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With new leadership And with a soon-to-be-thinned labor base, Lyft looks very different by the end of 2023 than it did in the beginning. The company said last week it plans to dramatically cut its workforce by up to 30 percent after the co-founders said they would step down as CEO and president in March.
The changes were probably necessary. Lyft, as it turns out, isn’t nearly as valuable a company as its founders and backers once hoped. And it’s strange to realize that your startup was able to raise billions while it was private, and then eventually went public with a $72 share price raising over $2 billion and a completely stagnant market cap of $24 billion.
But it has changed. Shares of Lyft ended last week at $10.44, up a solid 6% on the news of the impending cuts. That helped it regain some of its lost value, but the company is worth just $3.9 billion this morning.
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It’s a little strange to consider, but the ride-sharing company’s stock is trading at an all-time low despite reporting revenue of $1.18 billion in Q4 2022, the result of a quarterly revenue decline. The company lost about a third of its value after forecasting earnings below analysts’ estimates for the first fiscal quarter.
The lesson here is that fast revenue growth companies can make them look like great investments when capital is cheap, but it’s often difficult for any technology-enabled company to exceed the relative valuation range for the industry.
Lyft is just the latest to join the ranks of public market dudes who have spent time as venture capitalists. To cite just two examples: Allbirds has given up most of its historical value, and Warby Parker has given up about 80% of its peak value. The list is long and some of the most beaten-down recent venture-backed IPOs today share a quality: incredibly low revenue multiples.
The compressor
We talk a lot about revenue multiples on The Exchange, mostly discussing what a dollar of recurring, hosted software revenue is worth. We use this perspective frequently because software is the most common startup product and software-as-a-service (that is, hosted software) is the most common business model.
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