According to a report in The Wall Street Journal citing S&P Global Market Intelligence, Lyft has had losses of $911 million in the twelve months leading up to its IPO, which is higher than any other startup in the U.S. that went public. Uber, noted the paper, is losing more than $800 million each quarter. Uber is going public at some point in 2019. The Lyft IPO will be a big test for investors’ appetite for startups that aren’t making money since the dot com boom and subsequent crash. In the 1990s, startups with steep losses were going public left and right, raising billions of dollars. Many of them went on to implode. Fast forward to 2019, and lots of internet-based companies are eyeing the public markets again.
Lyft isn’t the only heavily investor-backed, money-losing startup that will debut on the public markets this year. In addition to Uber, WeWork, which manages office space, plans to go public later this year and has had losses of $1.2 billion in the first nine months of last year, reported The Wall Street Journal. These losses have been made possible because of the level of venture capital the startups are able to raise. With promising revenue growth, investors bet the spending will be worth it. But it’s not clear how these companies will fare if the economy goes into a recession, since many weren’t around when the last one hit. “Many of their business models have not been tested fully,” Ilya Strebulaev, a Stanford University business professor told The Wall Street Journal. “I would not be surprised if many of these companies would not be as successful as investors expect them to be.” The paper noted Groupon, Moderna, Snap and Vonage Holdings, four of the five companies with the biggest losses ahead of their IPO, went on to perform poorly.