Lime’s Valuation May Fall 80% in Emergency Fundraising

Scooter rental startup Lime, one of the hottest startups in tech two years ago, is trying to raise emergency funds at a valuation slashed by 80% from last year, two people familiar with the matter said. The company is seeking funds from new investors at a valuation of just $400 million, compared with the $2.4 billion level at which it last raised money, the people said.

The discussions, which one person said are in the early stages, foreshadow the pain to come for startups looking to raise cash as the financial markets and the economy are reeling from the impact of the coronavirus. Lime, which has shut down its scooter-rental operations in all but one market, has between $50 million and $70 million of cash left, The Information reported Saturday. At the startup’s current rate of spending, that cash will only last a few months, said one of the people. Lime is expected to lay off staff, however.

The Takeaway

$400M valuation would be down 80% from last year
Company discussing “cram-down” financing
Lime pulled scooters from every market but one

One option Lime is discussing is a so-called “cram-down” financing in which investors from previous rounds would see their stakes reduced, one of the people said. New investors would get paid back first in the event of a sale or IPO. The person cautioned that the company is discussing multiple scenarios to raise cash, including funds from existing investors. A Lime spokesperson declined to comment.

Lime counts some of the biggest names in tech as investors, including Andreessen Horowitz, Alphabet, GV, GIC, Fidelity Investments, Coatue Management and Uber.

The company last raised equity capital in February 2019, pulling in $310 million at a $2.4 billion post-money valuation that more than doubled the previous price of its shares. It tried to raise more money last fall but abandoned the effort after investors resisted paying a higher valuation. At that time, the collapse of WeWork’s IPO had made investors wary about pouring money into money-losing companies. As of last fall, Lime told investors it expected to lose more than $300 million in 2019, on revenue of $420 million. After halting fundraising talks, the company decided to focus on turning profitable, attaining what its CEO described in a blog post as “financial independence.”

Two people close to the company said it was making progress on that goal at the start of the year. But the company’s business took a significant turn for the worse last week when Lime announced it would pull scooters from more than 100 cities in North America, South America and Europe, in response to coronavirus-related quarantine orders. That list then extended over the weeked to include Australia and New Zealand. The company is now only operating in South Korea, according to its website.

Lime executives told employees last week they already secured a “significant loan” from the Bank of Montreal, a person familiar with the matter said. Executives added that they also were counting on a tax refund associated with the tariffs it had to pay on its Chinese-made vehicles, the person said. It wasn’t clear if those sums of money was included in estimates of its $50 million to $70 million cash reserves.

As the company looks to raise cash, it is also expected to reduce staff. Lime has already laid off more than 100 employees from its staff of about 600 this year but further layoffs are likely, said a person close to the company.

Cory Weinberg is deputy bureau chief responsible for finance coverage at The Information. He covers the business of AI, defense and space, and is based in Los Angeles. He has an MBA from Columbia Business School. He can be found on X @coryweinberg. You can reach him on Signal at +1 (561) 818 3915.