Lyft

How it works

Riders must download the Lyft mobile 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). Passengers can then request a ride from a nearby driver. Once confirmed, the app shows the driver's name, ratings by past passengers, and photos of the driver and car. Drivers and passengers can add personal information to their profiles about their hometown, music preferences, and other details to encourage drivers and passengers to converse during the ride. After the ride is over, the rider is given the opportunity to provide a gratuity to the driver, which is also billed to the rider's payment method.

Lyft offers three types of rides within the app:

Safety

One tenet of Lyft’s platform is establishing trust among its users. All drivers undergo the following screening processes:

Ratings

After a ride is completed, drivers and passengers are given the opportunity to rate each other. Any driver averaging a low rating by users is dropped from the service.

Insurance

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. Additional coverage includes:

Establishment

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 carpools 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. To use Lyft, clients must set up an account that links directly to a funding source such as a debit card or PayPal account. Once the ride is completed, funds are debited from the funding source. Lyft then retains approximately 20-25% (20% from drivers who applied before January 2016 and 25% from those who applied starting January 2016) of this total as business revenue.

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." In December 2016, Lyft introduced a new color-changing dashboard indicator called "Amp."

Financing

Lyft 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.

Financing history

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 Fund. 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, which 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.

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. In September 2013, the California Public Utilities Commission unanimously voted to make the agreement permanent, and created a new category of service called Transportation Network Companies, making California the first state to recognize and regulate such services.

The Washington, D.C. City Council passed emergency legislation in September 2013 to allow ridesharing platforms like Lyft to operate.

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 May 2014, Lyft signed a temporary operating agreement with the city of Detroit that allows operation under a specific set of rules for two years or until new regulations are developed.

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.

Other cities and states such as Austin, Nashville, Tulsa and Illinois have passed laws to regulate or outlaw Lyft and other TNCs.

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.

Self-driving car research

On May 5, 2016, Lyft and General Motors announced, as part of their partnership, that they planned to begin testing self-driving cars within the next year. They were considering using a self-driving Chevrolet Bolt for this purpose.

Financial results

In 2014, the company said it had grown ride numbers and revenue five fold. In January 2017 the company announced it facilitated 160 million rides combined in all cities where it operates.

Competition

Lyft faces competition from Uber, Via, Haxi, Dryver, and other car-service startups. Lyft's global alliance includes China's Didi Chuxing, India's Ola Cabs and Southeast Asia's Grab.

Reception

In 2013, San Francisco Mayor Ed Lee proclaimed July 13 as Lyft Day.

Beyond its fundraising and user adoption numbers, investors and commentators have praised Lyft's sense of "community". 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." Others have protested the impact of Lyft and its competitors on the taxicab industry.

Political involvement

In 2017, Lyft pledged to donate $1 million to the ACLU in response to the executive order signed by President Donald Trump.