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As Uber and Lyft continue to melt, the 2019 unicorn class loses its shine
You’d be excused for feeling that mid-2019 was in a different decade as far as venture-backed IPOs go.
Last year saw a number of successful flotations of venture-backed technology and technology-enabled companies, and most performed well after they began trading. But despite some early success, a number of the most famous 2019 IPOs have seen their valuations decline rapidly in ensuing quarters.
In some cases, once richly valued public unicorns are off more than twice the market’s recent declines, have given up all their gains earned as public companies, or fallen under their final private market valuations. It’s a stunning reversal for several of the most-lauded companies to come out of the venture capital machine in a decade.
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Robinhood’s downtime as a stress test for the consumer fintech boom
Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
Earlier this week, the popular free stock trading service Robinhood suffered downtime over a two-day period. The company, a well-funded unicorn taking on incumbents in its industry, failed to operate properly when the public markets were surging on Monday (bad) and falling on Tuesday (very bad).
Complaints flooded investing forums and social media. Images of Robinhood account screens featuring huge losses from the periods of downtime (or missed upside) weren’t hard to find. For Robinhood, it wasn’t its first misstep, but it was perhaps its worst. Mishandling the rollout of a high-yield savings function? Embarrassing, but hardly a serious wound. Some options oddness? Eh, not the worst.
Going down during surging volatility? Much worse. The company is already in the market with apologies and some give-aways to try to stem the negative news cycle. But what’s notable so far is that, while you might expect to see rival apps and services to Robinhood boom in the wake of its downtime, it instead appears that only select competitors to the popular company are seeing a jump in downloads this week. And given the insane market movements, it’s hard to pin some of their gains on Robinhood instead of, say, what stocks are themselves doing.
I’d expected by today to have some data in hand that painted a starker picture for Robinhood, given that the company’s recent missteps triggered a lot of negative press and user reaction. Let’s peek at what numbers can tell us, and try to figure out if there’s a lesson for consumer fintech and finservies companies while we’re at it.
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Airbnb’s New Year’s Eve guest volume shows its falling growth rate
Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
It’s finally 2020, the year that should bring us a direct listing from home-sharing giant Airbnb, a technology company valued at tens of billions of dollars. The company’s flotation will be a key event in this coming year’s technology exit market. Expect the NYSE and Nasdaq to compete for the listing, bankers to queue to take part, and endless media coverage.
Given that that’s ahead, we’re going to take periodic looks at Airbnb as we tick closer to its eventual public market debut. And that means that this morning we’re looking back through time to see how fast the company has grown by using a quirky data point.
Airbnb releases a regular tally of its expected “guest stays” for New Year’s Eve each year, including 2019. We can therefore look back in time, tracking how quickly (or not) Airbnb’s New Year Eve guest tally has risen. This exercise will provide a loose, but fun proxy for the company’s growth as a whole.
The numbers
Before we look into the figures themselves, keep in mind that we are looking at a guest figure which is at best a proxy for revenue. We don’t know the revenue mix of the guest stays, for example, meaning that Airbnb could have seen a 10% drop in per-guest revenue this New Year’s Eve — even with more guest stays — and we’d have no idea.
So, the cliche about grains of salt and taking, please.
But as more guests tends to mean more rentals which points towards more revenue, the New Year’s Eve figures are useful as we work to understand how quickly Airbnb is growing now compared to how fast it grew in the past. The faster the company is expanding today, the more it’s worth. And given recent news that the company has ditched profitability in favor of boosting its sales and marketing spend (leading to sharp, regular deficits in its quarterly results), how fast Airbnb can grow through higher spend is a key question for the highly-backed, San Francisco-based private company.
Here’s the tally of guest stays in Airbnb’s during New Years Eve (data via CNBC, Jon Erlichman, Airbnb), and their resulting year-over-year growth rates:
- 2009: 1,400
- 2010: 6,000 (+329%)
- 2011: 3,1000 (+417%)
- 2012: 108,000 (248%)
- 2013: 250,000 (+131%)
- 2014: 540,000 (+116%)
- 2015: 1,100,000 (+104%)
- 2016: 2,000,000 (+82%)
- 2017: 3,000,000 (+50%)
- 2018: 3,700,000 (+23%)
- 2019: 4,500,000 (+22%)
In chart form, that looks like this:
Let’s talk about a few things that stand out. First is that the company’s growth rate managed to stay over 100% for as long as it did. In case you’re a SaaS fan, what Airbnb pulled off in its early years (again, using this fun proxy for revenue growth) was far better than a triple-triple-double-double-double.
Next, the company’s growth rate in percentage terms has slowed dramatically, including in 2019. At the same time the firm managed to re-accelerate its gross guest growth in 2019. In numerical terms, Airbnb added 1,000,000 New Year’s Eve guest stays in 2017, 700,000 in 2018, and 800,000 in 2019. So 2019’s gross adds was not a record, but it was a better result than its year-ago tally.
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Is a direct listing the right choice for your company?
Ran Ben-Tzur is a corporate partner at Fenwick & West. Ran’s issuer-side initial public offerings include Facebook, Fitbit, Upwork, Zuora and Peloton Interactive.
Jamie Evans is the co-chair of Fenwick & West’s Capital Markets & Public Companies group. Jamie’s representative initial public offerings include Smartsheet, Redfin, Fitbit and Facebook.
Spotify did it. Slack did it. Many other late-stage private technology companies are reported to be seriously considering it. Should yours?
If you are a board member of a late-stage, venture-backed company or part of its management team, you likely have heard of the term “direct listing.” Or you may have attended one or all of the slew of recent conferences being hosted by big-name investment banks and others, including tech investor guru Bill Gurley, who recently debated the pros and cons of choosing a direct listing over a traditional IPO.
Before you decide what’s right for your company, here are a few things you need to know about direct listings.
Direct listings vs. IPOs
For people not familiar with the term, a direct listing is an alternative way for a private company to “go public,” but without selling its shares directly to the public and without the traditional underwriting assistance of investment bankers.
In a traditional IPO, a company raises money and creates a public market for its shares by selling newly created stock to investors. In some instances, a select number of pre-IPO investors, usually very large stockholders or management, may also sell a portion of their holdings in the IPO. In an IPO, the company engages investment bankers to help promote, price and sell the stock to investors. The investment bankers are paid a commission for their work that is based on the size of the IPO—usually seven percent for a traditional technology company IPO.
In a direct listing, a company does not sell stock directly to investors and does not receive any new capital. Instead, it facilitates the re-sale of shares held by company insiders such as employees, executives and pre-IPO investors. Investors in a direct listing buy shares directly from these company insiders.
