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CarGurus' IPO proves you don't need early venture funding to succeed on Wall Street

A story about a founder who didn’t plead for early cash.

Langley Steinert, founder of CarGurus, speaks onstage at the From Campaign to Commerce
Langley Steinert, founder of CarGurus
Photo by Monica Schipper/Getty Images for AWXI

A Boston-based tech company that hadn’t raised any money from venture capital until ten years after its founding staged a successful initial public offering Thursday — a reminder startups don’t need to raise huge amounts of cash from Sand Hill Road to succeed.

Stock for CarGurus, an online marketplace for used and new car sales, was trading up by about 75 percent as of mid-day Thursday. The company’s market value was expected to exceed $3 billion.

The company raised $150 million in its IPO, selling stock at $16 a share. The fact that shares have gone as high as $30 during its first day of trading could be taken as a pricing failure on the part of CarGurus’ banking advisors. Or, it could be taken as a sign of irrational hunger for tech IPOs.

A reminder: For every dollar a stock goes up on its first day of trading is a dollar the company lost in its IPO. Of course, you want IPO investors to make money, so the stock should trade higher, but 75 percent higher leaves a lot on the table.

Entrepreneurs trek to brand-name Silicon Valley venture firms to find the cash that can finance a high-growth, high-risk, capital-intensive business. But some newer founders have eschewed trading away ownership of their companies to meet payroll, and have gravitated toward projects like crowdfunding — or maybe bootstrapping the company on their own dime — to make ends meet.

"Venture capital raised is the ultimate startup vanity metric," said Eric Paley, a Boston-based partner at the firm Founder Collective and an appreciator of how CarGurus grew. "It pays for founders to be capital efficient! More money raised does not yield a better business."

CarGurus’ founder, Langley Steinert, previously started TripAdvisor and retains over 60 percent voting power in the company in part due to his unwillingness to take on venture money, according to the company’s disclosures to the SEC. He owns 29% of its shares.

The company raised about $6 million from angel investors through 2015. That’s when Wall Street heavyweights like T. Rowe Price funneled hundreds of millions into CarGurus.

This article originally appeared on

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