|Industry||Transportation Network Company (TNC)|
|Founders||Logan Green, CEO
John Zimmer, President
|Headquarters||San Francisco, California, United States|
|Revenue||US$ 800 million (2015)|
Lyft is a privately held American transportation network company (TNC) based in San Francisco, CA. Launched in June 2012 by Logan Green and John Zimmer, the company's mobile-phone application facilitates peer-to-peer ridesharing by connecting passengers who need a ride with drivers who have a car. Lyft now operates in over 200 U.S. cities, including San Francisco, Los Angeles, and New York City, and is valued at $5.5 billion. As of January 2016, Lyft had raised more than $2 billion from investors General Motors ($500M), Alibaba, Andreessen Horowitz, Coatue Management, Didi Kuaidi, fbFund, Floodgate, Fontinalis Group, Fortress, Founders Fund, GSV Capital, Icahn Enterprises, Janus Capital Management, K9 Ventures, Mayfield Fund, Prince Alwaleed's Kingdom Holdings Company, Rakuten, Tencent, and Third Point Ventures.
Lyft was launched in the summer of 2012 by Logan Green and John Zimmer as a service of Zimride, a ridesharing company the two founded in 2007. Zimride focused on ridesharing for longer trips, often between cities, and linked drivers and passengers through the Facebook Connect application. Zimride eventually became the largest rideshare program in the United States (U.S.).
Lyft launched as an on-demand ridesharing network for shorter trips within cities. Similar to Zimride, the app connects drivers with cars to passengers that need rides. Drivers and passengers rate each other on a five-star scale after each ride, and the ratings establish the reputations of both drivers and passengers within the network.
Due to regulatory hurdles in New York City, the company eventually decided to significantly alter its business model to establish Lyft on the East Coast. Lyft’s launch in New York City occurred on the evening of July 25, 2014 and, in accordance with the Taxi and Limousine Commission (TLC) and the approval of the Manhattan Supreme Court, only drivers registered with the TLC were permitted to drive Lyft-branded vehicles in New York City. Instead of Lyft's signature pink mustaches, Lyft drivers in New York City sported a smaller pink mustache on their dashboards, which eventually evolved into the “glowstache,” the company’s current icon on its cars.
In May 2013, Lyft completed a US $60 million Series C venture financing round led by Andreessen Horowitz; the other investors were Founders Fund, Mayfield Fund, K9 Ventures, and Floodgate. In July 2013, Lyft sold Zimride to Enterprise Holdings, the parent company of Enterprise Rent-A-Car, to enable the company to focus exclusively on the growth of Lyft.
In April 2014, Lyft completed a $250 million Series D financing round led by Coatue, Alibaba, and Andreessen Horowitz, bringing its total amount raised to $332.5 million. A $530 million investment led by Japanese online retailer Rakuten Inc. in March 2015 and an additional $150 million led by a $100 million investment from Carl Ichan in May 2015 brought the total raised to over $1 billion and the valuation to $2.5 billion.
On January 4, 2016, Lyft announced a partnership with U.S. automaker General Motors, who invested $500 million as part of a $1 Billion fundraising effort. The partnership is designed to help both companies accelerate in the ride-sharing market, as well as the autonomous car arena. In conjunction with GM's investment, Prince al-Waleed bin Talal of Saudi Arabia also made an investment in Lyft which included the purchase of $148 million worth of existing stock from Andreessen Horowitz and Founders Fund.
One tenet of Lyft’s platform is establishing trust among its users. All drivers undergo the following screening processes:
- Department of Motor Vehicle, national sex offender registries, and personnel-type criminal background checks. The criminal background check goes back seven years and includes national and county-level databases, as well as national sex offender registries.
- In-person interviews with current Lyft drivers.
- Drivers must be 21 years or older and have had a driver's license for more than 1 year.
- Zero-tolerance drug and alcohol policy.
Although Lyft drivers are classified as independent contractors, Lyft also insures each driver with a $1 million commercial liability policy that is primary to a driver’s personal policy. Any driver averaging a low rating by users is dropped from the service. Additional coverage includes:
- Contingent comprehensive and collision coverage up to $50,000 with a $2,500 deductible. (Applies from the time a driver accepts a ride request until the time the ride is ended in the app.)
- Contingent liability coverage up to $50,000 per person/$100,000 per accident/$25,000 property damage. (Applies from the time when a driver flips into driver mode until the driver accepts a ride request.)
- Uninsured/underinsured motorist coverage up to $1 million. (Applies from the time a driver accepts a ride request in the app until the time the ride is ended in the app.)
