicon Valley’s favorite virtual spin class—had its IPO yesterday, and investors aren't feeling the love.
As of Thursday afternoon, the stock is trading at $27, already down from its IPO price of $29. With this drop, Peloton joins the ranks of unprofitable startups that have IPO’d to less-than-stellar results this year.
Uber had an IPO price of $45 a share in May. As of Thursday, it trades around $31.50. Lyft priced its IPO at $72 a share in March. As of Thursday, it trades around $41.90. Slack entered the market in June at $26 a share, and as of Thursday is down to around $22.60.
The common thread among all of these companies is that, while their large growth numbers and massive addressable markets made them darlings in the venture capital world, their lack of profitability devalues them in the eyes of investors on the public market.
The fact that there is some misalignment of value models between venture capitalists in the private market and stock traders on the public market isn’t news by any means, but exactly how misaligned the two markets are is still uncertain. Peloton provides an interesting test. Will the stock continue its nosedive, or will its differentiating attributes prevent the long-term spiral we’ve seen in other tech IPOs this year?
By differentiating attributes, we mean Peloton’s financials, which have some fundamental differences from the afore mentioned startups. For example, only 0.65% of Peloton’s over 510,000 users discontinue service each month. Uber, for comparison, has had monthly churn rates as high at 13%. Peloton is also a hardware company in some respects, differentiating it from the more pure software plays we’ve seen this year.
While the results aren’t great for Peloton so far, it’s differences from other pure software companies—and the way public traders respond to it—will provide some extra information for mapping the disconnect we’ve seen in 2019 between public and private markets. Can an absurdly low churn rate and expensive hardware product offset a lack of profitability in the eyes of investors, or will Peloton become another cautionary tale of an unprofitable unicorn shredded by the public market? [Image: Peloton]
15 fast-growing startups to join after FAANG
In terms of total compensation, FAANG-sized (Facebook, Apple, Amazon, Netflix, Google) companies are among the best in the world. If you want job security and the highest possible salary, there's nowhere better than a Big-N tech company.
However, thousands of people leave FAANG companies for startups every year, for a variety of reasons. Often, they leave because they want:
A role where they can have a bigger impact on the company.
A chance to work with a new, cutting edge technology.
To be an early employee (and equity owner) at the next tech giant.
To get a better understanding of why people leave FAANG companies—and what they're looking for in their next roles—we collaborated with Blind, a trusted online community where 2.8M+ verified professionals anonymously share advice, provide honest feedback, and discover relevant career information.
After comparing Blind data with AngelList's startup data, we noticed an interesting trend around people who leave FAANG companies for startups: They tend to join the same companies.
In fact, we've found that there is a small subset of startups, spanning all stages of fundraising and sectors of technology, that consistently recruit talent away from the top tech companies.
We've listed the top 15 startups people are leaving FAANG companies for—all of which you can apply to on AngelList today.