Why does Zipcar need an extra $21M before it goes public?

Zipcar, a car-sharing service that lets people rent cars by the hour, announced today that it has raised an additional $21 million in its seventh round of funding led by Meritech Capital Partners.

The service is available in most cities, where cars are strewn across the city in special parking spots. Users sign up for a subscription, and then schedule a time and a car to pick up. They receive a card that activates the car and are free to drive it during their scheduled time.

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What’s slightly peculiar is why the company felt it needed to raise additional venture capital funding. The company filed to go public earlier this year in order to raise $75 million. The funding was intended to help spin up their operations and pay off debt.

It seems the company’s been on a bit of a spending spree, which may be hampering its ability to pull in a decent income. Zipcar most recently picked up London car-sharing service Streetcar and acquired a minority stake in Spanish car-sharing service Avancar. Zipcar also acquired American rival Flexcar in 2007.

All the expansions have so far been funded with a healthy dose of venture capital. To date, the Cambridge, Mass.-based company has raised $59 million to finance its operations. Zipcar will use the funding to expand its fleet and strengthen its balance sheet ahead of its initial public offering.

Then again, Zipcar has been losing money for some time now. It lost around $14.5 million in 2007 and 2008, and around $4.5 million last year. It lost about $5 million in the first quarter of this year. Its revenue has been steadily increasing, though. It made about $58 million in 2007, about $84 million in 2008, and brought in $131 million last year. So when the company does go public, it’s going to probably try to pad its balance sheet to appeal to investors.

Former AOL CEO and co-founder Steve Case will join the Zipcar board as part of the deal. John Mahoney, CFO of office supply chain Staples, is joining the board as well. Pinnacle Ventures also participated in Zipcar’s most recent round of funding.