Lyft Files S-1
sec.gov
sec.gov
Not as bad as snap but what could they possibly be spending $100 million a year on?
~400PB of data in S3.
~2600 bare metal "x1 type" ec2 instances running 24/7, 3 year upfront reservation.
~60M Write IOPS in dynamodb
~300M Read IOPS in dynamodb
~3500 16xl RDS aurora instances
Again, each of those is spending the entire budget on a single service, but that seems like a nonsense level of spending.
Maybe they really have that much data. Maybe they have 100PB of data in S3. Assuming 1B rides since day 1, that's 100MB per ride, which seems high. If the average ride is 20 minutes, that's 80KB per second. That would be 25% of the budget.
But assuming they generate 80KB/s/ride, that's ~1MB/second (assuming 1M rides/day). So maybe all of that hits DynamoDB, and between duplicate data, secondary indexes, and size of dataset we have 6 million write iops. And then we do big data processing jobs and have 5x the read load. That's 20% of the budget.
And to process all these events there is a massive EMR cluster of bare metal instances. About 1750 of them. That's 50% of the budget.
Leaving 5% (a measly 400k) for load balancers, and the like.
Those numbers are all a little outrageous to me, but I can see how they might be using that much.
Just trying to get a rough ballpark for infra at that level of spend.
~3500 16xl RDS aurora instances? I worked at one of the 100 biggest websites on the internet (a search engine), and we only had 3. Why/how would Lyft need 1000x that!?
It highlighted pretty well, evidenced by your comment, that RDS was not likely a significant portion of their spend.
Category three was relational, IIRC like ~2TB. We originally stored it all on a custom MySQL cluster, and we started running into pretty bad replication lag. Amazon came around with Arora and promised we'd never have any replication lag. We switched over. Still had replication lag.
Source: I work at Lyft.
Worked for us at Twitch.
Their surges are nothing like yours.
Source: also work at Twitch.
Oh, or are you making fun of using Bare metal?
The problem is that provisioning, reliability, and security are by themselves really tough problems. If those issues aren't in your company's core competencies, it's not necessarily efficient to invest in building out all of that.
I look at it as the question: can you get the same set of agility/reliability/security guarantees for your narrower set of use cases by paying for your own hardware and engineering? I won't even begin to pretend I have any answers there, but I think that's the calculus.
Maybe that's just the story cloud providers tell you.
Until you try, do you really know if it's all that complicated? People have been running datacenters for a long time, and not all of them work for Amazon.
But there may be also a beneficial side effect of having gearheads around, and maybe that's the real cost to going cloud.
Operating bare metal at scale requires talent that doesn't exist, not necessarily at an engineering level, but at all levels.
As an example, I worked at a place that had a large bare metal deployment, i.e. >1MW worth of compute. It was woefully inefficient and costly to operate. The product that they offered required network QOS and compute with real time capabilities, neither of which was available from any cloud provider at the time.
One of our executives (formerly a leader in the DC ops org at AWS) left the company to be replaced by another executive by another well-known silicon valley org who then insisted we should migrate everything to the cloud.
I showed him the relatively easy math that efficiently utilized bare metal was way less costly and that the aforementioned QOS and RT requirements would be a deal breaker anyway. He failed to fully grok this and remained insistent. When I quite, he seemed surprised. After the fact, I discovered that they'd made a deal with IBM to move everything into their cloud. A year later it was an utter failure and they abandoned the project.
There are lots of folks in the valley with lots of experience on their resumes that suggests that they should be capable of understanding these kinds of things that simply don't. Lacking that understanding leads to poor decision-making, which leads to failure, which leads to risk-aversion, which leads to everyone believing that it must be cheaper in the cloud.
Or so goes the old adage, "nobody ever got fired for buying IBM."
They want to make money brokering rides.
Taking on their own cloud infrastructure -- in theory -- could economically make sense. But that's just an extra layer of risk and complexity they'd rather forego to focus on their core business.
After all, their core business is already losing $930M on $2B in revenue. They're cash-flow doesn't put them in a good position to make large up-front investments on data centers.
So, yeah, like a broke renter in an expensive city. In theory, it might be better to buy a house, but you don't have the down payment, and maybe you should be focused on increasing your earning power rather than saving money anyway...
