Lyft Receives Rare VC Investment From Loeb’s Third Point

Lyft

Will Lyft be the next mega internet-based success story?

$250 million raised from well-known investors, with previous valuations at $700 million

The ride-sharing company said on Wednesday it had raised $250 million from a group that includes Alibaba Group, a Chinese e-commerce firm, but perhaps most notably the firm garnered an investment from Dan Loeb’s Third Point.

Loeb’s Third Point seldom invests in early stage, venture investments, preferring an activist approach with established firms already trading on public stock exchanges.  Loeb was, however, one of the largest early stage investor in Yahoo!

Lyft is a major player in ride-sharing, competing with Uber, which was valued by TPG at $3.5 billion, as reported in the Fortune Magazine.

Lyft and Uber: same goal, very different brand definitions

Lyft and Uber are similar in that they both compete with taxi cabs to ferry customers from one location to the next, but their approach is very different.  Uber provides a sophisticated service, picking up customers in luxury vehicles and large SUVs.  Lyft, on the other hand, takes a more rock and roll approach to ride-share.  When customers enter a Lyft vehicle, which can be identified by its signature pink fuzzy mustache that hangs from the rear view mirror or attached to the front grill of the car, they are greeted with a fist bump, accentuating a hip, young brand.

Lyft has been rapidly growing, operating in 30 cities, up from just two a year ago.  The company counts among its investors high profile early stage investment firm Andreessen Horowitz, Founders Fund and Mayfield, all of whom join Coature Management in climbing aboard the bandwagon.

While hopes are high, ride-share could face local challenges

While there is a popular heft to Lyft and other ride sharing programs, they are starting to run into regulatory issues in local markets.  In major cities such as Chicago, Boston and New York, for instance, the powerful taxi lobby, which advocates for those who own medallions and control the market, have always held political sway.  Lyft and Uber are a challenge to that existing structure that has not gone unnoticed.

“The fight over the future of ridesharing in Chicago is increasingly being waged through shadowy lobbyists,” a WBEZ report noted on February 25. “This has some aldermen concerned about how that could influence the current regulatory debate.”  In Boston WBZ noted the problem on the same day.  “Boston Police Commissioner William Evans says he wants more public regulation of what he calls ‘gypsy cabs.’ The commissioner on WBZ NewsRadio 1030 last night singled out a popular mobile app Uber, which connects drivers with passengers… Evans questioned the level of safety and security provided by these new app services because they are not subject to the same level of scrutiny as traditional cabs.”



About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com