Dan Primack

The latest on private equity, M&A, deals and movements — from Wall Street to Silicon Valley

Is Zipcar's IPO on the rocks?

December 16, 2010: 9:54 AM ET

If Zipcar's IPO plans are zooming along, why did it just need to raise a bunch of private money from venture capitalists?

Yesterday I had lunch at Henrietta's Table in Harvard Square, which is beginning to resemble an upscale Buck's of Woodside (i.e., lots of local VC diners). For a suburbanite like me – particularly one who was running late – there are two easy choices for parking: An overpriced garage in the basement of the Charles Hotel, or a concrete-encased set of meters right across the street.

These meters are risky, because the only exit leads to a one-way street in the wrong direction. But I saw an empty spot, so pulled in with a minor surge of miserly exhilaration. And then devastation: It was a Zipcar spot.

Two immediate thoughts: (1) Screw you Zipcar, and (2) I should make some calls about the company, given that it had just announced $21 million in new VC funding. Seemed to be a possible sign of weakness, which would lead back to schadenfreude over point number one.

As many of you know, Zipcar is a VC-backed car-sharing company currently in registration for a $75 million IPO. Its most recent financials show a $10.4 million loss on $79 million in revenue for the first six months of 2010, compared to a $4.6 million loss on $57 million in revenue during the year-earlier period.

Not the worst trajectory for an IPO candidate, given that most of the extra expenses seemed to be for expansion. Plus, public markets often go gaga over unusual sector plays with at least a few potential acquirers (privately-held Enterprise Rent-a-Car continues to be my odds-on favorite, since I think Hertz could run into some FTC issues).

But why that new $21 million, which was provided by new investors Meritech Capital Partners ($20m) and Pinnacle Ventures ($1m)? First, it's a "Series G" round, which often seems to stand for "glitch." Second, none of the company's existing backers – Greylock, Benchmark Capital, Revolution, Smedvig Capital – participated.

Not surprisingly, cleantech blogger Katie Fehrenbacher wondered if Zipcar's "highly anticipated IPO is on the rocks."

After speaking with some folks familiar with the situation (yes, there was some selection bias at play), my understanding is that things actually are much healthier than they would otherwise appear.

Zipcar did indeed plan to have gone public by now, but put things on hold after running into unexpected UK anti-trust troubles with its planned acquisition of British car-sharing company Streetcar. Regulators finally gave the green light late last month, and Zipcar has once again revved up the IPO engines – with plans to float early in Q1 2011. The $21 million is being viewed as a sort of bridge financing.

I'm still troubled by the lack of participation by existing investors, although Revolution's Steve Case has just hopped on the Zipcar board. Plus, word is that Meritech had tried to participate in earlier Zipcar rounds, but couldn't get in. It typically invests up to $25 million in its portfolio companies, and probably doesn't expect to be tapped again.

Maybe folks are trying to snow me on this one, but I honestly don't think so. And, if I'm wrong, at least I'll have an easier time parking in Cambridge…

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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