- Recently had to purchase new servers, because of signed contracts the only servers we were allowed to purchase and put in the datacenter were four years old and technically EOF.
- Firewall changes, AD changes, provisioning a VM, etc. are 48 hour turnaround. Purchasing new hardware requires 4-6 weeks.
- Had an intermittent issue with their edge firewall, it'd slow certain connections to a crawl and eventually they'd timeout. Took six months to fix it, for the first three months they told us it wasn't their fault (turning off their deep packet inspection ended up fixing it). I still remember when we opened the first ticket about it, and the reply was "no other customers are experiencing problems" and it was closed.
That's just a few examples of how painful it can be. To give you the other side of the coin, having worked with an enterprise contract in AWS, we were having an intermittent issue with DNS resolving failing for a few seconds every few days. They put an engineer on it full time till they found the problem (we misconfigured it), and it didn't cost us anything more than the enterprise support. I was actually shocked they'd invest that much on such a vague issue.
Yes AWS is expensive, but you're getting world class engineering proven at scale, and access to some very smart/motivated people to support it (and they have access to the teams who built it, when they can't solve it). I don't think I'd ever choose managed datacenter over AWS/GCP/Azure/etc. Either do it in-house where there's accountability, or use cloud providers who have proven they're competency.
To be clear, I'm talking about VPC/EC2/etc. I can't really discuss a lot of their higher level and newer managed services; they either weren't as good, or I haven't tried them. But the bedrock these clouds are built on is solid, and that's worth paying good money for.
Since we're internal and we manage a lot of capacity, we do often provision and roll our own equivalents of things that cloud providers will sell you, rather than just buying a cloud solution. It's often ambiguous whether it was a good use of time/money. If it weren't for the economies of scale that kick in at the sheer size of this operation, it would definitely not be worth it.
It slowed down both them.
Remember that staff cost money too!
Conversely, with GCP 4 years ago now had some support issues - didn't come away impressed - I'm convinced even internally GCP isn't well doc'd or something.
That's not a judgement on whether it's worth it for Lyft or not, but especially for a growing company with spiky load the decision is not just a dollars to dollars comparison.
If you gave me $300m to spend, largely up-front, for significant capex purchases? Sure. We could do it. The team I would build would also probably still make mistakes that AWS et al have already largely learned how to avoid, but we could do it. But capex and opex are very different beasts. By the end of that three years I'm already looking at spending way more to refresh what I bought at the start of that three year period because I'm starting to near the end of early contracts and I'm figuring out how best to wrangle, in a way that makes the rest of the business succeed most optimally, a now-heterogeneous environment, etcetera etcetera and etcetera. It's all solvable. But whether it's cheaper, at scale, and more reliable, and presents a unified tool for use by the business...that's a harder question.
Understanding how capex and opex work and how they differ is pretty critical to successfully running an engineering organization, to say nothing of a company.
- person who knows how hard it is to run your own infrastructure
> fierro Profile: SWE @ Google Resource & Capacity Planning
I think you mean "Person who's job it is to convince others it's really hard and they should just buy your product"...?
- person who knows how hard it is to run your own infrastructure.
There is way, way, way, way, way more to a running a successful business than "saving money".
There are certainly examples for big companies that benefit from having their own infrastructure (i.e. Dropbox since they have relatively specialized hardware needs compared to what cloud providers set prices around), but the number of people you need to hire to build and maintain datacenters is very high.
See https://blog.twitter.com/engineering/en_us/topics/infrastruc....
Sure. If they are paying $100M/y on hammers, it's at least worth running the numbers and investigate alternatives.
Strategically, you probably want to focus on what your core competencies are, even if you could in theory do something for cheaper. It's easy to ignore the foregone best alternative of iterating on your own product instead.
* If the hammer manufacturer decides not to sell you any, you'll still have hammers.
* If the hammer manufacturer gains enough power to fix prices, you won't be paying them exorbitant prices.
* If the hammer manufacturer or their country gets embargoed and you're unable to legally purchase their hammers, you'll still have hammers.
All the above grant you a strategic advantage since you'll still have the necessary tools to continue your business while your competitors won't (or will have to pay much higher prices for their supply of hammers).