Does this mean that a company doing a direct listing doesn’t need investment banks? Not quite. Companies still engage investment banks to assist with a direct listing and those banks still get paid quite well (to the tune of $35 million in Spotify and $22 million in Slack).
However, the investment banks play a very different role in a direct listing. Unlike a traditional IPO, in a direct listing, investment banks are prohibited under current law from organizing or attending investor meetings and they do not sell stock to investors. Instead, they act purely in an advisory capacity helping a company to position its story to investors, draft its IPO disclosures, educate a company’s insiders on process and strategize on investor outreach and liquidity.
Understanding the current direct listings trend
The concept of a direct listing is actually not a new one. Companies in a variety of industries have used similar structures for years. However, the structure has only recently received a lot of investor and media attention because high-profile technology companies have started to use it to go public. But why have technology companies only recently started to consider direct listings?
The rise of massive pre-IPO fundraising rounds
With an abundance of investor capital, especially from institutional investors that historically hadn’t invested in private technology companies, massive pre-IPO fundraising rounds have become the norm. Slack raised over $400 million in August 2018—just over a year prior to its direct listing. Because of this widespread availability of capital, some technology companies are now able to raise sufficient capital before their actual IPO to either become profitable or put them on a path to profitability.
Criticism of current IPO process
There has been increasing negative sentiment, especially amongst well-known venture capitalists, about certain aspects of the traditional IPO process—namely IPO lock-up agreements and the pricing and allocation process.
IPO lock-up agreements. In a traditional IPO, investment bankers require pre-IPO investors, employees and the company to sign a “lock-up agreement” restricting them from selling or distributing shares for a specified period of time following the IPO—usually 180 days. The bankers put these agreements in place in order to stabilize the stock immediately after the IPO. While the merits of a lock-up agreement can certainly be debated, by the time VCs (and other insiders) are allowed to sell following an IPO, oftentimes the stock price has fallen significantly from its highs (sometimes to below the IPO price) or the post lock-up flood of selling can have an immediate negative impact on the trading price.
In a direct listing, there is no lock-up agreement, which allows for equal access to the offering to all of the company’s pre-IPO investors, including rank-and-file employees and smaller pre-IPO stockholders.
IPO pricing and allocation: In a traditional IPO, shares are often allocated directly by a company (with the assistance of its underwriters) to a small number of large, institutional investors. Traditional IPOs are often underpriced by design to provide large institutional investors the benefit of an immediate 10-15% “pop” in the stock price. Over the last few years, some of these “pops” have become more pronounced. For example, Beyond Meat’s stock soared from $25 to $73 on its first day of trading, a 163% gain. This has fueled a concern, particularly shared amongst the VC community, that investment banks improperly price and allocate shares in an IPO in order to benefit these institutional investors, which are also clients of the same investment banks that are underwriting the IPO. While the merits of this concern can also be debated, in instances where there is a large price discrepancy between the trading price of the stock following the IPO and the price of the IPO, there is often a sense that companies have left money on the table and that pre-IPO investors have suffered unnecessary dilution. If the IPO had been priced “correctly,” the company would have had to sell fewer shares to raise the same amount of proceeds.
Because a company is not selling stock in a direct listing, the trading price after listing is purely market driven and is not “set” by the company and its investment bankers. Moreover, since no new shares are issued in a direct listing, insiders do not suffer any dilution.
The Spotify effect
Before Spotify’s direct listing, technology companies hadn’t used the direct listing structure to go public. Spotify was, in many ways, the perfect test case for a direct listing. It was well known, didn’t need any additional capital and was cash flow positive. In addition, prior to its direct listing, Spotify had entered into a debt instrument that penalized the company so long as it remained private. As a result, it just needed to go public. After clearing some regulatory hurdles, Spotify successfully executed its direct listing in April 2018. After Spotify’s direct listing, Slack (relatively) quickly followed suit. Slack’s direct listing was notable because it represented the first traditional Silicon Valley-based VC-backed company to use the structure. It was also an enterprise software company, albeit one with a consumer cult following.
Is a direct listing right for my company?
While a direct listing offers many benefits, the structure does not make sense for every company. Below is a list of key benefits and drawbacks:
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Atom Finance’s free Bloomberg Terminal rival raises $12M
If you want to win on Wall Street, Yahoo Finance is insufficient but Bloomberg Terminal costs a whopping $24,000 per year. That’s why Atom Finance built a free tool designed to democratize access to professional investor research. If Robinhood made it cost $0 to trade stocks, Atom Finance makes it cost $0 to know which to buy.
Today Atom launches its mobile app with access to its financial modeling, portfolio tracking, news analysis, benchmarking and discussion tools. It’s the consumerization of finance, similar to what we’ve seen in enterprise SaaS. “Investment research tools are too important to the financial well-being of consumers to lack the same cycles of product innovation and accessibility that we have experienced in other verticals,” CEO Eric Shoykhet tells me.
In its first press interview, Atom Finance today revealed to TechCrunch that it has raised a $10.6 million Series A led by General Catalyst to build on its quiet $1.9 million seed round. The cash will help the startup eventually monetize by launching premium tiers with even more hardcore research tools.
Atom Finance already has 100,000 users and $400 million in assets it’s helping steer since soft-launching in June. “Atom fundamentally changes the game for how financial news media and reporting is consumed. I could not live without it,” says The Twenty Minute VC podcast founder and Atom investor Harry Stebbings.
Individual investors are already at a disadvantage compared to big firms equipped with artificial intelligence, the priciest research and legions of traders glued to the markets. Yet it’s becoming increasingly clear that investing is critical to long-term financial mobility, especially in an age of rampant student debt and automation threatening employment.
“Our mission is two-fold,” Shoykhet says. “To modernize investment research tools through an intuitive platform that’s easily accessible across all devices, while democratizing access to institutional-quality investing tools that were once only available to Wall Street professionals.”
Leveling the trading floor
Shoykhet saw the gap between amateur and expert research platforms firsthand as an investor at Blackstone and Governors Lane. Yet even the supposedly best-in-class software was lacking the usability we’ve come to expect from consumer mobile apps. Atom Finance claims that “for example, Bloomberg hasn’t made a significant change to its central product offering since 1982.”
The Atom Finance team
So a year ago, Shoykhet founded Atom Finance in Brooklyn to fill the void. Its web, iOS and Android apps offer five products that combine to guide users’ investing decisions without drowning them in complexity:
- Sandbox – Instant financial modeling with pre-populated consensus projections that automatically update and are recalculated over time
- Portfolio – Track your linked investment accounts to monitor overarching stats, real-time profit and loss statements and diversification
- X-Ray – A financial research search engine for compiling news, SEC filings, transcripts and analysis
- Compare – Benchmarking tables for comparing companies and sectors
- Collaborate – Discussion boards and group chat for sharing insights with fellow investors
“Our Sandbox feature allows users to create simple financial models directly within our platform, without having to export data to a spreadsheet,” Shoykhet says. “This saves our users time and prevents them from having to manually refresh the inputs to their model when there is new information.”