Riders must download the Lyft app to their iOS or Android-based phone, sign up, enter a valid phone number, and enter a valid form of payment (either a credit card, or link to a Google Wallet or PayPal account). When a passenger wants a ride, he or she opens the app and requests a ride from a nearby driver. Once confirmed, the app shows the driver's name, their ratings by past passengers, and photos of the driver and their car. In March 2015, Lyft announced the ability for drivers and passengers to add personal information to their profiles about their hometown, music preferences and other details to encourage drivers and passengers to connect during the ride.
Lyft offers three types of rides within the app:
- For a discounted price, Lyft Line (currently available in cities such as Atlanta, Austin, Boston, Chicago, Denver, Los Angeles, New York, San Francisco, and Washington D.C.) will match passengers with other riders if they are going in the same direction.
- Lyft is the original offering that matches passengers with nearby drivers.
- Lyft Plus will match passengers with a six-seater car.
Regulatory opposition and momentum
Like many peer-to-peer startups, Lyft faces legal and regulatory hurdles and has been criticized by established commercial enterprises, including taxi services. In the fall of 2012, the California Public Utilities Commission issued a cease and desist letter to Lyft (along with Uber and Sidecar) and fined each $20,000. However, in 2013 an interim agreement was reached that reversed those actions.
In June 2013, Lyft, Uber and Sidecar were served with cease and desist letters by the Los Angeles Department of Transportation. Despite this, all three companies continue to operate and offer their services in Los Angeles.
In September 2013, the CPUC unanimously voted to make the agreement permanent, and created a new category of service called Transportation Network Companies to cover Lyft, UberX, Summon, and Sidecar—making California the first state to recognize such services.
The Seattle City Council passed an ordinance in March 2014 that capped Lyft drivers on the road at any given time to 150. As that failed to function with Lyft's model, the company supported a coalition that submitted a referendum containing 36,000 signatures from residents that called for the ordinance to be appealed. Following the signatures, Seattle Mayor Ed Murray worked with Lyft to reach a deal in July 2014 that legalized ridesharing in Seattle.
In the spring of 2014, Lyft hired two lobbying firms, TwinLogic Strategies and Jochum Shore & Trossevin, to address the regulatory barriers and opposition it had received since its launch.
In June 2014, Colorado became the first state to pass rules for TNCs through the legislative process, when S 125 was signed into law.
In July 2014, the Minneapolis City Council voted almost unanimously to legalize Lyft and other Transportation Network Companies.
In September 2015, Lyft announced a relocation of their customer service operations to Nashville, and mentioned that a full relocation would be possible in the future from San Francisco.
In December 2015, Lyft became the first ride-hailing service allowed to pick up passengers at Los Angeles International Airport.
Lyft, like other ride-sharing services, has been criticized by government officials for operating what they consider to be unlicensed taxi services. For example, upon expansion into Virginia in April 2014, the Virginia Department of Transportation levied a $9,000 civil penalty against Lyft for failure to register as a transportation broker. Virginia DoT had previously communicated with the company and informed it that it had to register in order to provide services inside the Commonwealth. In August, state officials reversed their ruling and allowed Lyft to operate in Virginia.
In 2016 Lyft offered promotions to attract public transit customers affected by transit service disruptions. During Washington Metropolitan Area Transit Authority's SafeTrack construction Lyft offered deep discounts in the areas impacted, and after Massachusetts Bay Transportation Authority ended late night service Lyft discounted trips during the overnight times impacted.
In 2014, the company said it had grown ride numbers and revenue by five times.
Self-driving car test
On May 5, 2016 Lyft and General Motors announced, as part of their partnership, that they planned to begin testing self-driving taxis within the next year. They were considering using a self-driving Chevrolet Bolt for this purpose.
Beyond its fundraising and user adoption numbers, Lyft has received acclaim for creating a community that makes transportation a more welcoming, uplifting and fun experience. Scott Weiss of Andreessen Horowitz said the venture capital firm ultimately decided to invest in Lyft because of its strong community and transparency. He wrote in his blog, "Lyft is a real community—with both the drivers and riders being inherently social—making real friendships and saving money."
Drew Olanoff of TechCrunch wrote, "You feel like you're in the car with a friend, and that's no mistake...Whether it's bringing someone a sandwich for the ride or letting them choose the music in the car, Lyft drivers have their own budding community growing." Jessica Gelt wrote in the Los Angeles Times, "Lyft's marketing strategy, which is geared toward the young and technologically savvy, draws a relaxed and friendly demographic."
- Collaborative consumption
- Online platforms for collaborative consumption
- Sharing economy (commercial peer-to-peer mutualization systems)
- Summon (company)
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