The Lyft IPO

[0] I don't know about you, but I've literally like, I've been like, I had trouble sleeping the last couple of nights.

[1] Dude, I woke up early this morning.

[2] I know.

[3] I woke up at, yeah, I woke up at 6 .30 and like, went for, I ran down here to the office and like, I spent all last night and all today just like getting hype.

[4] Welcome to season four, episode four of Acquired, the podcast about technology, acquisitions, and IPOs.

[5] I'm Ben Gilbert.

[6] I'm David Rosenthal.

[7] And we are your hosts.

[8] Well, David, as Vince Vaughn once said to Owen Wilson in Wedding Crashers, it's wedding season, kid.

[9] The IPO floodgates are open, and we are here with the very first one of 2019, the Lyft IPO.

[10] I am so excited.

[11] I know.

[12] Well, obviously, this is an important moment for Lyft and ride sharing broadly, but what it represents for the entire technology industry is possibly even greater, that the good times can continue.

[13] We've had a serious drought in big tech IPOs of the last few years, with most of these companies opting to famously stay private longer.

[14] There was significant risk that the public markets do not value these unicorns as highly as the late stage private investment market has been.

[15] If Lyft had not overcome its last private valuation, we'd be seeing a lot of articles right now about how valuations for startups across the board would drop and times could get tough.

[16] Now, we've still got a lot more IPOs ahead, and we've just seen one day of trading.

[17] But from what we know, where we sit today, people in the technology ecosystem everywhere can breathe easy.

[18] Yeah, the signs are good.

[19] I mean, this is huge.

[20] We've never seen anything like this before.

[21] This is a whole generation of tech companies that are all going to go public all in the next, you know, probably two months here.

[22] And seriously pent up demand.

[23] these companies, the full A -plus, as David and I were joking about.

[24] You've heard of Fang.

[25] Now the A -plus.

[26] What is it?

[27] Airbnb, Pinterest, Lyft, Uber, Slack, you know, all from different sort of eras of tech over the last, you know, decade, decade and a half, all raising so much in the private markets and here all in the next six months, all really IPOing.

[28] Yeah, here they are.

[29] Playoff atmosphere.

[30] Indeed.

[31] Let's get to it.

[32] Well, I do have to say the limited partner bonus show that we've been doing.

[33] The one that we did with David's partner Sarah was so timely and so awesome because Sarah used to run corp dev at Airbnb and before that at Dropbox.

[34] So on the heels of the Airbnb Hotel Tonight deal that now funnily enough feels sort of like old news, we got her inside take on Airbnb's strategy with mergers and acquisitions, how to build corporate development functions within companies.

[35] And we speculated just a bit on where they might be going with with hotel tonight.

[36] So if you want to listen to that and many other great LP episodes and become a limited partner, you can do that in literally 10 seconds.

[37] And I promise you literally 10 seconds with just two taps.

[38] And you can listen to the show right here in whatever podcast player you use for all of your podcast listening.

[39] So you can click the link in the show notes or you can go to Kimberlite .fm.

[40] slash Acquired to join.

[41] And David, I'm not kidding, 10 seconds.

[42] And you can, you can join and listen right here.

[43] So that's awesome.

[44] Man, the people behind that Kimberlake company are really talented.

[45] Spoiler.

[46] That's, that's, well, us, but mostly Ben.

[47] Okay.

[48] Listeners, now is a great time to thank one of our big partners here at Acquired, ServiceNow.

[49] Yes.

[50] Service Now is the AI platform for business transformation, helping automate processes, improve service delivery, and increase efficiency.

[51] 85 % of the Fortune 500 runs on them, and they have quickly joined the Microsoft's at the NVIDias as one of the most important enterprise technology vendors in the world.

[52] And, just like them, ServiceNow has AI baked in everywhere in their platform.

[53] They're also a major partner of both Microsoft and NVIDIA.

[54] I was at NVIDIA's GTC earlier this year, and Jensen brought up Service Now and their partnership many times throughout the keynote.

[55] So why is ServiceNow so important to both NVIDIA and Microsoft companies we've explored deeply in the last year on the show?

[56] Well, AI in the real world is only as good as the bedrock platform it's built into.

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[59] For example, smarter self -service for changing 401k contributions directly through AI -powered chat, or developers building apps faster with AI -powered code generation, or service agents that can use AI to notify you of a product that needs replacement before people even chat with you.

[60] With ServiceNow's platform, your business can put AI to work today.

[61] It's pretty incredible that ServiceNow built AI directly into their platform.

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[63] So if you want to learn more about the ServiceNow platform and how it can turbocharge the time to deploy AI for your business, go over to servicenow .com slash acquired.

[64] And when you get in touch, just tell them Ben and David sent you.

[65] Thanks, ServiceNow.

[66] So to set the stage for David here as he dives into the history and facts.