Shoykhet positions Atom Finance in the middle of the market, saying, “Existing solutions are either too rudimentary for rigorous analysis (Yahoo Finance, Google Finance) or too expensive for individual investors (Bloomberg, CapIQ, Factset).”
With both its free and forthcoming paid tiers, Atom hopes to undercut Sentieo, a more AI-focused financial research platform that charges $500 to $1,000 per month and raised $19 million a year ago. Cheaper tools like BamSEC and WallMine are often limited to just pulling in earnings transcripts and filings. Robinhood has its own in-app research tools, which could make it a looming competitor or a potential acquirer for Atom Finance.
Shoykhet admits his startup will face stiff competition from well-entrenched tools like Bloomberg. “Incumbent solutions have significant brand equity with our target market, and especially with professional investors. We will have to continue iterating and deliver an unmatched user experience to gain the trust/loyalty of these users,” he says. Additionally, Atom Finance’s access to users’ sensitive data means flawless privacy, security, and accuracy will be essential.
The $12.5 million from General Catalyst, Greenoaks, Global Founders Capital, Untitled Investments, Day One Ventures and a slew of angels gives Atom runway to rev up its freemium model. Robinhood has found great success converting unpaid users to its subscription tier where they can borrow money to trade. By similarly starting out free, Atom’s eight-person team hailing from SoFi, Silver Lake, Blackstone and Citi could build a giant funnel to feed its premium tiers.
Fintech can feel dry and ruthlessly capitalistic at times. But Shoykhet insists he’s in it to equip a new generation with methods of wealth creation. “I think we’ve gone long enough without seeing real innovation in this space. We can’t be complacent with something so important. It’s crucial that we democratize access to these tools and educate consumers . . . to improve their investment well-being.”
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What seed-stage dilution tells us about changing investor expectations
Dale Chang is the Operating Partner at Scale Venture Partners, where he advises portfolio companies on strategies for go-to-market and scaling.
More posts by this contributor
Round sizes are up. Valuations are up. There are more investors than ever hunting unicorns around the globe. But for all the talk about the abundance of venture funding, there is a lot less being said about what it all means for entrepreneurs raising their early funding rounds.
Take for instance Seed-stage dilution. Since 2014, enterprise-focused tech companies have given up significantly more ownership during Seed rounds. What gives?
Scale is an investor in early-in-revenue enterprise technology companies, so we wanted to better understand how this trend in Seed-stage dilution impacts companies raising Series A and Series B rounds.
Using our Scale Studio dataset of performance metrics on nearly 800 cloud and SaaS companies as well as Pitchbook fundraising records covering B2B software startups, we started connecting the dots between trends in valuations, round sizes, and winner-take-all markets.
Bottom line for founders: Don’t let all the capital in venture mislead you. There’s an important connection between higher Seed-stage dilution and increased investor expectations during Series A and Series B rounds.
These days, successful startups are growing up faster than ever.
Founders face an important trade-off decision
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Workhorse gets $25 million needed to finish electric delivery van
Workhorse Group, the electric vehicle company that grabbed headlines last month over a proposed deal to buy General Motors’ Lordstown, Ohio factory, has raised $25 million from a group of unnamed investors.
The money will not go toward the factory. Instead, it will be used for the more pressing matter of keeping the company running. Under terms of the deal, investors will receive preferred stock and warrants to buy shares. An annual dividend will be paid out in shares of Workhorse stock.
The Cincinnati-based company is small, with fewer than 100 employees. Its biggest problem isn’t ideas or even product pipeline; it’s capital.
Workhorse has struggled financially at various points since its founding in 1998. The company reported just $364,000 in revenue in the first quarter, down from $560,000 in the same period last year. As of March 30, 2019, the company had cash, cash equivalents and short-term investments of $2.8 million, compared to $1.5 million as of December 31, 2018.
Workhorse borrowed $35 million from hedge fund Marathon Asset Management earlier this year.
Workhorse, which was once owned by Navistar and sold in 2013 to AMP Holding, has a customer pipeline for its electric trucks that includes UPS. It’s also hoping to win a contract with the United States Postal Service.
But it needs capital to scale up. The funding gives Workhorse the capital to deliver on its existing backlog and produce its N-GEN delivery van, according to CEO Duane Hughes.
“We now have all necessary pieces in place to bridge Workhorse into full-scale N-GEN production and are looking forward to commencing the manufacturing process, in earnest, during the fourth quarter of this year,” Hughes said in a statement.
Meanwhile, GM has been in talks since early 2019 to sell its Lordstown vehicle factory in Ohio to Workhorse Group. GM’s Lordstown factory stopped producing the automaker’s Chevrolet Cruze in March; without any new vehicles slated for the factory, workers were laid off.
Under the potential Lordstown deal, a new entity led by Workhorse founder Steve Burns would acquire the facility. Workhorse would hold a minority interest in the new entity. This new entity would allow Workhorse to seek new equity without diluting existing shareholder value.
Workhorse would build a commercial electric pickup at the plant if the deal goes through, Hughes has said.
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Luckin leaves bitter aftertaste, now trading below IPO price
In the first few days following Luckin Coffee’s initial public offering, the stock chart for LK looked like a roller coaster. Now it’s looking more like a free fall.
The Chinese Coffee chain successfully completed its highly anticipated offering roughly a week ago, raising more than $550 million after pricing at $17 per share, the high end of its $15-$17 per share range.
Luckin was met with a warm reception from the markets, with the stock skyrocketing roughly 20% to a greater than $5 billion market cap in its first day of trading. However, concerns over the company’s lofty valuation, major cash burn and uncertain path to profitability have caused the stock to nosedive since.
Luckin has dropped around 25% since closing its debut trading day at $20.38 per share, and 40% from its intraday peak of $25.96. As of Friday’s open, Luckin stock sat at $15.44, now well below its IPO price.
Leading into the IPO, Luckin had already been the topic of much debate. Luckin had filed for its public offering just a year and a half after its founding. And prior to its filing, Luckin had raised more than $500 million in venture capital through four fundraising rounds that all occurred just within roughly one year’s time, per PitchBook and Crunchbase data.
As Luckin’s valuation continued to level up, many questioned the sustainability of its business model and heavily discounted pricing strategy, with Luckin’s limited operating history already pointing to substantial losses and heavy cash outflows.
The concerns have followed Luckin into the public markets, and it’s unclear whether the stock’s early struggles are just growing pains or a broader indication that public investors have limits to the levels of nascency and unprofitability they are willing to accept and bet capital on.