This is expensive and risky and also difficult to do in piece meal
Disclaimer: former AWS + Amazon employee
EDIT: typo
> Adobe, Airbnb, Alcatel-Lucent, AOL, Acquia, AdRoll, AEG, Alert Logic, Autodesk, Bitdefender, BMW, British Gas, Canon, Capital One, Channel 4, Chef, Citrix, Coinbase, Comcast, Coursera, Docker, Dow Jones, European Space Agency, Financial Times, FINRA, General Electric, GoSquared, Guardian News & Media, Harvard Medical School, Hearst Corporation, Hitachi, HTC, IMDb, International Centre for Radio Astronomy Research, International Civil Aviation Organization, ITV, iZettle, Johnson & Johnson, JustGiving, JWT, Kaplan, Kellogg’s, Lamborghini, Lonely Planet, Lyft, Made.com, McDonalds, NASA, NASDAQ OMX, National Rail Enquiries, National Trust, Netflix, News International, News UK, Nokia, Nordstrom, Novartis, Pfizer, Philips, Pinterest, Quantas, Sage, Samsung, SAP, Schneider Electric, Scribd, Securitas Direct, Siemens, Slack, Sony, SoundCloud, Spotify, Square Enix, Tata Motors, The Weather Company, Ticketmaster, Time Inc., Trainline, Ubisoft, UCAS, Unilever, US Department of State, USDA Food and Nutrition Service, UK Ministry of Justice, Vodafone Italy, WeTransfer, WIX, Xiaomi, Yelp, Zynga [1].
[1] https://www.contino.io/insights/whos-using-aws
Additional Info: http://nymag.com/intelligencer/2018/03/when-amazon-web-servi...
Giant EMR clusters to develop fraud models
Running a giant dynamic marketplace
Running giant EMR jobs for pricing/demand
They are working on self-driving cars — which likely comes with massive storage requirements for recorded sensor data, and the compute to crunch it.
EDIT: now I see, page 3: "Simultaneously, we are building our own world-class autonomous vehicle system at our Level 5 Engineering Center, with the goal of ensuring access to affordable and reliable autonomous technology"
I strongly dislike the notion that on-prem hosting is somehow a bad thing, or too cumbersome, or otherwise totally solved by cloud providers. AWS specifically is hugely convenient in a number of ways, but it doesn't come close to the cost savings from running your own infrastructure. You need a pretty large amount of capital and engineering talent, but it really is worth it even in the short term (~3-5 years).
I think people would be shocked at what the money comes out to be if they saw costs from companies doing their own physical infrastructure. AWS makes you pay through the nose, seeing the difference would change a lot of minds I'm sure.
Facebook is a similar story: being the biggest website in the world is a core competency for them, and one of the ways they outcompeted rivals early on was by scaling their website better.
Uber has yet to turn a profit.
If datacenters are a part of your business proposition - not necessarily "we're selling datacenters to other people" but rather "we will be able to outcompete our rivals because our datacenter strategy will be better" - then self-hosting makes sense. But if the datacenter is a commodity from the point of view of your business - and I would assume that would be the case for Lyft - then it makes sense to buy off the shelf.
You have to rewrite application to use something else that's open source and self-hostable.
For new startups, I honestly recommend using DigitalOcean or Vultur. You don't get all the AWS components, but you can build around flexibility. If you have to move, you can take all your Terraform and Anisble scripts, and port them to a new provider (and yes, you do have to rewrite your Terraform config. Every provider is insanely different and the magic of multi-cloud is a myth, but it's still easier than trying to move off of AWS specific services).
I remember back in the day, Stackoverflow ran everything off of a single, very expensive, dedicated server. I've worked at other shops where we've migrated stuff from AWS to self hosted solutions to reduce our $200k/month AWS bill.
The trouble when people build things that have nothing to do with their core value propositions, they get locked into those services too. It is very easy for companies to get locked into their own homebrew garbage frameworks, clustering solutions, reporting & data analysis apps, or whatever else people hacked up because "omg vendor lockin!!".
I agree with you on Uber and Facebook though.
