It was almost one year ago (to the day!) that my colleague Kim Mai-Cutler wrote our first story on Lyft, and how the company was going to offer some lower-priced competition to on-demand ride leader Uber in San Francisco. Now, 366 days later, Lyft is celebrating the anniversary of that launch with some huge news: It’s raised a $60 million round of financing led by Andreessen Horowitz.
The new funding will give Lyft a huge shot in the arm as it plans to expand aggressively both in the U.S. and internationally, according to founder John Zimmer. And it will have Andreessen Horowitz to help, as a16z general partner Scott Weiss will be joining the board and the firm will be lending some of its operational experience to Lyft as it scales up.
“Andreessen Horowitz has demonstrated that they are the top VCs in the world to work alongside entrepreneurs and build real and established businesses,” Zimmer told me. “It’s great to work alongside someone like Scott, and Mark and Ben, who have built really large companies and are willing to roll up their sleeves and work alongside us.”
“This is why [Andreessen Horowitz] came together as an organizing principle. All of us have scaled companies,” Weiss said. As it pertains to Lyft and its growth moving forward: “Now it’s an execution play of bringing this out to the entire world. It’s about, ‘How do you bring in management talent and move faster than you thought you could?’ We’re going to put the full weight of the firm behind [Lyft] doing that.”
In addition to its new funding from Andreessen Horowitz, Lyft is also confirming a $15 million round led by Founders Fund, which we reported on earlier this year. Altogether, the company has raised a total of about $83 million since being founded as Zimride in 2007. Along with Weiss and founders Zimmer and Logan Green, the Lyft board of directors also includes Founders Fund principal Geoff Lewis, as well as Raj Kapoor, who had invested in the company as managing director of Mayfield Fund.
30,000 Rides A Week
The funding comes as Lyft is already growing rapidly in all of its markets, including San Francisco, where it competes against ride share offerings from Uber and SideCar. There’s also growing adoption of taxi e-hail apps such as Flywheel and hybrid taxi-community app InstantCab. With mounting competition, Lyft has more than doubled its number of drivers in its launch market, and is still trying to keep up with demand.
The incredible growth that Lyft has shown is one thing that impressed Weiss and Andreessen, as they evaluated the company for investment. “Two months ago, they were doing 14,000 rides a week,” Weiss told me. “Now they’re doing 30,000 rides a week.”
Lyft is also seeing fast adoption in new markets. It launched service in Los Angeles in January, Seattle in March, and Chicago earlier this month. In each case, both the number of drivers and passengers who have signed on in the first several weeks of a new market has outpaced the market that preceded it.
With the new funding in place, Lyft plans to accelerate its expansion schedule. The company brought on Cherry co-founder Travis VanderZanden to lead operations and, with three or four launches under its belt, the team thinks it’s got its expansion playbook down. Lyft will be hiring in all aspects of its business — community, engineering, operations, and public policy — as it plans to scale globally. Yes, globally.
While it plans to expand into a number of new markets, the Lyft team recognizes that there will be challenges on the regulatory front as it attempts to get regulators on board with the idea of on-demand ride-sharing services. Competitor SideCar has faced regulatory scrutiny in a number of new markets that it has launched in, including Austin, Philadelphia, and New York City.
So how does Lyft plan to convince regulators that its service should be allowed to operate? Safety is key.
“I think this is the year for a lot of that [regulation] to get ironed out,” Zimmer told me. “Our approach is and always will be to work together with regulators and stress what’s important, which is safety. I think technology can actually get us to a safer place.”
For Lyft, that includes background checks and driver safety checks. But the company goes above and beyond that, trying to hire drivers who are actually, you know, friendly and nice to talk to. And, of course, it ties everything back to an identity layer, requiring all drivers and passengers to connect to a Facebook account. That helps to ensure that, even if something does go wrong, Lyft has a way to identify both parties in the case of a ride gone bad.
Weiss admits that requiring someone’s real identity through Facebook Connect could limit the potential market in some ways, but it also builds a required level of trust between driver and passenger. Breaking that trust barrier is necessary when you’re talking about peer-to-peer services, and Lyft appears to have succeeded. For instance, more than 50 percent of Lyft passengers are women, Weiss notes.
So far, its safety record is one of the main reasons that Lyft has won over regulators in jurisdictions like California. And it’s a key part of Lyft’s plan to get regulators in upcoming expansion markets to allow ride sharing in their cities.
Airbnb for transportation?
Lyft has plenty of work ahead, Zimmer admits. But he’s confident that the company is on the right track to bring peer-to-peer rides to the world, and in doing so, fundamentally improve the transportation industry. About 80 percent of seats in cars are empty today, and Lyft wants to change that. The funding is just a small part of what will help get the company there, as Lyft is still on “page one” of a 100-page story, Zimmer says.
“For us, raising money is not what we set out to do,” Zimmer tells me. “We want to change the world and create a new form of transportation. Now we have all the ingredients we need to build out our community and make transportation more affordable and efficient.”
For Weiss, the idea of establishing a peer-to-peer marketplace around transportation was fundamentally different from what others in the space were doing and is part of what attracted him to Lyft’s model. “It wasn’t that Lyft was using smart phone technology to make existing transportation systems [like cabs and limos] better,” Weiss told me. “It was using the existing capacity of cars already on the road.”
The end result, they hope, will be a more efficient use of existing resources. In that way, Lyft reminds Weiss a whole lot of Airbnb, another company that Andreessen Horowitz made a big bet on. Will Lyft do to transportation what Airbnb did to the tourism and hospitality industry? Only time will tell, but the folks at Andreessen Horowitz sure hope so.