As one of the few publicly traded early-stage growth companies, and likely the only one in the “coffee” vertical, Luckin lacks similar companies for investors to compare the stock to and also seems to lack a natural investor base — with the story a bit too foreign for typical tech sector investors and a bit too hectic for your typical food and beverage investor.
What is clear is that much is still misunderstood regarding the company’s unique history, its growth strategy, local market dynamics or otherwise. We’ll continue to keep an eye on Luckin stock to see whether the picture gets a bit brighter once investors get more comfortable with the story and as management proves its ability to execute.
For now, check out articles on Extra Crunch written by TechCrunch’s Danny Crichton and Rita Liao for deep dive primers into Luckin and all its moving parts.
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SoFi launches gig-focused ETF
SoFi is one of the leading fintech startups to emerge from San Francisco and breach the financial markets. Originally started as a way to better finance student debt, it has since expanded to include products targeted at personal loans and home loans.
Today, the company announced a new exchange-traded fund (ETF) product focused on the gig economy. GIGE, which trades on Nasdaq, is an actively managed fund advised by Toroso Investments that allows investors to capitalize on this hot sector of the economy. Toroso offers a range of services around creating and managing ETFs.
The company also announced the creation of an ETF focused on high-growth stocks. That ETF, which trades as SFYF on the NYSE, is designed to identify and capture the growth of the top 50 of the 1,000 largest publicly traded issues.
It has formerly used that growth focus to create two ETFs, targeting 500 high-growth companies under the trading name SFY and a product it called “SoFi Next 500 ETF,” which trades under SFYX, both of which have no management fees.
SoFi’s SFYF fund is composed specifically of public companies that show the strongest growth on three key metrics: top-line revenue growth, net income growth and forward-looking consensus estimates of net income growth.
For its GIGE fund, SoFi defines the “gig economy” as a group of companies that “embrace and support the workforce in which employment is based around short-term engagements that allow for flexibility and personal freedom and temporary contracts.”
SoFi’s new funds add value to investors primarily through providing 1) access to industry disruptors at 2) an earlier-stage point in their growth cycle.
In recent years, more and more investors have been trying to get a piece of the hottest tech companies earlier with a growing number of traditional institutional investors now dipping their toes into startup and tech investing.
Furthermore, a number of platforms and funds were launched to support the high-demand for access to some of the top public and private companies and major disruptive trends, including funds focused on themes such as artificial intelligence, big data, cybersecurity or the next manufacturing revolution.
SoFi argues that its GIGE fund offers compelling value due to the speed at which it offers investors access to new equity issues, as the fund is structured so that most post-IPO companies can join the GIGE within 31 days of IPO, relative to the 60-90 days traditional passive funds that often have to wait to add a newly IPO’d company.
Additionally, because SoFi’s GIGE fund is actively managed, SoFi is also offering fund investors access to experienced asset managers and an alternative to algorithmic, machine-led passive funds that have increasingly dominated the capital markets.
“Our members are excited by high-growth and gig economy companies because these companies are in many cases part of their lives,” said SoFi CEO Anthony Noto in a press release. “We’re giving our members a way to get started investing by buying what they know and investing in themselves.”
The announcement is the company’s latest step in its attempt to further establish itself under the new guard of CEO Anthony Noto, formerly of Goldman Sachs, who replaced former head Michael Cagney in 2018, as the company looks to move further away from dark clouds in its past established by lawsuits, sexual harassment claims, FTC penalties and chunky rounds of layoffs. In the past week, the company also announced that CMO and former COO, Joanne Bradford, will be leaving the company at the end of May, though the split was reportedly long-planned and amicable.
The launch of SoFi’s new investment products also comes just weeks after the company was reportedly in discussions to raise $500 million from the Qatar Investment Authority.
To date, SoFi has raised roughly $2 billion in venture capital, according to data from Crunchbase, with backing from a number of Silicon Valley and Wall Street heavy hitters, including SoftBank, Silver Lake Partners, Morgan Stanley, Founders Fund and a host of others.
Already at a valuation of nearly $4.5 billion, according to PitchBook, SoFi appears well on its way to an eventual IPO. Noto, however, noted in a recent interview with Yahoo Finance that “an IPO is not a priority at this point” for SoFi as the company remains focused on executing on a high-quality sustainable growth path.
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Dissecting what Lyft’s IPO means for Uber and the future of mobility
Extra Crunch offers members the opportunity to tune into conference calls led and moderated by the TechCrunch writers you read every day. This week, TechCrunch’s Kirsten Korosec and Kate Clark led a deep-dive discussion into Lyft’s IPO and the outlook for the business going forward.
After skyrocketing nearly 10% on its first day hitting the public markets, Lyft stock has faded back down towards its IPO price as some investors grow more concerned over the company’s path to profitability (or lack thereof) and the long-term fundamentals of the business. But Lyft’s public listing is bigger than just the latest in increasingly common unicorn IPOs. As the first public “transportation-as-a-service” company, Lyft offers the first inside glimpse into the business model and its economics, and its development may ultimately act as the canary in the coal mine for the future of transportation.
“Lyft, hasn’t just survived, they’ve grown. 18.6 million people took at least one ride in the last quarter of 2018. That’s up from 16.6 million in late-2016. That illustrates the growth that the company has had. They’ve also said that they have 39% share of the ride-sharing market in the US. That’s up from 22% in 2016.
To me, the big question is let’s say they had Uber’s share, which is 66%, would they be able to make a profit? Is that the determination? And I’m not convinced that it is, which is why all these other aspects of the transportation-as-a-service business model [micromobility, AVs, etc.] are going to be really important.”
Image via Getty Images / Mario Tama
Kirsten and Kate dive deeper into what the market response to Lyft means for Uber and the timeline for its impending IPO. The two also elaborate on their skepticism of ride-hailing economics and debate which innovative transportation model will ultimately drive the path to profitability for Lyft, Uber and others.
For access to the full transcription and the call audio, and for the opportunity to participate in future conference calls, become a member of Extra Crunch. Learn more and try it for free.
Danny Crichton: Good afternoon and good morning everyone this is Danny Crichton, executive editor of Extra Crunch. Thanks so much for joining us today with TechCrunch reporters Kate and Kirsten.
I’ll start with a quick introduction for our two writers today. We have Kate Clark, our venture capital reporter. Kate has been with us for a while now covering everything in the startup and venture world. She’s also one of the hosts of TechCrunch’s podcast Equity and also writes our Startups Weekly newsletter.
Our other writer today is Kirsten, our intrepid automotive writer covering all things Elon Musk, Tesla, and everything else in the autonomous vehicle space. Kirsten has also been with us for quite some time and also writes a newsletter that she just introduced in the last couple of weeks, around transportation. So with that, I’m going to hand off the conversation to the two of them now.
