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“So There Is Such Thing As a Free Lunch in IPO Unicorn Land?”

Wifey’s been eating her lunch for free – courtesy of a new Tech-bro app called Ritual.

The incentive to use it is good.

You can walk into most places about town, order something, and they pay the first $5. Wifey has a small appetite, so she ends up paying nothing. But is this a business, I wonder?

Or is it just another money-losing front that’s hoping to cash in quick on the stock market?

I ask this question, because there are many similar companies now selling new shares to investors. They’re called ‘IPO Unicorns’: companies that are going public with a market cap of over $1billion.

Lyft is one of them – went public a couple of weeks ago.

We have Lyft posters up around our city, offering free $20 rides.

This uber-like ride sharing service posted a net loss of over $900million last year…But it is apparently worth over $20billion. Why? Here’s a question for you…

Would you buy a business that loses 5% of your initial investment every year? Probably not.

And the share price has got off to an abysmal start – already selling for almost $20 less than on its first day.

Pinterest is next. They’ve been going 10 years, and they’re still not making a profit. Tell me: If a company hasn’t figured out a way to make money in 10 years on their own, what chance have they of doing any different with your money?

It reminds me of a quote from the former IBM CEO Thomas Watson: “Nothing happens in business until a sale is made.”

If you’re starting a business, make it your mission to earn $1 of profit. That’s it. Just $1. Because when you make a dollar of profit, you have a system which can scale…to $100…$1000…and beyond.

That’s the time to look for investors.

I don’t claim to be an investing expert, but I do invest my own money. And it seems to me that Wall Street has gone gaga for speculative gambles. They’re handing out all sorts of crazy perks to company owners looking to float on the stock market; boozy breakfasts and denim suits.

It’s all a load of hysteria.

And the money-losing IPO unicorns? I guess they’re hoping to scale through their losses. If you thought Lyft’s losses sound bad, take a look at Uber’s. They’re losing $hundreds-of-millions each quarter. For some, maybe the gamble will pay off.

Fair play.

Just not with my money. Thank you.