Given that cloud costs easily 6-7x for the equivalent amount of hardware resources as a well priced dedicated server provider, you can just buy 2-3x the resources you need for extra scalability and not have to share those resources with anyone. Or if you are in the tiny minority of companies that really does have extremely erratic load requirements, you can put your base load on bare metal and your excess load on cloud.
I don't understand why people on HN always put forth a false dichotomy between cloud and running your own data centre when there's a plethora of different mixes of infrastructure and managed services that falls in between.
This is a little tongue in cheek, but: Lyft is an abstraction. It doesn't own anything or have any customers because it's a market maker.
Lyft is an efficiency mechanism for maximizing liquidity and minimizing bid-ask spreads in hyperlocal ride trading :)
In other words, holding real estate in a Corp that does other stuff isn’t efficient.
If you've got billions then you can create your own limited liability company, poach a bit of top talent to fill it (overpay a bit if you must) and get a decent operation going. One that will jump when you say jump no matter what.
You can't replace AWS global scale, but for your rental example its definitely possible. Companies rent mostly due to tax & liability reasons from what I can tell.
That didn't turn out very bad for amazon
And frankly i 'd rather invest in a cloud company than a money-losing taxi company.
That assertion makes no sense at all, particularly if we acknowledge the fact that they are in the business of providing a web service. IT infrastructure is critical to Lyft's core business.
Would it make any more sense to criticise Lyft for hiring developers because that would mean they would slowly turn into a software development company?
Article says it takes 20 people to run. GM hasnt turned into a datacenter company...
Is a century old car manufacturer in Detroit able to do what a startup in Silicone Valley can't?
Interestingly enough, GM owns 7.8% of Lyft.
While in theory you'd "just need a database and some REST API" it is never as simple as that. Say you have one set of systems for production, you may want one or more duplicates for engineering purposes. And then you'll want tools to managed those systems, and tools to manage those tools. Then there is AAA, versioning and storage, and you'll have some sort of forensic/auditing log.
Up to some point, what makes a system expensive isn't the one set of parts that make production, that is just the tip of the iceberg. It's that you need everything else as well.
So regardless on whether you are doing a relatively simple service (getting people from A to B), or doing buying, sales and logistics for retail, which isn't rocket science either, you get the same initial cost and overhead.
Maybe they're harvesting more than ride information. Perhaps they're aggregating behavioral data on customers to sell.
I thought this was a pretty interesting point. I was about to call it dogfooding but not quite, since it's more of an experience check than a crucial internal usage.
I imagine when investors or execs give rides, they probably don't generally reveal their affiliation, since that may skew the experience and the feedback. Though on the other hand, I suppose it could be helpful to say "I work at/with Lyft, how do you like the app?"
When you think about it, it seems so obvious that companies should do things like these, yet it still seems so rare. It's easy to fall out of touch with your users and product.
I believe every franchisee is required to attend Hamburger U. There are a number of corporate-owned stores in the area where the a lot of the staff is white-collar professionals in training. Those stores are always amazing.
In general stores in the Chicagoland region are way better than stores elsewhere, and I think part of this is due to the fact that corporate sends managers around for training here. I didn't understand the "mcflurry machine is broken" meme until I took a road trip. I had a number of horrible experiences, including a 20 minute wait for a mcflurry that ended up having more ice cream on the outside of the cup than the inside.
I used to work at the corporate headquarters of a company that owns several chain restaurants. The cafeteria there didn't have any of the chain food dishes, but was very high quality as far as office cafeterias go. They had a test kitchen there also and sometimes they'd give out free meals of the stuff they were testing.
Source: work for McDonald’s head office.
The end game was supposed to be autonomous taxis (cutting the driver out). I don't see how that's going to happen before they run out of money unless they 1) significantly raise prices or 2) take increasingly bigger cuts from drivers.
Personally I will be shorting as soon as I can.
I don't see how this works out for Lyft or Uber. To me it just looks like they'll both eventually run out of money and get squashed. Maybe I'm missing something?
That said, given the dynamism of markets, there's nothing to indicate that Lyft/Uber will have any huge advantage when the time comes.
But this is a game of musical chairs - early investors need to create the biggest, most miraculous but 'believable' story so they can pass the bag onto retail investors long enough to cash out.
