Name: Lyft

Estimated valuation: $5.5 billion

Product: Ride sharing, Autonomous Vehicles 

IPO Timeline: To Be Determined

Date Founded: June 2012

Lyft has expanded in four years to become the second-largest ride-sharing company in the U.S, behind its larger rival, Uber, by enabling consumers to easily order service via a mobile phone. The approach has disrupted the traditional taxi cab industry. Lyft completed 13.9 million rides in July and said it was on track to generate $2 billion in revenue annually, according to an investor document seen by Business Insider.

Lyft's Founding

The company was founded in June 2012 by CEO Logan Green, 32, and President John Zimmer, 32, in San Francisco, in the heart of Silicon Valley. But the idea was spawned five years earlier when the co-founders created a ride-sharing service called Zimride, according to TechCrunch. The startup won $1.5 million in seed funding in two separate rounds. Unlike Lyft, Zimride had no mobile app and focused on longer trips. The idea for Lyft emerged during a hackathon where Green and Zimmer were trying to figure out how Zimride would operate in a mobile environment with smartphones

The co-founders seemed to be unlikely partners. Before Zimride, Green had graduated from the University of California, Santa Barbara and Zimmer was working as a real estate analyst for Lehman Brothers prior to its bankruptcy after graduating from Cornell University. The two met through a mutual friend on Facebook after Green posted an idea about a ride-sharing company he was working on, which became Zimride.

Lyft vs. Uber

Lyft has succeeded in expanding sales even in the face of a rival that is dramatically larger. Lyft's $5.5 billion valuation, for example, is 12 times smaller than Uber's $65 billion, according to Bloomberg. A year after Lyft's launch, it was already providing customers 30,000 rides per week and by May of 2016 its volume had risen to 12.7 million rides, according to Business Insider. It operated in more than 60 cities globally as of 2014, the most recently available figures.

Uber and Lyft are in a battle for business, which imposes heavy advertising and customer acquisition costs, including discounted rides, free-ride vouchers and constant promotions to gain market and mindshare. Zimmer has publicly said Lyft is gaining market share in the top 20 cities, including places like Los Angeles and San Francisco. Even though the two rivals compete for the same clientele, both have been taking share from black cars and taxis. Lyft and Uber take about 20% and 25% of the revenue made from fares.

Lyft's Venture Funders

Lyft raised its first funding in 2011 totaling $6 million in a Series A funding round, led by Mayfield Fund. From there, it raised $2.01 billion in nine rounds, from investors including Andreessen Horowitz ($60 million, Series C), Coatue Management ($250 million, Series D), and Icahn Enterprises ($150 million, Series E), Crunchbase says. Most recently it received a $500 million investment from General Motors Co. as part of a $1 billion funding series. That gave Lyft its latest valuation of $5.5 billion. As part of the deal, General Motors will work with Lyft to develop an on-demand network of self-driving cars. 

Andreessen Horowitz is famous for investing in companies such as Facebook, Medium and Slack, while Coatue has invested in Snap Inc., Didi Chuxing, Jet and others.

IPO vs. Takeover

Lyft's initial financial losses have been big. In the first half of 2015, it lost $127.6 million, nearly triple its $46.7 million in revenue, according to Bloomberg. Lyft CFO Brian Roberts has publicly stated, however, that the company does have a path to profitability and 2016 losses are coming in below what the company told investors, according to Bloomberg. Revenues are accelerating. They were growing at a $1 billion annual rate in October of 2015, and were approaching  $2 billion based on May, 2016 figures, according to Business Insider.

Even with that growth, the company still faces significant challenges in competing against Uber, its much better capitalized rival, in advertising, driver recruitment and fare wars. That may make it hard for Lyft to continue raising funds if it can’t eventually report consistent profits or show that it's on a clear path to do that.

That's why Lyft's next step may be a sale to a financially strong buyer rather than an IPO. In June 2016, the company hired boutique investment bank Qatalyst Partners to either raise money or sell itself, but neither has come to fruition. General Motors has been speculated as one potential buyer, according to Reuters, as have other large technology companies, such as Apple Inc. (AAPL) and Google parent Alphabet Inc. (GOOG).

 

 

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