Kirsten Korosec: Thanks so much Danny. This is Kirsten Korosec here. The newsletter is in a bit of a soft launch but it is being published Fridays and we hope to have an email subscription coming sometime in the future, so just keep an eye out for that.
I should also mention I too have a podcast centered around autonomous vehicles and future transportation called The Autonocast that comes out weekly. Thanks so much for joining the call and just a reminder, we want participation. So at about the halfway point, we’ll turn and open up the line and answer questions. Let’s get started.
Before we dig into all the hot takes out there, I think it’s worth providing a primer of sorts — a general timeline of events. We all probably know Lyft of course and most of us think of 2012 as the launch date when it came to San Francisco, but really Lyft was build out of the service of Zimride. Which is the ride-sharing company that John Zimmer and Logan Green founded in 2007.
A lot of attention has been placed on Lyft in 2018 with what happened in the past year, in the run-up to the IPO. But I think it is worth noting the intense activity and growth that happened between 2014 and 2016. These are critically important years for Lyft, just a frenzy of activity in a period where the company gained ground, investors, and partners.
To showcase the amount of activity that was happening; Lyft had two separate funding rounds, one for $530 million another for $150 million, just two months apart in 2015. You might also recall in early-2016 its partnership with GM and the automakers’ $500 million dollar investment as part of the Series F $1 billion dollar fundraising effort.
That was really interesting because GM’s president at the time Dan Ammann took a seat on the board, which he has since vacated. As Lyft and GM started realizing that they were competitors. Now, Dan is the CEO of GM Cruise which is the self-driving unit of GM.
2017 and 2018 were also big years, as Lyft launched their first international market in Toronto. They made big moves on the autonomous vehicle front, which we’ll talk about today, and in micromobility. Their scooter business launched in Denver in 2018. They bought Motivate, which is the oldest and largest electric bike share company in North America. Then, we finally get to the end of 2018, and this is when Lyft confidentially files a statement with the FDC and we’re off with the races to the IPO.
The last two months or three months is when Lyft unveiled its prospectus, met with investors, priced its IPO and made its public debut. So Kate what are the nuts and bolts of the IPO and what’s happening right now?
Kate Clark: Hi everybody this is Kate. So I’m just going to mention really quickly the timeline these last couple of months in the run-up to Lyft’s highly historical IPO. So going back to December, that’s when Lyft initially filed confidentially to go public. We later find out that they are going public on the NASDAQ when they eventually unveiled their S1 in early March.
This is after Lyft had raised $5 billion in debt and equity funding at a $15 billion dollar valuation, so there are a lot of people paying attention to what was the first ever rideshare IPO. So then in early-March, we’re able to get a closer look at Lyft’s S1, which tells us that the company has $911 million in losses in 2018 and revenues of $2.2 billion. So after calculating and pulling together some data, a lot of people were quick to find out that that means Lyft has some of the largest losses ever for any IPO. But also has some of the largest revenues ever for any pre-IPO company, just following Google and Facebook in that category.
So this is a really interesting IPO for a lot of people given these sky-high losses but also these huge, huge revenues. The next we see Lyft price their IPO between $62 and $68 dollars a share. Some people were quick to say that that was maybe a little underpriced, given that this was a highly anticipated IPO with a ton of demand. So on the second day of Lyft’s roadshow, the process, they say that their IPO is oversubscribed. So demand is apparently huge, their oversubscribed, so they decide we’re going to increase the price of our shares.
Image via GettyImages / maybefalse
So Lyft then says they gonna charge a max of $72 per share and then on the day of their IPO they charge $72 per share, the next day opening at $87 per share. So we see a huge IPO pop that I don’t think was particularly surprising given that they already spoke of this demand, and we had already known that there was a lot of demand on Wall Street. Not just for Lyft but just for unicorn IPO’s of this stature, given that there are so few of these. So Lyft began trading hitting $87 per share though, if you’ve been following the news that’s not were Lyft is today.
Kirsten: Yeah so I was just about to ask — Kate give me the latest numbers, you know a lot of focus is on that opening day but things haven’t exactly sustained. So what’s happened in the past few days?
Kate: Yeah it’s really tough to manage expectations after an IPO. I mean, I think there has been a lot of criticism towards Lyft now and I think it’s trading below its initial share price. So as I mentioned Lyft opened at $87 per share, it priced at $72, but almost immediately they began trading below that $72 price per share. So they closed Tuesday trading at $68.96 per share. Still boasting a market cap larger than $19 billion. So they’re still significantly valued at more than they were as a private company at $15 billion but it doesn’t look good to be trading below a price per share so quickly.
However, it actually did hit its IPO price for just a minute today, so maybe let’s give it a few more hours and see where it closes. It’s possible that it will sort of jump towards that $72, but it’s still trading quite significantly below that $87.
Kirsten: With IPOs like this, and especially such a high profile one, there’s going to be a ton of attention on share price and on volatility. And so I’m wondering, in your view, what did this first week, or first few days of volatility say to you? What does it say about Lyft’s future and, well certainly, its present?
Kate: Yeah. I mean, it’s hard to say. I think a lot of people were questioning if Wall Street was going to be interested in a company like Lyft that’s extremely unprofitable at this time and has years left before it will reach profitability, if indeed it ever reaches profitability.
So at this point you got to wonder, do some of these investors that did buy Lyft right off the bat, were they really long on Lyft? Because it does look like a lot of those investors have already sold their stock and perhaps weren’t as invested in Lyft’s long-term profitability plan, which involves a lot of very iffy things, like the future of autonomous vehicles, which we’ll talk about later in this call. And there’s a lot of uncertainty there.
But with that said, it’s not uncommon for a stock to experience volatility right off the bat, and you can’t assume the future of that stock price just because of some early volatility.
And we gathered some examples of IPOs where there was some early volatility that did not determine the long term future. So Carvana, for example, which is an online used car dealer in the automotive space, and it did experience volatility at first, with the stock sliding in the first few months but ultimately trended upward.
Kate: So Carvana opened at $13.50 a share, falling below its IPO price, so it didn’t even have the IPO pop. And then in 2018, it hit an all-time high of $65 per share. Today, it’s trading around $58 per share, so that’s ultimately a positive story to be told there.
And then another example on the other side of things is Snap, which actually took four months to dip beneath its 2017 IPO price, and we all know Snap has definitely not been a success story and it’s trading well below its offer price. But then finally, Facebook, for example, dropped below its IPO price on its second day of trading and then actually had a rough first year on the stock market before the stock ultimately took off and became a very obvious success.
Kirsten: So, Kate, I’m wondering why you think that there was that initial run up on that first day. Was it excitement? Was there something material that was pushing the price up? What was the cause?
