I had a similar question, and I would really like to know how "cumulative losses" are calculated.
As someone else posted, it is possible that, in addition to equity financing (the "amount raised" number), the company also received debt financing, and they've spent most of that, but I don't think that can explain everything, e.g. the huge delta in Teladoc Health only raising $170 million but having $11.2 billion in cumulative losses.
Doing a little searching, it looks like Teladoc recently took a $6.6 billion goodwill impairment on its acquisition of Livongo in 2020 that it did for $18.5 billion. The original acquisition was for "Livongo shares will be exchanged for 0.5920 shares of Teladoc plus cash of $11.33 each consideration per share." So if a lot of the merger deal was done with inflated Teladoc stock, and then that stock fell, it would be considered a loss in a particular quarter, but I feel like it's weird to call the non-cash charge part of its "cumulative losses".
In any case, the numbers are at least "funny" in the sense that they're not comparing apples to apples (or, more accurately, "cash to cash").
Yeah looking into it a bit, my guess is the real explanation is that this is due to sloppy math on the part of the original authors, especially since they neglected to even address this most obvious / basic question.
It's directly addressed in the linked Marketwatch article that the table comes from, in the 2nd and 3rd paragraphs after that table. The "Funds Raised" column is startup funds. It does not include additional funding rounds, selling stock, debt, etc.
I'm pretty sure "startup funds" would include additional funding rounds (i.e. Series B - whatever). But you bring up a good point, I'm not sure if it includes, for example, funds raised in an IPO. But it makes 0 sense to include funds in private rounds and not includes funds raised in an IPO - they're both equity purchases in the business.
It would make sense to not include debt raises, because as the article points out, those debt raises need to be financed. Still, not at all a useful comparison without more detail.
A very large chunk of GAAP losses are attributable to stock comp expense (a quick and easy way to check cumulative profits/losses is looking at the balance sheet’s equity section for “accumulated deficit”) which still gets counted as an expense but since it’s non-cash it’s not a drain on whatever the company has raised. If you look at Uber’s last three FY’s, they’ve cumulatively reported losses of about $16 billion, and stock comp has been about $6.5 billion of that. For the vast majority of public companies this isn’t as material but for all these VC-backed, Bay Area-type tech companies they have this systemically dysfunctional culture where they dole out stock and options to no end.
If stock-based compensation information is made public to investors, what's the problem with it? I don't see why compensating people in stock rather than cash makes it a "systemically dysfunctional culture".
I think the right way to handle that in a chart like this would be to include the stock comp on both the “funds raised” and “cumulative losses” columns, or neither of the columns.
When you issue stock comp, you are trading dilution for money, just like you are when raising from VCs or doing an IPO. The money is just spent on paying an employee immediately instead of sitting in the corporate treasury for a while.
If you include the spending part of the stock comp as a “loss”, but don’t include the creation of that stock as a “raise”, you end up with these nonsensical results.
Why does Uber need debt? They’re a software, logistics company. It makes sense for a real estate company to be loaded with debt as that’s the nature of the beast. But I don’t see an argument for logistics.
Their product isn't some software, and they're not making money by selling software or a software-based service [1], so they're not a software company.
They're selling taxi rides, the fulfillment of which is outsourced to semi-independent contractors. Therefore, they're a taxi company.
[1] Yes, they have an app – who doesn't, today – but clients aren't paying for using the app, they're paying for the service arranged via the app.
As I understand it, they claim their worth comes in the algorithm getting someone to their user more efficiently. Still not seeing why all the leverage. For a cab company I suppose it’d be car and insurance/gas costs. This gets more fuzzy because I remember cab companies renting vehicles to drivers per day. I think the rent was the companies effective share of the rides.
But the whole point of "cumulative losses" is that one would assume losses means revenue - expenses. If "revenue - expenses" is a negative number that is far larger than the amount you have raised, how are you not bankrupt yet?
Uber has a market cap of 58 billion (cf. "$25.2 billion funds raised"). Teladoc Health has a market cap of 5 billion (cf. "$0.17 billion funds raised"). The Funds Raised column in the article does not seem to include stock issuance.
Say you received 1,000 when graduating high school. You then got a job making 100/month, signed a lease and moved out of the house. You have expenses of 180/month. How long before you are destitute?
It's a combination of the two reasons cited by others here.
1. They may have revenue which is adding to total cash pile; and
2. They may have taken on additional debt
Maybe obvious, but probably worth repeating is that raising capital does not raise debt for your company (i.e. you're selling off a piece of your company, not taking on debt which you have to repay). I'm assuming that the "Funds raised" column is the amount they've taken in venture funding, and not debt. If it does include debt, you can ignore point #2.
Raise money. Use raise as an asset to secure credit. Accrue liabilities during normal business operations. Fail to generate revenue and raise more money and credit. Demonstrate growth without profit. Rinse, repeat.
If that's because of revenue, why is that being accounted as a loss?
Is it because they spend it all? No real profits?