If retail investors were able to do their homework, or rather, if their advisors at Morgan Stanley etc. were to do their jobs, I think that they'd see there is far more risk in these things than the valuations imply.
The problem is of course is that Morgan Stanley private wealth managers, managing for all those doctors, dentists, lawyers etc. only make money if there is buying action. And the emotional excitement of 'getting in on an IPO' is just too much to ignore.
The 'bragging rights' value of your dentist in Akron Ohio being able to tell to his buddies on the golf course that 'he has an 'in' on the Lyft IPO' (not really of course, he's at the tail end), is just worth more than a scrutinized deal.
Also - notice the PR/branding for Lyft, it's so funny, like the opposite of Uber - and yet they are for all intents and purposes the very same thing.
I used to say this too, when companies sold stock to the public at outrageous valuations.
I thought it was insane to be the retail "dumb money" left holding the bag on companies like Amazon, Google, Facebook, Netflix, Twitter and Snap.
So will Lyft and Uber be more like Snap or the others on this list?
Amazon went IPO very early and had a very long term vision.
Lift and Uber, it's hard to say and also depends on price.
I believe Lyft has significant financial ties with GM, who has Cruise, so maybe they'll be able to navigate it from a partnership angle.
Are you saying taxis can't exist?
As far as I know, any taxi dispatcher take a similar cut (30%) as them and their cost seems way higher (no automation at all, require people on phone, etc..).
Theses loses are either because they are considered unlawful somewhere (I never heard of this issue with Lyft but I guess that's may be happening) and have to fight for it, or because they are trying to expands. If they stop both of theses (operating everywhere they are considered unlawful and stopping to expands) then their cost remaining are pretty similar to any Taxi dispatcher but they require much less staff.
Lyft and Uber have higher cost basis than taxi companies because they don't leverage economies of scale of car ownership and insurance via shared fleet as taxis do. Then they also charge less to riders. There's also no guarantee people would continue to use Lyft or Uber if they raised their prices to above the cost to provide the service, particularly when that number is actually higher than a taxi.
To my knowledge, Uber has a -61% profit margin. You give them $10 and they spend $16 to provide you the service.
These are just pyramid schemes disguised as companies.
Lyft is SaaS (technically a platform) and doesn't really have more operating expenses than any other internet company.
Painful amount of dilution....wow.
"Consists of (i) 4,663,809 shares of Class B common stock held by El Trust dated August 3, 2015, for which Mr. Green serves as trustee, (ii) 675,564 shares of Class B common stock held by The Green 2014 Irrevocable Trust dated June 12, 2014, for which Mr. Zimmer serves as trustee, (iii) 360,979 shares of Class B common stock held by The Logan Green 2016 Annuity Trust, for which Mr. Green serves as trustee, (iv) 360,979 shares of Class B common stock held by The Eva Green 2016 Annuity Trust, for which Mr. Green’s spouse serves as trustee, (v) shares of Class B common stock issued pursuant to the Founder Option Net Exercises and (vi) 1,180,329 shares of Class A common stock underlying RSUs for which the time-based vesting condition would be satisfied within 60 days of December 31, 2018 and assuming the satisfaction of the performance-based vesting condition. Subsequent to December 31, 2018, a portion of the shares described in this footnote were transferred between the trusts described in this footnote for estate planning purposes."
Yes, it’s a lot, but to build a $30b company and make 90m pre-tax (maybe 50m post in CA) is something...
The obvious comparison is Travis Kalanick, who is definitely a billionaire and retained much more of Uber.
That's why I said outside objective measure. By any objective standard 90M is an insane amount of money for one person to have. One billion is so far off the scale it is impossible to describe.
That's because Kalanick got screwed by VC's previously and made sure that wasn't going to happen again.
Your point of view is not objective, but subjective to how much money you need to have in order to do the things you are planning to do.
No one is saying they're not going to be well off, or that it wasn't a worthwhile use of their time to build the company. They're just saying the return is smaller than it could have been. Your "objective outside measure" isn't enlightening in that sense, because the point is specifically about relative measures.
