Late in July at its new headquarters in San Francisco's Mission Bay neighborhood, Lyft served pink martinis and prosciutto to around 40 reporters, public relations specialists, driver partners, and Lyft staff at an early-evening happy hour celebrating the ride-hailing startup's four-year anniversary.
The gathering capped off what was later reported as a record-breaking month for the the company: 14 million rides, an uptick in full-price rides taken, and a $400 million to $500 million run rate by Recode's calculations. It also came amid two major news stories. First, that Lyft had hired investment bank Qatalyst Partners, spurring speculation the company was exploring a sale. Subsequently, Uber merged its China business with Didi Chuxing, a Lyft partner and investor, meaning that Lyft could be part-owned by its archrival.
Lyft says it will evaluate its partnership with Didi over the coming weeks. While Lyft never operated services in China, the complication adds heat to a U.S. market some say is winner-take-all, where one company has a valuation more than 10 times that of the other. Still, Lyft (early tagline: "Your friend with a car") launched with a considerably different style and business model than Uber's original black-car service. In considering the future of Lyft, those early differences matter. Lyft's path forward could look a lot like its origins.
"This is like our life's work," Lyft cofounder and president John Zimmer tells Inc.
Zimmer and co-founder and CEO Logan Green launched Lyft in 2012 as Zimride Instant, which evolved from the pair's long-distance ridesharing platform for college students, Zimride. Instant, soon renamed Lyft, was a peer-to-peer mobile solution for short trips, and started with the same goal as its predecessor: To end car ownership. Zimride sold to Enterprise Holdings in 2013.
From a swivel chair in one of the many identical 10-by-10 conference rooms at Lyft's labyrinthine offices, Zimmer declined to comment specifically on the rumors Lyft is entering merger and acquisition territory. But he points to his and Green's consistency of vision beginning with their founding of Zimride as an indication of what's to come.
"When we think about all the potential paths for our business, we think about what maximizes our vision, our ability to impact the future of transportation, our ability to impact the future of our cities," he says. "And to date, that has been being an independent company that innovates and brings about that change."
Noticeably absent from Zimmer's rhetoric is the desire for ubiquity. Whereas Uber CEO Travis Kalanick has spoken about seeing every car uberized and the company has extended its tendrils into areas like delivery, Zimmer is careful to delineate distractions and define the limits of Lyft's goals. He lists international expansion and food delivery as areas that Lyft generally avoids.
Diverging business models
In practice Lyft, with a present valuation of $5.5 billion, looks like a smaller Uber, last valued at $66 billion. The two apps offer the same features for riders, and reports indicate Lyft and Uber drivers average comparable hourly pay. Both companies claim relatively large percentages of drivers are part-time: Lyft says 80 percent of theirs drive 15 hours or less, while Uber says 60 percent of their drive 10 hours or less. The most striking difference between the two companies is probably Lyft's onboarding process, which includes a training ride where a new driver rides with someone more experienced.
NYU Stern School of Business Professor Arun Sundararajan, author of The Sharing Economy, believes the carbon-copy feel of Uber and Lyft is temporary and attributes it to present competition for drivers.
"I think that [Lyft] could coexist with Uber and the business models are likely to look quite different in the long run," he says. He looks at future changes through the lens of car ownership rather than disruption of the taxi industry: Uber might own a fleet of cars and hire full-time drivers; Lyft will continue to rely on part-time drivers using their own vehicles.
Perhaps the best illustration of how Lyft will distinguish itself moving forward lies in the company's thinking surrounding self-driving cars. Lyft announced a partnership earlier this year with GM to test a fleet of self-driving vehicles on public roads. (Some think GM, which has invested $500 million in Lyft, is a likely candidate to acquire Lyft.) Uber is also testing self-driving vehicles.
Zimmer says that Lyft's view of self-driving vehicles' immediate future contrasts with ideas of a "magical autonomous car [that] drops out of the sky and does everything," and also of cars with autonomous software that theoretically improve over time in the model of Tesla's Autopilot. He wouldn't speak to Lyft's specific plans with self-driving technology, but said he envisions the first step for mainstream autonomous rides as fixed routes, similar to bus routes, with restrictions for speed and weather conditions under which the vehicles would operate.
"Until the car can do everything for one trip type, we're not that interested," he says. Even once that technology is developed, he estimates that will leave 95 percent of Lyft's rides to still be controlled by a human driver into the relatively distant future, filling in gaps not covered by autonomous routes or public transportation. Ultimately he envisions a future of transportation-as-a-service, where riders purchase mileage packages similar to minutes plans with cellphones.
A hurdle Lyft would encounter in introducing self-driving systems is one Zimmer and Green are familiar with: Trust issues. When Lyft first launched, recalls the company's director of marketing strategy & operations Gina Ma, "it felt like really asking people to participate in this really big sort of social experiment almost--the idea of doing these things that your mom always told you not to do." Don't ride with strangers, for example.
In launching Zimride, Zimmer and Green solved the issue of anonymity, which kept many from using the major competing option of Craigslist rideshare, by attaching profiles to riders and drivers. Lyft also engendered trust with riders, Zimmer says, through background checks of drivers.
Regarding the challenges of Lyft's dwarfed role in a notoriously competitive duopoly, Sundararajan says it's early days yet. Even in tech, Lyft is "an incredibly young company." No one even paid attention to Google until it was around five years old, he adds.
So while some might tout the competitive advantages of Uber in a winner-take-all market or predict a general plateau in demand for ridesharing services, Sundararajan foresees a wildly transformed transportation market with room for Lyft, Uber, and possibly other players to compete.
Zimmer's perspective aligns with that vision.
"This is like a four lap race, and you know we're probably in the second lap. And if you're in your second lap and you get distracted and you look to your right because someone's screaming over there, that's going to be bad," Zimmer says. "But we've just stayed very focused on the race we're running, because we intend to win it."