Kate: I think there was a lot of excitement and demand around this IPO because it was very much one-of-a-kind, and there were a lot of investors that it seemed were really long on the possibility of Lyft becoming this hugely profitable company. And I think a lot of that was because in the S1, although you did see these really, really big losses — quite major, just ridiculously huge losses — you did see that they were shrinking over time and that there was definitely a path in which Lyft could take where it would reach profitability, say, in the next five years.
And I think Wall Street was really paying attention to that, and they were not paying attention to some of the other metrics. Now, they’ve taken off their rose-colored glasses and they’re looking at Lyft as a public company, and it’s just a little bit different now that it’s actually completed its debut.
Kirsten: Well, so, I mean, I like to view IPOs often times, and especially in Lyft’s case, as a measure of an investors’ faith in the company’s growth prospects, because this is a company that while it does have quite a bit of revenue, it has significant losses and it’s really planning not just for the present day but for the future. It’s been called a disruptive business for a reason, and it is certainly very forward-looking. So I’m wondering if you think it was a good strategy for Lyft. They wanted to open it up to “the everyman” when they actually went to market. They did a different approach, and do you think this might have had an effect? I mean, it’s very on-brand for them to do this, but I’m wondering if you thought that means that some of the investors aren’t as disciplined.
Kate: Do you mean with the fact they were providing bonuses to their employees and drivers to actually participate in the IPO as well?
Kirsten: Absolutely. That’s actually a really good point that maybe you can elaborate on. Lyft did a little bit of a more open approach for its IPO. Typically IPOs can be closed off to only large, institutional investors. So did this set them up perhaps to have more volatility?
Kate: Yeah, Lyft provided some of their drivers up to, I think, $10,000 to, in theory, actually buy stock in the IPO. Do I think that had a high impact? I don’t know. I think there’s not enough comparison, not enough data to really make a decision or to make a hot take on whether that really was part of the volatility. I think just given the uncertain nature of Lyft’s future and their big losses, I think their volatility was pretty inevitable, and I think people paying attention to this are probably not particularly surprised by how the stock has fared in these first couple days.
And I do want to add there’s this six-month lock-up period for the venture capital funds that own Lyft and as well as their employees, so I think we’re not sure what’s going to happen when that lock-up period ends and those holders can just sell their stock right then or how that will impact the stock price, as well.
Image via TechCrunch/MRD
Kirsten: So something to keep an eye on. It reminds me a lot of a company I write a lot about, which is Tesla, and I’ve been covering them for years. And it’s one of the most volatile stocks, and their investors, they certainly have large, institutional investors, but the number of fanboys that they have with smaller investors, either prop up the share price sometimes or add to that volatility, and I’m kind of really curious to see if that happens with Lyft. If you go to a shareholder meeting at Tesla, for example, it’s filled with people who are passionate about the brand and its CEO, Elon Musk.
And Lyft and possibly Uber, if they end up finally going through with their IPO, you can see that potentially happening because people feel very strongly about the brand and also the service it provides. So I’m curious to see how this all sort of shakes out. And I tend to take the view that I invest personally in mutual funds and things like that. I don’t invest in any of these companies, but the long, patient view tends to be the better one, and trying to catch a falling knife, as investors have told me, is never really a good idea.
So I’m curious to see if investors sort of grow up and learn with Lyft, if they’ll become disciplined and just sort of wait it out and see them play out the growth prospects for the company in the long term. So, we’ve been talking about Lyft and I can’t not talk about Uber as a result. I’m wondering what you think this might mean for Uber. The big story initially was let’s beat Uber to IPO and I’m wondering what this means then. Is this indicative of what Uber is going to experience?
Kate: I think that question is really at the top of everyone’s mind right now, including my own. I will say that I still do think it was highly beneficial for Lyft to get out first. Because imagine if and when Uber does too experience volatility, which it probably will, if it were to have gone first, I think that would have frightened Lyft a lot more than Lyft’s volatility may or may not be frightening Uber. So, with that said, I think I’m of two minds right now with my thoughts on how this impacts Uber’s IPO. I think that if Lyft stock continues to be volatile and perhaps even falls lower than it already has. I do think that there is a chance Uber may ultimately decide to push its IPO back.
I think that for a few reasons, namely being that Uber is not in a huge rush to go public. They do have the ability to wait. They have filed to go public. So it’s likely to happen quite soon, but it may not happen in April as they are reportedly planning to do.
On the other hand, Lyft went public at like a $24 or $25 billion dollar market cap. Whereas Uber is going to debut at maybe a $120 billion dollar initial market cap. So these IPOs, although they are both ride hail IPOs and they are very similar companies in a lot of ways, they’re also very different and Uber is operating on an entirely different scale though it still is unprofitable. And has some of the same issues that, investors are probably noting about Lyft.
I think it’s either going to be that it’s maybe that they do decide to push it back or maybe that Uber is like, well we’re five times larger, six times larger. We have much larger statistics to show to investors. There’s just a chance it could go either way. I wish I had a better, more concrete answer, but I just don’t think we know yet.
Kirsten: Well I’m okay with not taking hot takes just a few days into this IPO. I think this is a good time to open it up to questions. While we wait for a question, I will do one quick follow up with you Kate. What do you think this means for Uber? Will it delay its IPO?
Kate: Right now, no, I don’t think they’re going to. But it’s like I said, it’s tough to say given that it’s only been a few days of Lyfts IPO. But no, I think you’ve got to imagine that they are ready to discuss the possibilities of Lyfts IPO and already planned ahead if there was volatility. They maybe already assumed that would happen, given that that’s not uncommon. So right now I’m going to say no, I don’t think they’re going to delay, but it’s certainly still a possibility.
Kirsten: Okay, great. I think another really interesting piece for Uber was their acquisition of Careem. This is a deal that was made right before their IPO, so it was shifting attention away from Lyft, just for a moment.
Why did Uber do this? Is this not a signal that they’re delaying their IPO? Is this just prepping for it? What are you hearing on it? I’m wondering if this might have just been a strategy to show the world investors, specifically potential shareholders, what the road ahead is going to look like. Or is it some other reason — Is it to justify their really big losses?
Image via Careem / Facebook
Kate: I think it’s the latter two things you said. Just to give some background Uber is paying about $3.1 billion to acquire Careem, which is a Middle Eastern ride-hailing company. So basically just the Uber of the Middle East. Uber does have a history of acquiring, smaller competitors like this in different markets where it’s not active, just as a way for Uber to quickly grow essentially.
So I do think it’s a big deal to make just before going public. So I guess we don’t know if they necessarily will go public in April, but I think it was a move to present to public market investors as a prep for an IPO, to show “we just acquired this company, here’s more evidence of future growth”. Like you mentioned, it’s definitely a justification of those huge losses that we know Uber has.
