Lyft announced the close of its $1 billion Series F round today – half a billion of which came in from General Motors. The ridesharing service is now worth a whopping $5.5 billion and plans to use the money to work with GM on a connected network for self-driving cars.
The other $500 million came from Saudi Prince Al-Waleed’s Kingdom Holding Company, Janus Capital Management, and previous investors Didi, Rakuten, and Alibaba.
The funding from GM helps form a long-term strategic alliance to build out a connected, ownerless car service with Lyft. GM has been working on autonomous vehicle technology and will now start testing autonomous Chevy Volts on several of its campuses in 2016 – though GM did not want to give a date for when these vehicles might be available to consumers.
This is a very interesting development, considering Lyft CEO Logan Greene has said in the past that most people wouldn’t buy self-driving cars. Seems he believes Lyft and GM will be the future providers for these vehicles and we will all be summoning them on our smartphones instead.
So what’s in the Lyft deal for GM? The vehicle manufacturer wants in on the rideshare business and Lyft is offering GM a ridesharing platform for GM’s self-driving vehicles.
“We’ve seen the growth in the ridesharing space and in particular, Lyft is growing faster than anybody else,” GM president Dan Amman explained about the investment to TechCrunch. Lyft says it is growing 3x’s faster than any other ridesharing service with a 14x year-over-year growth rate in New York City and a completion of 7 million rides each month (or 84 million a year). Keep in mind Uber, 2.5 years older than Lyft, just completed its billionth ride.
“With GM and Lyft working together, we believe we can successfully implement this vision more rapidly,” Amman said.
GM also has OnStar, a built-in communication network. The vehicle manufacturer sees an opportunity to use its OnStar network as a tool on the ridesharing platform. Lyft plans to use part of the new funding to create what it aptly calls an “Autonomous On-Demand Network” to use for picking up passengers with GM’s self-driving vehicles.
[graphiq id=”iCu3NJSJALr” title=”Lyft Inc.’s Funding – Peer Comparison” width=”600″ height=”674″ url=”https://w.graphiq.com/w/iCu3NJSJALr” link=”http://listings.findthecompany.com/l/32811883/Lyft-Inc-in-San-Francisco-CA” link_text=”Lyft Inc.’s Funding – Peer Comparison | FindTheCompany”]
But there’s more to the new alliance than a fleet of self-driving cars to pick you up at the push of a button. GM and Lyft also see a different vehicle ownership model coming into play for human drivers in the near future. It’s a sort of rental model that Lyft believes will provide wheels for drivers who want to earn money but don’t want to (or can’t) take on full car ownership – and GM would like to provide temporary cars for those drivers.
Beginning immediately, GM will provide Lyft drivers with a “rental hub” as a preferred provider of short-term vehicles in various U.S. cities and GM will provide these drivers with OnStar services, which provides emergency, security and navigation services through a connected network.
Any type of rental deal for drivers would likely end when the self-driving cars take over and thus no need for human drivers – but Lyft could always buy or rent these self-driving cars from GM.
Lyft’s co-founder John Zimmer didn’t think a scenario where there were no more human Lyft drivers would happen for several years, but some in the self-driving space – including Elon Musk and YC’s Sam Altman believe consumers will be in autonomous vehicles as soon as the next two to three years.
Of course, that’s only if the industry can overcome any sticky regulatory problems such as the recently introduced California bill requiring drivers to be present in self-driving vehicles. If we really are that close, and we can get over a few regulatory humps, that could truly change the on-demand ride industry and set Lyft and GM up for something unique.
Uber also sees the opportunity to create a network of driverless cars but is taking a different route to get there. Rather than buddy up with an already established car manufacturer, the rideshare giant is making its own fleet of self-driving vehicles. Of course, with more in the bank than Lyft is currently worth on paper, it has the money to do so.
It’s appropriately on brand for the warmer, pinker, fuzzier Lyft to create partnerships and take in money from strategic allies – be it a vehicle manufacturer or an established rideshare service like it did with Didi in China (Lyft and Didi allow passengers to use each other’s platform when visiting each other’s territory) and for the darker, seemingly more button-up Uber to not do that.
Of course, that also means Lyft is subject to focusing on just the U.S. for now, instead of a wider global expansion. Meanwhile, Uber has expanded to 68 countries – but not without trouble, even violent outbursts in some places like Paris.
Will Lyft’s cross-pollination approach work in the long-term or will Uber’s quick, partnerless expansion and plan to build its own cars win in the end?
It’ll be interesting to see which path ultimately works best. But now Lyft has a billion more dollars in the bank and a significant investor, which by the way produces vehicles in more than 30 countries, and could help the ridesharing service build out a network that may position it well for an eventually autonomous future.