Responding to a discussion about funding dilution by saying, "well they're well off anyway!" is kind of odd, because that's not really relevant. Dilution also materially impacts non-founding employees, and small changes in dilution could have outsized impacts on their returns.
It's also comparable to negotiating with a company who tells you that you're still getting a lot of money "by any objective measure" even if they won't meet your ask, because their offer is higher than the median wage for your locale. Yeah, sure, but that's a pretty empty observation isn't it?
$90M is definitely enough to be more than comfortable the rest of your life. But a $5B payout would have meant they could start a VC firm, invest in the next several generations of startups, partially self-fund something ambitious like a Space-X, start funded non-profits, etc.
...yes? I don't really see what's so absurd about that idea.
It also seems more than a little disingenuous to suggest that the founders were the only ones that created that $20B in value. They didn't single handedly create the apps, the marketing platform, drive the cars, etc. etc.
https://en.wikipedia.org/wiki/Y_Combinator
> In 2009, Sequoia Capital led the $2 million investment round into an entity of Y Combinator which would allow the company to invest in approximately 60 companies a year as opposed to their previous 40 companies a year. The following year, Sequoia led a $8.25 million funding round for Y Combinator to further increase the number of startups the company could fund.
I think they'll be OK if this is their goal.
They are actually successful in the minds of VCs because their revenue has been growing.
Makes you wonder if raising money to run a business like Lyft is worth it from a personal financial perspective. The bootstrapped founders I mentioned are extremely satisfied with no outside interference or investors breathing down their necks
But then again, not everyone can build a $10M ARR business
So the last line is 15million common stock held by A16Z
page 169 shows that Logan Green also has 3.5M in vested (unexercised) options and about 2M in unvested options.
Lyft had a modern secondaries policy. Many early people sold shares.
Sorry for being unclear. I was positing an alternative mechanism, apart from dilution, through which the founders could have ended up with a small share of the company.
Yeah, that's oversimplifying it, but it's not like they own factories or storefronts or need to buy access to expensive services or something. The vast majority of their "employees" are independent contractors with no healthcare or retirement benefits who get paid by the ride (so Lyft doesn't lose out when business is slow).
It seems like it should be a license to print money, but somehow they're losing cash hand over fist. Are they subsidizing rides all over the world?
To solve this, they must offer guaranteed minimums to drivers to maintain an available network even with low ridership. Without that, passengers are unlikely to find an available ride and will easily give up on the app.
Those guaranteed minimums are expensive, but are true one-time costs. They are no longer needed once the network is established.
Looks like the other driver incentives may not be included in revenue?
>This four percentage point improvement in Revenue as a Percentage of Bookings was driven by greater efficiency and effectiveness of driver incentives, which contributed approximately two percentage points, increased service fees and commissions, which contributed approximately one percentage point and revenue from the Select Express Drive Partner program, which contributed approximately one percentage point.
Revenue is money they take in. If they pay drivers a minimum it will be an expense. I’m assuming under “cost of revenue” or “sales and marketing”, since they don’t categorize drivers as employees but contractors.
Not to mention the salaries you need to pay to stay competitive in the bay area, they seem to have a sizable headcount (~1600 from a quick google search)
I want to see Lyft succeed just to counter Uber, but yeah, those numbers need to be healthier
[0] https://www.reuters.com/article/us-uber-results/uber-posts-5...
People have mistakenly accused both Uber and Amazon of doing the former when they were doing the latter.
[0] https://www.bloomberg.com/news/articles/2018-11-14/uber-reve...
* As a percentage of revenue, cost of revenue decreased from 62% to 58%.
* As a percentage of revenue, sales and marketing expenses decreased from 54% to 37%.
These seem to be positive signs.
Cost of revenue primarily consists of insurance costs that are generally required under TNC and city regulations for ridesharing and bike and scooter rentals, respectively, payment processing charges, including merchant fees and chargebacks, hosting and platform-related technology costs, amortization of technology related intangible assets, certain direct costs related to bikes, scooters and the Select Express Drive Partner program, and personnel-related compensation costs.
FTFY
2016 - ($682,794)
2017 - ($688,301)
2018 - ($911,335)
As a percentage of revenue though the loss is decreasing,
2016 - 2x
2017 - 0.6x
2018 - 0.45x
2018 revenue was $2.1bn.