Kirsten: Thanks for that. Questions?
Caller Question: Hi there, so when we talk about looking ahead and moving towards profitability — what role, if any, do you think the acquisition of a scooter or other mobility companies will have for companies like Lyft and Uber?
Kirsten: That’s a great question. I think it’s going to be a huge piece of both of their businesses. A lot of people describe this as the first ride-hailing IPO. We need to stop calling this a ride-hailing company. These are transportation-as-a-service companies and they’re making money. But generating revenue as opposed to making profit is a totally different thing. When you start talking about ridesharing, it’s a tough business. With those it’s an asset-light business, right? They don’t own the cars and then they technically don’t employ these drivers.
But at the same time, as of 2016 only something like 1% of people in the US were using rideshare. So you see this opportunity, but they’re not pushing forward. There is a ton of car ownership still that’s happening. Yes, sharing has absolutely increased, but 17 million new cars were sold in the US last year. So scooters, bike share and other businesses are going to be key to their paths to profitability because ride-sharing alone is just difficult to make a profit. It’s not difficult to generate revenue. It’s difficult to make a profit on.
And I’m wondering, talking about that road to profitability, I do think it’s worth noting how much they have grown. Lyft, hasn’t just survived, they’ve grown. 18.6 million people took at least one ride in the last quarter of 2018. That’s up from 16.6 million in late 2016, that illustrates the growth that the company has had.
They’ve also said that they have 39% share of the ride-sharing market in the US. That’s up from 22% in 2016. To me, the big question is let’s say they had Uber’s share, which is 66%, would they be able to make a profit? Is that the determination? And I’m not convinced that it is, which is why all these other aspects of the transportation-as-a-service business model are going to be really important.
Kate: I think what you pointed out is important, about Lyft and Uber both becoming transportation businesses, not ride-hailing companies and I think their long-term visions involve scooters, bikes, autonomous vehicles, all sorts of different models of transportation beyond just car sharing.
Kirsten: I hate to be wishy-washy here and say, I don’t know, but I do really think that it’s going to come down to a variety of items all coming together. It’s just not going to be enough for Lyft to scale up its ride-hailing business. And I should point out that Uber should be treated in some ways the same way, but there are some distinct differences. But it’s important for us to think of Lyft as a transportation-as-a-service business. I mean they say in their prospectus that transportation is a massive market opportunity. The hard part of course is turning that into a profit. There might be opportunity there.
So there’s this asset-light business that they have right now, which is the ride-hailing, but then they are making acquisitions in the micromobility space and that is going to become more capital intensive. And that’s going to force them to change their business. And then there’s the autonomous vehicle piece. And then finally, I actually think that one of the pieces of their S1 that has really not received much attention at all is what they’re pursuing in terms of public transportation. And they have said that they, and Uber, intend on being a piece of the public transit ecosystem.
Now that doesn’t mean that they’re going to necessarily be operating buses, but there are people that I’ve talked to in the industry who actually feel like, in Uber’s case, they want to control every mode of transportation. For Lyft, I see them seeing more of the opportunity financially with the data piece and becoming more of a platform and becoming that one-stop shop where you use an app to figure out if you want to use the scooter or a bike, or ride-hailing or buy that ticket for the L in Chicago or the Bart System.
So I really think that the public transit piece often gets ignored and cities are having so much more control now and weighing in. We see this in New York City with congestion pricing. It’s going to force Lyft and Uber to take advantage of these opportunities and use their platform in a way that perhaps accelerates faster than they had intended.
Kate: I’m very interested in the public transportation element, but I’m also very skeptical of the scooters and bikes in the future for Lyft, I think, given the unit economics, I certainly wouldn’t rely on them to be Lyft’s path to profitability. I think autonomous vehicles are a much more interesting path towards profitability. So a lot of companies, Uber, Lyft, Waymo and more are focusing on autonomous vehicles and their development, whether that be with hardware or software. How does Lyft’s strategy with autonomous vehicles differentiate from some of their competitors or does it does differentiate?
Kirsten: It does differentiate, and the funny thing is, is that so you don’t see micromobility necessarily as the oath to profitability and are interested in AVs and I write about AVs, but I see that AVs as a harder path to profitability in a way because of the nuts and bolts that it takes to develop them.
So just to weigh in really quickly on the micromobility piece and then I’ll move on to AVs; To show the opportunity but also the volatility in a real-world example for micromobility, I was in Austin for South by Southwest, I think you were there too, and you probably saw scooters everywhere, right? 18 months ago there were no scooters or bike share in the city. Then bike share came first.
Image via Flickr / Austin Transportation / https://www.flickr.com/photos/austinmobility/41536051644/in/album-72157669223418248/
And I was talking to that mayor of Austin and one of the folks from Spin, which is a Ford owned business, and they told me something that was really remarkable that I hadn’t thought about, which was that scooters were disrupting the bike share business. So bikes share came in and then scooters came in and all of a sudden they’re pulling bikes off the streets because no one was using them or were not using them at the same level as scooters.
Lyft is going to go through these same exact growing pains and people are figuring out what works. And as you mentioned, the unit economics are an issue, the wear and tear on the scooters alone is driving up costs and driving down revenues certainly, but pretty much making it very difficult to make a profit on it.
But that’s a near term business, right? So it’s at least generating revenue right now. On the other hand, you have this other piece, which is the AV piece. Lyft is doing some really interesting things on the AV piece — they kind of have a two-prong approach.
So they basically created a ton of partnerships to use their platform. So this started a couple of years ago and companies like Aptiv, drive.ai, even Waymo and nuTtonomy, which Aptiv just recently bought about a year ago and GM, and Lyft basically allows developers to use their platform and connect to their autonomous vehicle and offer these rides.
And the best example of this, if you’ve been to CES or if you have been to Las Vegas I should say more specifically, is this partnership that Lyft has with Aptiv — and Aptiv as a tier one supplier, they used to be called Delphi, they spun out, they bought nuTonomy, and they’re Aptiv now. And this is taking Aptiv automated BMW, which are on the Lyft network. If you hail a ride, you might be asked if you want a self-driving car, or “are you okay with a self-driving car?” And they have a safety driver, no humans have been pulled away from it yet. But they provided about 35,000 rides since I want to say January 2018.
Then they’re also doing Level 5, a dedicated self-driving vehicle division that launched in 2017. And here they’re basically creating an open self-driving system or open SDS. On top of that, they have partnered with Magna, an auto parts producer, to develop these self-driving systems that can be manufactured at scale.