[67] We sit here on Saturday, March 30th, the day after the Lyft IPO.

[68] The company raised $2 .3 billion in its IPO, priced with a market cap or basically a valuation at the top of their expected range, which they had already increased once on their roadshow, of $24 billion, and closed its first day of trading up above $26 billion.

[69] So, David, how on earth did we?

[70] get here.

[71] I am so excited to tell the story and all the stories behind this.

[72] So we're going to tell the history of Lyft and how Lyft, the company that became Lyft, Zimride, that transformed into Lyft, how it got here, how peer -to -peer ride sharing became an industry.

[73] It's hard to believe now, but just about seven short years ago, it did not exist and is now one of the largest you know, technology -enabled markets in the entire world.

[74] What we are not going to talk about on this show is the history of Uber, which is quite different.

[75] We will save that for the Uber IPO show, which is coming later this season, hopefully.

[76] And Uber started differently.

[77] It was not peer -to -peer ride sharing to start, and it wasn't until 2013 after Lyft was around when they pivoted into that.

[78] But we'll get into it.

[79] We have a long story to tell.

[80] It is a story of transformation, metamorphoses, story of betrayal.

[81] A story of good and evil.

[82] Basically your typical acquired episode.

[83] So here we go.

[84] It's a nonfiction thriller.

[85] Indeed.

[86] Oh, man, this is a thriller.

[87] Okay.

[88] So we begin our tale in the 1990s with two young men who are growing up a complete opposite ends of the country, but would one day be drawn together by fate.

[89] And on the one side of the country on the west coast, we have Logan Green.

[90] He was growing up in Culver City in Los Angeles, and his parents are sort of leftover hippies.

[91] His parents are a doctor and a veterinarian, but they're pretty activists.

[92] And previously, they had helped organize farm labor unions, and they really encourage their children and Logan to take, you know, that kind of outlook on life.

[93] And Logan really takes after them.

[94] But unlike them and their activist roots, he's pretty introverted and focused.

[95] And so Logan, growing up, he teaches himself how to code.

[96] He's really interested in computers and coding.

[97] And in eighth grade, this is typical of him, he asks his parents to move the family television out of the living room and into the garage because it is too distracting from what he is trying to learn to code and accomplish in life.

[98] Amazing.

[99] I can't say that was me. Yeah, definitely not me either.

[100] I was like, can we move the TV into my room?

[101] and that's why he is the CEO of Lyft and we are doing acquired.

[102] Yeah, we do a package.

[103] So in high school, this is amazing.

[104] Logan ends up getting a part -time job.

[105] He's learned how to code.

[106] He gets a part -time job working for a company in Los Angeles called U -Wink.

[107] Now, what is U -Wink?

[108] U -Wink is the third or fourth, maybe even farther along, company from Nolan Bushnell, the founder and CEO of Atari, who hired Steve Jobs, who then went on and started Chuck E. Cheese.

[109] I had no idea that, one, I have no idea that U .Wink was a Nolan Bushnell company, but two, I remember when I was an intern at Cisco and moved out to California and went to Mountain View for the first time and was walking down, I think it's Castro Street or Castro Avenue.

[110] You basically see, like, basically see, like, all the Web 2 .0 logos that you're used to seeing on your browser, just sort of like jump back.

[111] from physical signs on each side of the sidewalk.

[112] And I remember the U -W -Wink building.

[113] I didn't think I have a picture in front of the U -Wink building because it just felt so like emblematic of the whole Web 2 .0 time period.

[114] That's amazing.

[115] That's amazing.

[116] Well, it started down in L .A. Because Nolan, after Atari, I believe when he started Chuck E .C .C .C .C. And it's, you know, incredible.

[117] Nolan hires, you know, first Steve Jobs and then Logan Green.

[118] And so Logan, this was in high school.

[119] he had his driver's license at this point.

[120] His high school was in Santa Monica, and U .N .N .S. headquarters was in Playa del Rey, which if you know L .A., Playa del Rey is not far from Santa Monica.

[121] I think it's about five or six miles.

[122] It's also on the west side of L .A. But if you know L .A. traffic or L .A. traffic before Lyft and Uber, it was a nightmare to get over there, a beast.

[123] And so Logan has his high school car, an old 1989 740 Volvo that his parents gave him when he got his license classic old hippie car and so he's spending all of this time after school commuting over to his job in Playa del Rey and he's like he's just sitting there and he's like this is insane all of this traffic all of this time wasted all of this gas wasted all this environmental impact this is crazy and he starts thinking that maybe he can make a difference and maybe he should dedicate himself once he grows up to eliminating traffic.

[124] And as we will see, that is what he does what he does what he does what he does and makes a big dent to them.

[125] So he goes off to college at UC Santa Barbara about two hours north of L .A. And initially he majors in computer science, but eventually he switches to economics.

[126] And he's really all in on this mission to solve traffic.

