By Lawrence Delevingne
NEWYORK (Reuters) – Two top technology investors cautioned against drawing broad conclusions about the valuation of private companies from questions swirling around U.S. office-sharing startup WeWork.
Scott Kupor, managing partner of $10 billion (8.01 billion pounds) venture capital firm Andreessen Horowitz, said at the CNBC Institutional Investor Delivering Alpha conference that it would be “dangerous” to generalise from the WeWork situation as it stems from the confluence of multiple factors.
These include governance issues, being a “late cycle, cash-consuming” company, and the tension between traditional real estate valuation methods and the more forward-looking ones favoured by some in Silicon Valley, he said.
“That’s what the public market investor is struggling with in these hybrid companies,” Kupor said. “How much of the business looks like a hardware or other business and how much does it truly have margins and moats that look like a technology company?”
Andreessen Horowitz is not a WeWork investor.
WeWork owner The We Company postponed its initial public offering this month following a barrage of questions surrounding its valuation. Reuters reported last week that The We Company was considering seeking a valuation in its IPO of between $10 billion and $12 billion, a steep discount from the $47 billion valuation it achieved in January.
Glen Kacher, chief investment officer of $2 billion Light Street Capital Management LLC, said no one should be surprised by rapidly changing valuations for private companies such as WeWork, given how common large price swings are in public markets.
“That’s the market,” Kacher said, speaking alongside Kupor at the annual New York City event. “I don’t think it’s a big deal.”
Kacher contrasted WeWork with Uber Technologies Inc, one of Light Street’s investments.
He said Uber’s “SaaS,” or software as a service, creates significant value because its cars and drivers can be used by many customers every day, whereas a set of WeWork’s rented desks can only be used by one client at a time.
“That’s where technology is marrying up with these fixed assets to create services … that’s a very unique economic solution (for Uber),” he said. “As opposed to WeWork, which is just carving a floor up into very tiny little spaces. That’s their technology.”
Kacher said he continues to find SoftBank Group an “interesting” investment opportunity, in part because Uber represents a bigger part of its portfolio than WeWork.
Earlier, U.S. Securities and Exchange Commission head Jay Clayton, in an on-stage interview at the conference, would not comment on WeWork’s IPO directly.
He did say, however, that it “doesn’t surprise” him that there would be differing valuations in public and private markets for the same type of company.
“The price discovery mechanism is completely different,” Clayton said.
(Reporting by Lawrence Delevingne; Editing by Jennifer Ablan and Tom Brown)