Zipcar’s $174M IPO and What It Means to the Boston Tech Scene: Some Reactions
Zipcar, the Cambridge, MA-based car-sharing company, has raised $174.3 million in an initial public offering. The company sold about 9.7 million shares at $18 per share—an increase over the 8.3 million shares it originally planned to offer at $14 to $16 apiece—according to data compiled by Bloomberg. The IPO was led by Goldman Sachs and JPMorgan Chase. Shares will be listed on the Nasdaq market as ZIP.
This makes national news, of course, but it’s especially big here in the Boston area, which hasn’t seen a large tech/software IPO ($100 million-plus) since… can anyone even remember? (OK, LogMeIn in summer 2009.) And in case you’re thinking of Zipcar as a short-term car-rental company and not a tech company, just consider the logistical problems of managing a fleet of more than 8,000 cars in 14 metro areas by the hour—where customers check the cars in and out by themselves and make reservations and payments online. (I must confess, I’m a Zipcar hater. It worked great for me in Seattle, but one bad experience in Boston led me to cancel my membership. Not that it matters.)
“The quickest route to gaining national mindshare for Boston’s tech and innovation scene is to have a huge national consumer IPO,” says Jules Pieri, founder and CEO of Lexington, MA-based Daily Grommet. She calls the Zipcar offering “monstrously meaningful” for local consumer-focused Internet companies, in part because it garners lots of attention from investors and media. “We can start keeping our students in town,” she says. “This is the answer to the naysayers who claim it can’t be done in Boston.”
At least one of Zipcar’s competitors agrees. “While Zipcar is not exactly a consumer Internet company, it certainly is consumer facing, and its high profile success could help to establish a stronger consumer-facing ecosystem in Boston,” says Shelby Clark, founder and CEO of RelayRides, a car-sharing company that started in Boston and recently moved to San Francisco.
Clark says going public could help Zipcar achieve “a larger scale, through organic growth or acquisitions,” as well as “better cover the fixed costs and achieve more attractive economics.” But, he notes, “Public markets are notoriously impatient, and they may react poorly if it takes Zipcar a while to reach profitability.”
It has been a long road indeed for Zipcar, which started in 2000 and has never been profitable. The company has said that proceeds from the IPO will be used to reduce its debt and expand its business internationally. Last December, Zipcar announced a $21 million Series G financing (which prompted some speculation that an IPO wouldn’t happen). Its pre-IPO investors include Revolution (Steve Case), Benchmark Capital, Greylock Partners, Smedvig Capital, and Globespan Capital Partners.
Local investors who aren’t involved with Zipcar have an interesting perspective on the company. Jeff Glass, a managing director at Bain Capital Ventures, made three observations that I’ll share here. One, he said, Zipcar “represents a home-grown truly innovative idea that was not obvious at the time.” Two, “The team demonstrated entrepreneurial grit having started it over a decade ago.” And three, he said (speaking to the impact on the local tech scene), “Unlike other successful businesses launched in Boston, the decision to go public vs. be acquired helps insure that talent, jobs, and innovation stays local here in the Boston area.”