And so you just see a rush of partnerships and sort of dual approaches and all of that costs a lot of money. And I can’t emphasize the amount of money that it costs or will cost to develop these systems and deploy them commercially. And I hear from other companies figures like $5 billion to get self-driving vehicles. So developing the full stack, doing fleet management, maintenance, all of that — that’s a lot of money. And, I’m not sure where Lyft, will get that capital, will they get it from the open market or will they have to go and ask for more capital.
Kate: So when do you think then that Lyft will be able to commercialize autonomous vehicles?
Kirsten: The timeline? So depending on who you talk to, you can hear from any of these developers between five years and 30 years. I think it’s important to talk about language and how we talk about autonomous vehicles. So to be clear, there is currently not a single commercial autonomous vehicle deployment where a human being or safety driver has been pulled away from the wheel. It just doesn’t exist.
There are plenty of pilots and Waymo is probably considered the leader in that list, though it is a bit of a confusing one for me because they have so many partnerships and they’ve become competitors to some of those partnerships. The analogy I use is “Survivor,” the reality show. Everyone wants to make these alliances so they don’t get voted off the island.
And now we’re at that point where autonomous vehicle development has entered what we call the trough of disillusionment, which is heads down, “let’s get away from the hype, let’s do the hard work.” And I think we’re going to see a lot of those partnerships and headwinds really come up in the next year, 18 months. So to put a target date on Lyft, it’s really going to depend on which one of those partnerships really play out and are real. I think the one with Aptiv seems the most real to me based on what I know the company is doing and I can see them doing a lot more pilots in the next 18 months.
Does that mean commercial deployment without a human safety driver behind the wheel? I’m not sure I can see a lot more these pilots with a human safety driver expanding beyond Las Vegas. I see pilots happening absolutely in the next year to 18 months. The issue is going to be when is that human safety driver going to be pulled out and with which partner.
Kate: So should we open it up to questions again?
Caller Question: Hi, I was just wondering how we should think about the regulatory risks that might exist as these companies expand to new cities, new markets, or even the public transport use case you mentioned. Thanks.
Kirsten: The regulatory piece is an interesting one. Let’s talk about ride-hailing first. We’ve already seen the regulatory environment, in cities, push back against companies like Uber and Lyft. I think the congestion pricing model that just launched in New York City is going to be one to watch and could be something that will put pressure on, on businesses like Lyft.
Kate: I agree and just to speak, quickly on the scooters; I think the narrative around scooters has been pretty dominated by how cities have forced them out or cities push these strict regulatory barriers on them. And I think that’s still playing out very much. There are even some scooter providers that have had to pull out of cities that they worked very hard to get into in the first place. So I think that has slowed down some of the growth there. And given that Lyft has micromobility as such a key part of their road to profitability, I think that’s partially why I am a little bit skeptical of how that’s gonna play out.
Kirsten: One thing we’ve found, and something to consider for Uber as well, in the future, if any of these AV developers end up, filing for IPOs on their own — there’s been chit chat about Waymo someday doing that or GM cruise someday— the implications for all of these companies and their relationship with cities should not be ignored or undervalued.
And I think you see a bit of that playing out with the present day track we have, which is the ride-hailing scooters and bike share cities and transit agencies or the DOT of different counties finding that they are in a more powerful position than they’ve ever been before. And they are exerting that power.
And so you will see instances like Los Angeles where they have put forth a mandatory data sharing component if you want to operate in their city. This raises some privacy concerns by the way, but it also adds another cost to a company or certainly forces them to look at their business a little bit differently.
Then you start talking about AVs and where are they will operate, how they will operate, where are they will park, what type of vehicle will be allowed in the urban center. In places like Europe, there are strict emissions rules, so that’s going to go to an AV or hybrid profile. And it’s important to think about what that regulatory framework might be and acknowledge the fact that it’s really a mishmash.
There are voluntary guidelines on the federal level right now, but there were no mandates. And so it’s really left up to the cities, counties and states to decide how an AV might be deployed. It’s going to mean probably more lobbyists in DC working with federal folks to ensure that their business doesn’t get hamstrung as a result as well as more of a presence in those cities and states and counties.
But Kate, I’m wondering what is your view from a startup perspective? Do you think of Lyft as a startup anymore are they acting like a startup or are they acting like a company that could handle all of these different complicated, various challenges? I mean, we’ve got pricing pressure, regulatory pressure or you’ve got AV development, opportunities with scooters and all this other stuff. So are they acting like a company that is able to handle this?
Image via Getty Images / Jeff Swensen
Kate: That’s an interesting question. I mean, they’re definitely not a startup anymore by, by anybody’s definition. You maybe could have still used that word, if they were still private, but even then, I know many people would yell at you for using that term for a company worth $15 billion. But now it’s a public company. It’s not a startup. I don’t think they’re acting like a startup, no. I think that they are mature in the way that they’re handling all of these different, so-called paths to profitability.
But we need to wait and see. Let’s see how this year goes, let’s see how they handle all the criticism that they’re going to undoubtedly take from Wall Street or from everyone who’s either interested in buying or just taking a seat and watching how the stock favors and then we’ll know what kind of lessons they took from all those years as a private company. Then we can decide if their behavior is really that of a mature public company.
Kirsten: I do want to make one point that I think is an interesting one on Lyft’s strategy versus Uber is in terms of AVs. Let’s all put a big asterisk that says no, AVs are still a ways out. It is important to note the Lyft and Uber’s strategies for AVs are wildly different and Uber does not take this dual approach. Uber is throwing a ton of capital towards developing their own, self-driving stack and also they’ve done, some acquisitions as well.
They’ve also had quite a bit of trouble. Last year Uber had the first self-driving vehicle fatality that happened in Tempe, Arizona, which looked like it was going to derail their self-driving unit, but it did not. They’re back, testing in a very limited way, but Lyft’s is all about what they call the democratization of autonomous vehicles.
And we can look at that as marketing speech, but I do think that it’s important to look at those words because it shows what their business model is. Their business model is partnerships, alliances, opening up the platform and casting the widest net possible. What I’m very interested to find out is which approach will end up being the winner. It’s going to be a very long game. It’s not going to be anything that’s going to be determined in the next year. I think what Lyft’s proven is that when they look like they’re down and out, they come back.
We’ll see what the better approach is. Do you do everything in-house and launch your own robo-taxi service? Or take capital partners on or do the Lyft approach, with multiple partners? Are partnerships actually too complicated? As someone who covers the startup world, do you have a thought on which one might work or not?
Kate: I have no idea which will work better and I’m sort of excited to see where this all goes, especially as Uber and Lyft are now going to be public.
That’s a good spot to end the call on.
Kirsten: Thanks so much for joining. Thanks again for being Extra Crunch subscribers, we really appreciate it. Bye everyone.
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