Lyft Burning Cash On The Way To $500 Million Round

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Lyft is raising a half a billion dollar round, but its financials look wobbly. According to Bloomberg, the ridesharing startup took a net loss of $127 million in the first half of this year, off less than $47 million in revenue.

It’s not clear if these numbers are GAAP or non-GAAP, but let’s presume those are cash numbers and do not take into account non-cash expenses. So on a GAAP basis, it could be worse. In any case, based on the report, Lyft is bleeding internally as it tries to convince investors to give it a giant mountain of money.

The New York Times first reported that the ridesharing startup was looking to raise $500 million at a $4 billion valuation and we’ve heard from our own sources to that effect. Lyft raised $150 million in May, putting the ridesharing startup at a $2.5 billion valuation.

Lyft co-founder John Zimmer said earlier this week the company reached an annualized gross revenue run rate of $1 billion in October. As we reported yesterday, Lyft’s share of the $1 billion in aggregate commerce on its service would bring it close to $200 million if you take into account a 20 percent cut on transactions.

Bloomberg obtained a financial presentation from Credit Suisse showing Lyft ripped through tens of millions of dollars in early 2015 and that it has not come close to hitting its own financial goals.

“The company has a history of losses and is not projected to be profitable in the foreseeable future,” reads a report obtained by Bloomberg.

Much of that spend was on marketing. According to the report, Lyft spent more than twice its net revenue for marketing purposes. Lyft has been subsidizing rides in hopes of luring in new customers and keeping users coming back for more. The startup spent some of that budget on pricey billboard ads in NYC’s Times Square and on Market Street in San Francisco this year and subsidized customer rides. Lyft Line is just $6 throughout San Francisco and the carpooling service started out offering $5 rides in New York. Lyft often pays its “driver partners” more than what the customer pays for Line rides.

All of this adds up to possible jeopardy as Lyft proceeds to curry financial favor.

That’s not to say the startup is doomed. Plenty of startups bleed cash. But it does mean Lyft’s focus on carpooling may be costing the company a whole bunch more cash than we thought.

Lyft’s rival Uber is also rumored to be raising a giant new $1 billion round, expected to close by the end of this year. This is right on the heels of a $1.2 billion round from Chinese company Baidu in September. According to a source, the new round would value Uber at a whopping $70 billion on paper.

The $4 billion Lyft valuation is still being negotiated and could change. One source put the number closer to $4.5 billion. However, if that number sticks, it would value Lyft a half a billion more than Uber was at this stage.

Lyft declined to comment on this story.