[127] He decides he is going to leave his car at home and commit to only commuting back and from L .A. to Santa Barbara with public transit.

[128] And this is like insane.

[129] I mean, it makes total sense to drive from L .A. to Santa Barbara.

[130] People do it all the time.

[131] So it's actually like kind of a huge pain that he does this.

[132] And his sophomore year in college, he learns about Zipcar.

[133] Zipcar had just been been started a few years before.

[134] And he tries to get them to come to UCSB.

[135] They refuse.

[136] And he reaches out to them.

[137] And so he says, Okay, great.

[138] Well, I'll start my own car sharing program at UCSP.

[139] So he convinces, this is going to become a theme here.

[140] He convinces the university to buy a small fleet of Toyota Priuses.

[141] And then Logan basically reverse engineers the entire way that the zip car system works.

[142] So if you remember at the time, you had a card that was like a prox card.

[143] You hold it up to the windshield.

[144] You hold it up to the windshield and then that unlocks the door.

[145] So Logan like reverse engineers this and he installs these.

[146] on the use of the University of Santa Barbara's Priuses that they had that they had bought.

[147] And he gets like a couple thousand students at the university to start using it.

[148] Pretty awesome.

[149] Yeah.

[150] But there's one thing, though, that that's not helpful for us.

[151] This is great for getting around Santa Barbara for students.

[152] But when they go home for breaks and when Logan's going home to L .A., you can't just like take one of these Priuses down to L .A. And so he just has to find other ways to get around his lack of a car.

[153] So he tries, he goes on Craven.

[154] And Craigslist, and Craigslist has a portion, has a board called ride sharing, which is meant for this purpose.

[155] And it's, you know, people saying like, hey, I'm going from Santa Barbara to L .A. or wherever.

[156] And, like, you know, if you want to come in and join me and, like, pitch in for gas, like, we can do it.

[157] So Logan tries this a couple times.

[158] But he's, like, a serious introvert and is, is really uncomfortable doing this.

[159] So he realizes this kind of isn't, isn't the best way, isn't the best way to do it.

[160] So ever the missionary here, he takes the next step.

[161] He's still a student at UCSB.

[162] He joins the Santa Barbara Public Transit Board, like the municipal authority that governs public transit in the city of Santa Barbara.

[163] I'm assuming he's like the youngest ever or something.

[164] He is the, he becomes the youngest board member ever.

[165] And he thinks, okay, maybe this is the way that I can accomplish my mission and solve these problems.

[166] And it turns out it's not.

[167] All he learns is basically a bunch of depressing stuff.

[168] One, he learns that 70 % of the cost of every public transit ride in the city is subsidized by the city.

[169] So if people talk about Lyft losing money on every ride today, most municipalities, public bus systems and train systems lose money on every ride.

[170] And it's super hard to get stuff done, try new things, or even incremental innovations on the existing system.

[171] So the next year, this is the summer before his senior year, he and his best friend from high school, guy named Matt Van Horn.

[172] They decide...

[173] No way.

[174] Yes.

[175] That Matt Van Horn.

[176] That Matt Van Horn.

[177] Best friends from high school in Santa Monica.

[178] They decide they're going to do a big international trip on their junior year summer before coming back for senior year.

[179] And initially, they want to go to Cuba.

[180] But Matt's mom, at this point in time, it was illegal to go to Cuba if you were a U .S. citizens.

[181] Matt's mom basically bribes them to go to Africa instead.

[182] So they go.

[183] They spend, I don't know if it was a month or two months in Africa.

[184] and while they're in Africa, they go to Zimbabwe and they see this thing that just like, to Logan, for his mission, just like blows his, you know, 21 -year -old mind.

[185] He's used to all this traffic in the U .S. And in Zimbabwe, which is this incredibly poor country at the time, almost nobody actually owns a car.

[186] But people get around the country and the cities super easily by their unlicensed drivers, unlicensed taxi drivers who own or at least operate minivans.

[187] And they just, like, have the minivan.

[188] And people come up to them, like, hey, I'm going here.

[189] They get in the car.

[190] They wait until they fill up the minivan.

[191] And then they drive and they drop people off along the way.

[192] It's kind of like a line, you know?

[193] It's like a line.

[194] And everybody pays a little bit.

[195] And like the system works.

[196] There's no organization.

[197] Like, there's no app.

[198] There's no booking.

[199] It just sort of organically works.

[200] And so Logan's like, man, like Matt, like this is super cool.

[201] Maybe there's a way.

[202] I know, I know I'm like throwing you off here, but like we both just, for listeners' sake, for people who don't know who Matt Van Horn is, can you, can you tell us that so we don't just leave everyone hang?

[203] No, no, no. I was going to bring it up with them.

[204] Because Matt actually, but not oft talked about, becomes the third co -founder of Zimmeride, of the company that would become Lyft.

[205] But he does not go full time.