Since they are a tech company and not a real company they can IPO at 10x revenue so that's ~20bn.
Who cares what their margins are.
- They claim their US ride sharing marketshare is 39% - that seems high to me.
- $800 mil in marketing spend in 2018 from $500 mil in 2017 - they say this increase was largely driven by cost of acquiring new drivers. I honestly thought this would be higher as a % of revenue - this topline number also includes spend on promotions/discounts for passengers.
What data do you have that indicates their market share is overstated?
I'm hoping there's more to this comment than just "my friends use Uber so it's hard to believe Lyft has 39% market share".
[1]: https://techcrunch.com/2019/02/26/heres-why-youre-getting-al...
Market share means drivers stay busy and make money. Market share means riders don't have to wait a long time.
Uber gave massive discounts for a long time to establish their market share, and it suited their long-term vision just fine.
Same strategy seems to be working well for Lyft, too.
[1] https://twitter.com/modestproposal1/status/11015421794812887...
e.g. Dropbox (which also confidentially filed earlier) was public 1 month after the public S1.
Realistically, Lyft is public by end of April, barring a Box-style pullback
This is the wet dream of all tech bubbles. It was the same in the 90s when people said whoever sells dog food online first will win that market and be the leader in perpetuity. Lyft and Uber will be easy to attack by local companies once they have to stop subsidizing their rides and actually run a real business (aka making profit)
Messaging for gamers a la Discord is a winner-take-all market because fellow gamers lock you in.
But from the rider perspective, there's very little lock-in for ride sharing services. Just install a new app and the car shows up.
Doesn't matter if your friends use it. There's no moat.
Ride-share lock-in is on the provider side. Can they get enough scale to cover entire cities and nations with enough cars that riders don't have to wait?
Turns out with a market this big, there's room for two or three players.
If the majority of riders are on one app, that's where the drivers will go. If the majority of drivers are one app, that's where the riders will go.
Think Craigslist not Facebook.
- If they do go public for $20B+ they that would be for more than Twitter and Facebook went public for. Would you really want to own Lyft over FB and TWTR the day they went public? That's a very large ask of the public markets.
EDIT To be clear I"m talking about their valuation multiple not the abs valuation.
- working with JPMorgan, Credit Suisse and Jefferies. So I guess we know 3 banks who won't be on the Uber IPO. Goldman probably has that locked up
- doing a traditional IPO
- banks pitching a valuation of $18 to $30 Billion, I believe their last round as at $15.1B
- Seems rushed to beat Uber to market, maybe there is only room for 1 hugely money losing, $10B+ ride sharing company?
- how do you loose $1B in a year on $2.2B in revenues and ave any concrete plan at all to become profitable?
> Lyft generated $563 million in revenue in the third quarter, up from $300 million in the same period a year earlier, a person familiar with the matter said in October. Losses increased to $254 million in the period from $195 million in 2017, the person said.
So losses increase as revenue increases, again, what's the profitability plan?
I actually have no idea how to value this company? What metrics should we be looking for? How do use future cash flows to evaluate a company when their future cash flows are all negative by even the most optimistic of estimations?
- Will be interesting to watch the first 6 months, if things don't go well, Uber could be in for a rough ride on the public markets. Uber has a much more diverse product line, maybe that will be their pitch.. Watch Uber's S1 to see if they promote food delivery, etc over ride sharing.
- Part of Uber's pitch may be their stake in Didi ala Yahoo and Alibaba, if that's true
- can't find any info yet on how long employee's and investors will be locked up
- Lyft has lots of room for international growth as they are only in North America
- shareholders with more than 5 percent of stock
- Rakuten Europe S.à r.l.with 13.05 percent
- General Motors Holdings LLC with 7.76 percent
- Fidelity associated entities with 7.71 percent
- Andreessen Horowitz associated entities with 6.25 percent
- Alphabet Inc. entities with 5.33 percent.
- from the S1 "We have incurred net losses each year since our inception and we may not be able to achieve or maintain profitability in the future. We incurred net losses of $682.8 million, $688.3 million and $911.3 million in 2016, 2017 and 2018, respectively."
