The Companies That Are Funding Uber and Lyft
In the United States, the two big ridesharing companies are Uber and Lyft. Both are receiving additional capital funding as their quest for growth gathers steam. In May 2015, activist Carl Icahn threw his considerable weight behind Lyft with a $100 million investment. He calls it "a bargain," and acquired a seat on the board. Although Lyft is still a minnow in the ridesharing business compared to Uber, that hasn't stopped venture capitalists and other investment entities from throwing money at both companies.
Uber's Big Investors
Uber was founded about five years ago with a killer app concept that an individual could hail a car ride not with a wave of the hand, but with a smartphone. The concept caught on with the Silicon Valley venture capital crowd; by summer 2015, its total funding reached $10 billion.
There is an almost insatiable appetite to buy into Uber and its leadership in car-hailing business. For example, in August 2015, Google Ventures plunged over $250 million into Uber, and the company's biggest investors also include blue-chip Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers, Fidelity Investments, Jeff Bezos of Amazon, Goldman Sachs, Blackrock, Lone Pine Capital, and dozens of other venture capital firms, hedge funds and private billionaires. Traditional Wall Street hasn't been left at the curb either.
The thinking among Uber financial supporters is that a tidal wave of cash will drown any rival and allow realization of the ultimate goal, a monstrously successful initial public offering (IPO) valued at $70 billion or more. Obviously, the reality of this goal is not guaranteed, and no one knows if Uber will crash and burn before the big payday.
Lyft's Big Money Investors
Lyft is clearly the smaller of the two companies, operating in 65 cities in the United States only, while Uber covers 250 cities worldwide. Marc Andreessen, founder of Netscape, has a fractious history of public feuds with Icahn, but he poured $60 million into Lyft through his firm Andreessen Horowitz LLC. A major investor in Andreessen's firm is former New York City mayor Michael Bloomberg, who a few years ago promised to destroy the yellow cab business in New York City. In early 2015, Lyft also raised over $500 million in funding from a Japanese venture capital firm.
Meanwhile, there is another facet of the rivalry between Uber and Lyft. As China pushes aggressively to grow Didi Kuaidi, its own dominant ridesharing service, against inroads in China from Uber, it is investing in Lyft. Alibaba, Tencent, and Softbank Capital have also piled in, joining the anti-Uber alliance.
Plenty of Invested Money, Still Big Losses
Although there is plenty of capital provided to both Uber and Lyft in this ridesharing war, the operating losses continue to pile up. Aggressive venture capitalists are used to that in the short run.
In June 2015, Uber's operating loss was revealed to be a staggering $470 million. The company tried to downplay the number as much as possible, saying that it is "unconcerned." Uber's financial engineering continues frenetically anyway.
For example, in June 2015, it issued an 8% convertible bond maturing in 2022. In October, Uber announced another $1 billion round of financing, the eighth time it has added outside capital in the last five years.
Lyft, meanwhile, lost $127 million, yet it continues to aggressively raise capital, though it falls well short of Uber's war chest. In November 2015, Lyft announced plans for another $500 million funding round, valuing the company at $4 billion compared to Uber's $70 billion potential IPO valuation.
The capital markets continue to be exceptionally bountiful for growing upstart companies such as Uber and Lyft. However, those conditions can change overnight if markets hit a speed bump, limiting or delaying growth for the ridesharing business as venture capitalists and Wall Street hit the road.