[206] Instead, Matt was at the University of Arizona.

[207] Instead, after graduation, he joins Dig.

[208] And he becomes a relatively early employee at Dig.

[209] And then, an executive at Path, and, man, remember Path?

[210] Path was so good.

[211] It was too bad it didn't work.

[212] Still could.

[213] Still could.

[214] I think it's shut down now, right?

[215] Well, another one could.

[216] Another one could.

[217] Yeah.

[218] Private social network.

[219] And Matt now runs June Oven, right?

[220] June Oven.

[221] Yep.

[222] He is the CEO and co -founder of June Oven.

[223] So moral of the story, everyone should take a trip to Zimbabwe in in college.

[224] Well, I think that and tech theme we often talk about here on Acquire.

[225] that is going to become super obvious through this episode and the Uber episode.

[226] It's a small world out there.

[227] It's all the same people and are very incestuous in all of these industries and sub -industries.

[228] So Matt and Logan, they come back from their adventures in Zimbabwe.

[229] And Logan starts his senior year at UCSB.

[230] And this idea is percolating in his head.

[231] So much so he decides he's going to, he hasn't figured out how to, how exactly to do this.

[232] the time graduation rolls around in summer 2006, but he takes a job at the university working as a sustainability coordinator just so he can stay there and kind of keep percolating on all this.

[233] Meanwhile, on the other side of the country, in a very, very different environment from, you know, leftover hippie parents on the west side of L .A. and then certainly Santa Barbara.

[234] In Greenwich, Connecticut, another young man is growing up, a man named John Zimmer.

[235] No relation to Zim Ride.

[236] Zimbabwe.

[237] No really, soon to be a relation to Zim ride, but no relation to Zimbabwe.

[238] Yeah, can we just like for a quick moment pause here and recognize, so this only came out when I was doing the research.

[239] How crazy is it that Lyft's previous name was Zimride and that has zero to do with the fact that one of the co -senders is John Zimmer and it has everything to do with the fact that the other co -founder went to Zimbabwe.

[240] And also totally, ironic that, you know, compared to its Lyft's big rival Uber, Lyft does not operate internationally, or does in Canada, does not operate intercontinately despite having started in Zimbabwe spiritually.

[241] Yes.

[242] So, John Zimmer is growing up in Greenwich, Connecticut, which for, I think most of our audience probably knows, but for those who don't, Greenwich, Connecticut is basically ground zero for hedge fund managers.

[243] and is one of, if not the wealthiest zip code in the United States.

[244] And for some reason, it's like a moths to a flame of hedge fund managers to living in Greenwich, Connecticut.

[245] It's a suburb of New York in New York City.

[246] And so John's growing up there, surrounded by all this incredible, incredible wealth, like ridiculous wealth.

[247] But for whatever reason, like, that doesn't like have a huge attraction to him, at least at that moment.

[248] his dad is an executive at Dixie Cups, which is incredible.

[249] It took me a little bit of digging to find that.

[250] I was trying to figure out, like, what did his family do?

[251] So, like, you know, they're super comfortable.

[252] They're well off, but they're not, you know, in the same league as in terms of wealth as all these hedge funds.

[253] Cups had been flying off the shelves.

[254] I mean, things were, times were good.

[255] Yeah, he's a marketing executive at Dixie Cups.

[256] Maybe a lot of that ends up influencing, influencing Lyft later.

[257] We'll see.

[258] So John, though, just like Logan.

[259] is equally as focused on what he wants his life mission to be and learns it just as early in life.

[260] But instead of traffic and transportation, he wants to work in hotels.

[261] Like seriously, that's his dream when he's in like middle school and high school is hotels.

[262] Ironically, he did not start Airbnb.

[263] But that's a different type of, you know, you can see the parallel to hospitality and and uh and sort of experience crafting yeah and this isn't just i'm not just like making this up this isn't just you know after the fact so like oh yeah like i wanted to do hotels in high school he goes to the high at regency in greenwich the hotel there and he basically talks the man it forces the manager there into giving him a job even though he's underage so they have to like call up their lawyers and find a way for like allow him to work because he so desperately wants to work there, even though he's not yet 18.

[264] This is like the, this is the equivalent of, uh, of putting the TV in the garage.

[265] Exactly.

[266] This is, this is his equivalent.

[267] Um, so he goes there and he, he ends up, he answers the phone.

[268] So like, this is guests calling from rooms with like, hey, I've got a problem in my room, like, come fix it.

[269] This is people calling to make reservations, et cetera.

[270] Like, most people would hate this job.

[271] John loves this job.

[272] And he loves it so much that when it comes time to go to college, he applies to go to Cornell, which is a great school, of course, and close by.

[273] But most importantly, Cornell has the best hotel management program in probably the entire world.

[274] As an undergrad, you can major in hotel management at Cornell.

[275] And not only does John do that, he ends up graduating number one in his class.

[276] This dude is like really, really good at hotels, which is incredible.

[277] But while he's there, though, he takes this class at Cornell called creating green cities and sustainable futures.

[278] And I don't know if this was in the hotel management school or broadly, more broadly at oil.

[279] Look up the curriculum or something?

[280] I did, yeah.

[281] I actually did, yeah.

[282] And he realizes as part of this class that transportation within cities is this like, you know, really inefficient and big problem that is contributing to all this pollution and all these problems within cities.

[283] And yet at the same time, there is this emerging mega, mega trend in the whole world.

[284] urbanization and people around the world continuing to move to cities and that this is going to get even more problematic.

[285] And this kind of light bulb goes off in John's head and he says, oh, wow, this is a huge problem.

[286] Everything I've learned about hotel management and literally he knows a lot.

[287] He's number one in his class at hotel management at the best school in the world for it is that the key to success in hotels is occupancy rates.

[288] And he's like, and I'm looking at like transportation in cities.

[289] And I'm thinking about these cars.

[290] And the thing about cars is 90 some odd percent of rides are one person in one seat in a car that typically seats, you know, five or seven people.

[291] Yeah, huge waste.

[292] How do I bring everything I've learned about occupancy rates in hotels?

[293] What if I move that over to transportation?

[294] Could I make a big impact here?

[295] Yeah.

[296] There's just stale inventory everywhere.

[297] Yeah.

[298] Indeed.

[299] Indeed.

[300] It's kind of amazing that he didn't start Airbnb.

[301] That's another episode to come.

[302] So this is all percolating in John's head, but he's also not quite ready to, he doesn't know what the right thing is to do, right angle of attack.

[303] So senior year rolls around and he ends up doing what, you know, all Ivy League students at the time, myself included did, is you go work on Wall Street and become an investment banking analyst.

[304] The glorious, glorious, noble cause of applying the most brilliant.

[305] minds to, well, you know, a training ground.

[306] It is a training ground.

[307] And I, you know, I don't regret for a minute that I did it.

[308] And I think John probably doesn't either because it's the summer of 2006 when he graduates.

[309] And he goes to work as an investment banking analyst at Lehman Brothers.

[310] And great reputation.

[311] I mean, fantastic firm.

[312] And really at the moment, Lehman was really on the rise.

[313] Yep.

[314] Setting itself up for a big fall to come, to come shortly.

[315] which we'll get into.

[316] So John goes off.

[317] He's working on Wall Street at Lehman Brothers in New York City.

[318] Logan is back from Zimbabwe.

[319] He's graduated.

[320] He's working as a sustainability coordinator at UC Santa Barbara.

[321] How on earth did these two guys get together?

[322] So Logan, he's realizing as he's thinking about this, and he's thinking about Craigslist's rideshare section.

[323] And he realizes the big problem is trust.

[324] Like, how do I trust when I get in a car with some?

[325] somebody that they're not going to, you know, do something bad.

[326] And likewise, if I'm driving, how do I trust that the person who gets in my car is not going to do something bad?

[327] Which, frankly, looking at how big ride sharing is today, and there have been some horrific incidents, but like, percentage -wise, it is remarkable how it basically goes off without a hitch.

[328] It's incredible.

[329] And that was not the case on Craigslist ride -sharing.

[330] So that fall in 2006, Logan sees an announcement that changes everything and that announcement that changes everything for lots of people is that Facebook, which was the hottest company, you know, hottest startup in the world at that time and certainly especially hot with college students and recent college graduates announces that they are going to open up their platform and invite developers onto it and have their first API and allow people to make apps.

[331] that include the social graph.

[332] And so inspiration strikes, hits Logan, and he immediately realizes this is it.

[333] This is what is going to crack this problem and solve trust with ride sharing, is that if you build the app, if you build the application on top of Facebook, you can see who you're writing with and see people's real identities and see who your mutual friends are, and you can message back and forth beforehand, and that might be exactly the wedge that he needs to, to crack the problem.

[334] I remember how crazy it was.

[335] So first of all, it was like very easy in 2012 to create a, I know we're, I'm pulling forward it here a little bit, but like the ease to create an account because I think the only way to create an account was logging in with Facebook at that point.

[336] And how crazy it was that like, it sort of made sense on other apps where I'm like, okay, I can see who else is using this app that's my friend.

[337] It was, for whatever reason, it felt like the next step further that I could see, what mutual friends I had in common with the driver.

[338] Like when someone was picking me up, I was like, oh, it was the most wonderfully sort of humanizing thing to see like, oh, you have two mutual friends with this person that's picking you up.

[339] It is, it instantly takes you to a place where you're going to treat the experience completely differently than you would a random stranger.

[340] Completely differently.

[341] Not just in terms of trusting that nothing bad is going to happen.

[342] Like, that's the worst case scenario, but there's also, you know, how is this person going to behave in my car?

[343] There's, well, yeah, there's upside opportunities, you know, people end up meeting, developing friendships, you know, relationships, getting married, like all this stuff in cars via via Zim rides.

[344] But yeah, there's also like, is this person going to trash my car, you know, are they, all this stuff.

[345] Logan sees this.

[346] He says, this is the opportunity.

[347] He quickly builds and launches an app on the Facebook platform called Carpool.

[348] It's a Facebook app called Carpool.

[349] And he decides to call the platform behind.

[350] the app, Zim Rides, because he's like, yeah, the inspiration came from Zimbabwe.

[351] Like, this is what I'm doing.

[352] Zim Rides, great.

[353] And this was 2008?

[354] This was end of 2006.

[355] End of 2006, okay.

[356] The company hasn't officially started yet.

[357] He's just calling the platform Zimrides.

[358] He teams back up with Matt Van Horn, the buddy from the trip to Zimbabwe, Matt's at Arizona, and they start working on this remotely together.

[359] And then in the next spring in May of 2007 is when Facebook public.

[360] publicly launches the, they had announced that they were opening up the API in the fall of 2006.

[361] They publicly launched the platform.

[362] I think this was the first F8.

[363] It must have been the first F8 when they do this.

[364] Yeah, I think so.

[365] And Logan had, he had gotten early access to the APIs and built the app and Carpool slash Zimride is featured as one of the first apps when Facebook launches the Facebook platform.

[366] It's incredible.

[367] It just goes to show the power of being there on launch day at one of these platforms or on one of these.

[368] these platforms.

[369] I mean, you look at the people that were initially featured as who to follow on Twitter before they built any algorithms around that.

[370] And it's like Chris Saka and Ashton Coucher and like some of these people still have these just unbelievable followings from getting juiced in that early era.

[371] Yeah.

[372] I mean, shoot, in a lot of ways, acquired benefited from this.

[373] Like, we weren't at the beginning of podcasting, but we started acquired before the, you know, the, we beat the most recent rush at least.

[374] Most recent wave.

[375] And we got featured on a bunch of podcast players.

[376] And, you You know, that growth rate compounds, it turns out.

[377] So ZimRides featured as one of the first launch apps for the Facebook platform.

[378] When this happens, a good friend of Logans from middle school back in L .A. named John Siegel.

[379] He sees that his buddy Logan has done this.

[380] He's like, this is so cool.

[381] He posts it on his Facebook wall.

[382] Turns out that John Siegel is mutual friends with John Zimmer.

[383] That's how they came together?

[384] the East Coast.

[385] This is incredible.

[386] So where did you find this?

[387] They had met.

[388] Zimmer talked about this.

[389] He does a lot of interviews.

[390] So Zimmer and Siegel had met while studying abroad, I believe in Spain, in college.

[391] They'd gone to different colleges.

[392] Seagull hadn't gone to Cornell.

[393] And Zimmer comes home one night.

[394] He's just started at Lehman.

[395] And I guess he's a couple months into Lehman.

[396] He's probably just started in his group of finished training at Lehman.

[397] And he comes home home one night.

[398] And he sees this post on Siegel's wall.

[399] and he's like, this has got to be fate.

[400] Like, I've been thinking about this.

[401] I know how to like operationally attack this problem.

[402] It's all about occupancy rates.

[403] I've been thinking about carpooling.

[404] My name is John Zimmer.

[405] This company is called Zimride.

[406] It has to be fate.

[407] So Zimmer pings Siegel that night and he asks him to introduce him to Logan.

[408] And Siegel does.

[409] They start talking, I believe, over Facebook to start.

[410] A couple weeks later, Logan flies out to.

[411] New York City, they meet in person, and they jam it, and they just, they hit it off and they decide, all right, we're going to work together.

[412] Now, Logan's still working as a sustainability coordinator at UCSB.

[413] And obviously, Zimmer is still in his analyst program at Lehman Brothers.

[414] They're not thinking about starting this as like a real company.

[415] It's like the side project.

[416] Like, great.

[417] Like, we're both thinking about this.

[418] Like, let's do it.

[419] So they, uh, they stay working on it part time.

[420] This is a total aside, but like, this sounds crazy today in 2019.

[421] but this stuff happened like Jenny and I have good friends who got married because they met on Jenny's Facebook wall so like it's incredible the kind of stuff that happened totally back in the day and it was right around this same time too one tidbit I found that I'm curious if you know the origin of it since you dug into this so much in the S1 they reveal that even before it was Zim Ride in 2007 the company was incorporated as Bounder Web inks I saw that Bounder Web I couldn't figure out what that came from So, you know, Logan and John, you know, if you're listening, hit us up.

[422] I love, yeah.

[423] Hit us up Acquiredfm at gmail .com or in the slide.

[424] Also congratulations.

[425] Yeah, also congratulations.

[426] All right.

[427] So they're working on it part time.

[428] And Matt Van Horn, like, he's still involved too.

[429] He's the third co -founder.

[430] But Matt decides that he's going to stay part time.

[431] He's going to be essentially an advisor.

[432] And he goes, as we said, to work a dig and then Path and now June.

[433] But he's been involved with the company.

[434] you know, the whole time.

[435] So the three of them, they decide, you know, they have to decide go to market strategy.

[436] They have the tech.

[437] They have the kind of product concept.

[438] But where are they going to start?

[439] Well, the natural place is college campuses, right?

[440] Like, that's where, A, that's where Facebook started.

[441] And that's where Facebook's, you know, user base primarily is college campuses in recent grads.

[442] Two, Logan works at a college.

[443] And three, they both, you know, recently graduated.

[444] So like, okay, we're going to focus on, focus on college campuses.

[445] And that's where some people have cars, other people don't have cars.

[446] It would be nice to be able to put those together.

[447] To do ride sharing and a lot of cost sensitivity.

[448] Totally, totally.

[449] So they launch, they choose Cornell as the first school that they're going to launch at.

[450] I don't know why they didn't do Santa Barbara.

[451] Maybe like Logan was worried about people finding out when he was working there.

[452] Unclean.

[453] But they choose Cornell.

[454] And within six months, they've signed up 20 %.

[455] of the student body that is actively using this.

[456] And the real use case is around breaks.

[457] So like school goes on break and like you're driving back from Ethica where Cornell is to Boston or New York or Philadelphia or wherever.

[458] Yeah, load up your car and, you know, share the gas money.

[459] Randomly, they then get a bunch of other schools that start using it.

[460] Apparently the University of Wisconsin lacrosse.

[461] They didn't do any marketing there.

[462] Just like, you know, popped up.

[463] founded and started, huh?

[464] Network effects, man, it's a thing.

[465] So they're doing this.

[466] They start doing at schools that they really want to get adoption at.

[467] They start doing these crazy marketing stunts.

[468] They go out and they buy a frog suit and a beaver suit.

[469] Like, I think they were just suits.

[470] I don't think they were specific college mascots.

[471] But then like they would go to campuses on the weekends and parade around with signs, advertising Zim ride while dressed up in these.

[472] animals you seem like the type of people that would put a pink mustache is on cars for sure yeah you can see where the DNA comes from and uh one one uh one time they do this uh zimmer does this back at cornell he's he's on a recruiting trip for leman and uh he goes a couple days early he dresses up in a beaver suit does this and then when they do with the info session uh he's there with like a managing director in his group and this girl comes up to him and is like didn't i see you you running around campus in a beaver suit the other day?

[473] And John's like, yeah, let's talk about that outside, which is hilarious.

[474] But it works.

[475] And so they're trying to land on the business model for this.

[476] And what they decide is they're going to go, once they get adoption at college campuses, they decide they're going to go to these colleges directly and ask the colleges to basically buy a license from them to set up Zim rides as the official.

[477] car share on campus.

[478] So like don't work with Zipcar or don't do what UCSB did where you buy a bunch of Priuses yourself, you know, have it be the sharing economy, even though it wasn't called that yet, and just buy a license from us to operate your own version of Zimrides, which they do in schools pay them like $10 ,000 each.

[479] And at the time, they're like, woohoo, $10 ,000.

[480] Great.

[481] Real business.

[482] Yeah.

[483] Turns out that was not the right business model.

[484] But we'll get to that in a minute.

[485] So they do this for basically a year from 2007 to 2008, gets into 2008, and Zimmer is coming to the end of his analyst program at Lehman Brothers.

[486] And he's trying to decide, you know, am I going to go work in private equity like all my other analyst classmates who are staying in Wall Street?

[487] You know, am I going to go full time on this Zim rides thing?

[488] It seems like it's really working.

[489] What should I do?

[490] Two things happen that help him make his decision.

[491] One, ZimRides gets its first institutional investment.

[492] Ben, do you know who the first institutional investor in ZimRides was?

[493] There was an angel investor beforehand, the VP of Finance at eBay, Sean Agarwal, who is still the chairman of Lyft's board today.

[494] Oh, interesting.

[495] But who was the first institutional investor?

[496] Is it before Floodgate?

[497] This is years before Floodgate.

[498] Huh.

[499] Yeah, because that was like 2012 or something.

[500] I don't know.

[501] it was Facebook so no way yeah so not only did get to the power of launching on these platforms not only did zim rides launch on the facebook platform facebook about a year later had started the facebook fund that's right and they invested $250 ,000 in zim rides to help support it because it was this you know growing app on the platform and they announced the investment on stage at f8 2008 whoa Did they hold that for a while?

[502] Whatever happened to that?

[503] So unclear.

[504] It appears it actually was a grant and not an investment.

[505] So I don't know that they got equity for it.

[506] I want that kind of funding.

[507] Yeah.

[508] Bad move by Facebook.

[509] So unclear.

[510] I don't know whether they got equity or warrants or just what.

[511] But pretty funny.

[512] So once they get the money and Zimmer's like, okay, we got $250 ,000.

[513] Like, that's a lot of money.

[514] Maybe I can do this.

[515] Before he makes his final decision, though, he meets up with a good friend's mother who works in the Lehman Brothers building in Manhattan at a at another finance firm in the building and she hears about she must have heard about what he was thinking about and said like I got to sit this kid down and set him straight she sits from down and she's like John like are you thinking about what you're doing you're about to leave a sure thing like Lehman Brothers for this crazy carpooling startup out in Los Angeles.

[516] Now, this is July 2008.

[517] And he's like, yeah, I mean, that is like extreme.

[518] But, you know, I really want to do this.

[519] I'm going to do that.

[520] And I mean, three months later, this story was different.

[521] Goes bankrupt.

[522] Whoa.

[523] That's right.

[524] I was going to say even before that, I mean, this, this, this exchange of sure thing for stupid risk.

[525] Like, this is on 10 acquired episodes.

[526] We see this over and over and over and over again.

[527] But literally, this is like, oh my God.

[528] you know, Wall Street institution, Lehman Brothers, been around forever, like, literally three months later, Lehman goes under financial crisis happens.

[529] Far too big to fail.

[530] Far too big to fail.

[531] Indeed.

[532] So, but Zimmer's mind is made up before then.

[533] He naturally uses Zimride to carpool across the country from New York out to Palo Alto.

[534] He and Logan decide they're both going to relocate to Palo Alto.

[535] They're going to make this a real startup.

[536] They're going to follow in Facebook's footsteps.

[537] You know, they have all this, you know, now money and mentorship and help from Facebook.

[538] A funny story about that, which I will come back to perhaps later in the episode.

[539] So they move into, I think they get a temporary office for a while, but they settle into, they decide they're going to get an apartment in Palo Alto that they're going to both live and work out of.

[540] And it turns out that it is next door to Marissa Myers' house.

[541] And so their windows look out over Marissa Myers' backyard.

[542] And Marissa, of course, at the time was one of the senior executives at Google, who had been there since basically the very beginning and was not yet, but would become the CEO of Yahoo. Neighbor friends?

[543] Like, what's the, what happens here?

[544] Well, so they talk about, you know, they'd see and hear, you know, all these Silicon Valley parties that would happen in her backyard next door.

[545] They'd be like, they'd look out the windows and try and figure out like who's out there and dream about someday they could, they could, you know, reach those same heights.

[546] They do.

[547] It just takes a while.

[548] So they basically operate this way for the next two years, which is crazy.

[549] So like they have the 250K from Facebook and the little bit of angel money from Sean Agarwal.

[550] But that's it.

[551] And they're not making that much money from these universities.

[552] So the two of them don't take a salary for in total, for those whole first two years that they go full time on this.

[553] They eventually raise a seed round, as you alluded to.

[554] you've been from Floodgate, from Anne Miraco there in 2010, but that's two years later.

[555] And then they would raise a Series A in 2011.

[556] I think, and Anne talks about this, I think part of the reason that they were able to raise that seed round was just that Anne and the other investors kind of looked at them and were like, well, these guys are like, you know, cockroaches.

[557] They just don't die.

[558] We'll invest in that.

[559] It is incredible how small the beginnings were here.

[560] So both the floodgate round and then, I can't remember who led the Series A, both those were Mayfield.

[561] Okay, into the ZimRide concept of recurring revenue from universities.

[562] Yep, they were.

[563] They were.

[564] This is before Lyft.

[565] So not long after the Series A that Mayfield does in 2011, Logan and John, you know, they're excited.

[566] They just raised an A and things are going well.

[567] But if they're like really honest with themselves, they're not setting the world.

[568] on fire here.

[569] Growth is slow wing.

[570] They've saturated universities at this point.

[571] They've opened up the product for corporate customers, but that's not that compelling.

[572] Like ride sharing back and forth to campuses for breaks is a great use case, but like ride sharing to work every day.

[573] It's also not daily.

[574] Like, I mean, they're not building habit here.

[575] It's a, you know, low frequency event.

[576] Exactly.

[577] Exactly.

[578] So then they were like, okay, well, we'll, as part of the series A, we'll open this up to everyone.

[579] So you don't have to be part of a campus or a corporate network anymore.

[580] But then they run back into the Craigslist problem all over again as like, I don't know these people.

[581] Am I going to get in a car with them?

[582] Yeah.

[583] So by mid -2012, six months -ish after their six, eight months after their Series A, they realize the problem here is with the market, not the product.

[584] And they need to do something different to solve it.

[585] