Lyft, the smartphone app for sharing rides, raised $250 million from a group that includes the Chinese e-commerce titan Alibaba Group.
The funding would help the San Francisco-based ride-sharing service provider to compete with rival Uber.
Massive series D funding
Lyft is part of the increasingly popular ride-share industry, functioning effectively as a sort of dispatch network for regular drivers use their own cars to pick up passengers. Its main rival is Uber, which investors like TPG have already valued at $3.5 billion.
Lyft said Wednesday that it had raised $250 million in a massive Series D funding round. The existing backers Andreessen Horowitz, Founders Fund and Mayfield also participated in the latest round of funding. In addition, newcomers like the Chinese e-commerce titan Alibaba Group, the hedge fund Coatue and Third Point also participated in the funding.
Started in 2013 in two U.S. cities, Lyft finished the year in 30. It already has 240 employees. With this latest infusion, it will be able to maintain its breakneck pace of expansion in the U.S. and begin to establish an international footprint.
Valued at $700 million
According to people familiar with the deal, the investment pegs the value of Lyft at over $700 million. That’s nearly triple its valuation of $275 million in a May 2013 round of funding.
There has been an intense race to raise substantial amounts of capital between Lyft and its rival Uber. Despite both the companies have little overhead – as they don’t own the cars or employ the drivers that shuttle passengers using their services – the startups are spending on marketing and promotions to attract new drivers and riders in an increasing number of cities.
Lyft’s CEO John Zimmer said advertisements and other promotions are needed to help spark the market when Lyft launched in new cities.
Alibaba has invested in a number of American start-ups from which it hopes to glean new insights into online commerce. The China’s International retail market leader confirmed last month it has decided to begin the U.S. IPO process. The IPO is rumored to be the largest IPO from Internet company.
Lyft’s other big-name investor Coatue is a hedge fund which backed popular start-ups like the messaging services Snapchat and the last-minute hotel bookings provider Hotel Tonight.