- will list on Nasdaq under ticker LYFT, sweet ticker!!
> For Mr. Green, the 2018 amount reflects $935,105 in personal security services and $1,787 in ride credits for use on the Lyft platform.
Nearly a million dollars for the CEO's security services (presumably also including private air travel)? I can understand Facebook or even Twitter doing this for their high-profile CEOs, but most people would not recognize Logan Green if they seem him on the street.
These are not role models (or similar business models), however there are several well-known examples of companies that have survived comparably substantial red ink to revenue ratios:
Twitter was a red ink machine its entire existence until 2018.
Amazon had a net loss of $719m on sales of $1.6 billion in 1999, as they spent aggressively to build out the infrastructure that would facilitate their present advantages. Again in year 2000, they did $2.7b in sales with a $863m operating loss and a $1.4b net loss.
Box looks like it will survive based on its latest quarterly burn rate (in 2015 they had $300m in sales and a $200m operating loss; latest quarter was $163m in sales with a $21m operating loss).
Tesla has burned enormous amounts of red ink to scale its business. Their 2012 figures were $413m in sales with a $396m loss.
Splunk lost $278m on $668m in sales for 2015. Operating income finally turned positive in the latest quarter, after 15 years of losses.
Those companies all survived thanks to sales growth that continued to march forward. A bet against Lyft is a bet on their sales having a low upside from here. They have to get a lot larger to bring that $1b loss down to a reasonable level.
Huh? Facebook's IPO was at around $100B.
A partial launch also gives you a bunch of opportunity to iron out other details, like establishing the protocols which allow a rider to call for assistance, or a remote safety driver to take over in a construction zone, weird driveway pull-in, whatever.
I personally wanted to see the patent lawsuit Google had brought against Kalanick to completion- much of the lidar and sensor technology at stake needs to be either licensed using FRAND terms or have each company using its own disparate systems. V2V may be a desired open standard but I'm less than optimistic about its targeted implementation date being a few years away because of this competition.
Lyft is IPOing at a higher valuation than Twitter, but Facebook went public at a valuation of $100B and raised $16B. FB's IPO was 5x bigger than Lyft's.
2017 Compared to 2018
* As a percentage of revenue, cost of revenue decreased from 62% to 58%.
* As a percentage of revenue, sales and marketing expenses decreased from 54% to 37%.
These seem to be positive signs.
It's just like Groupon, you can't have a good sell-through product indefinitely if the service providers aren't happy and churn at a high rate.
Sooo... what's the churn for the drivers?
Do you disagree?
And if you look around at what they spend all of this money on, it's incentives and marketing towards drivers (as well as insurance). That's a lot of churn given the loss they're taking on these expenses towards drivers.
Re: your other point about demand. A piece of anecdata that weighs on my mind is, 10 years ago, there was some extreme economic disincentive for a cabbie to come to my residential neighborhood. Uber's black car service was a godsend, even though it cost twice the price of a cab. The supply/demand curve made sense, since I was paying more for my sparse neighborhood.
Now I get 10x quicker service for half of the cab cost and a quarter or less of the black car cost. Wat.
What I want to know is whether this is because there's a supply of 96% of yearly suckers who come to my neighborhood without doing the math like cabbies in 2009? Or is it just that Uber/Lyft is dumping incentives on them? Because my neighborhood hasn't become more dense, and the math got far worse for the driver.
I keep wondering what a reversion to this norm means for Uber and Lyft. If drivers have a lot more pricing power through churn, is 2009-cab-refuses-to-come what it looks like? If you can't get a car due to supply constraints, somehow would that be good for these companies?
Anyway, it seems like Uber/Lyft pour most of their money into making drivers happy, and yet they fail to keep them on "the platform". I don't know the full ramifications of it, but it seems like a major issue.
[1] - https://www.cnbc.com/2017/04/20/only-4-percent-of-uber-drive...
1 billion+ cumulative rides.
$8.1 billion in bookings in 2018
$2.2 billion revenue in 2018
From risks:
>> "We have incurred net losses each year since our inception and we may not be able to achieve or maintain profitability in the future. We incurred net losses of $682.8 million, $688.3 million and $911.3 million in 2016, 2017 and 2018, respectively."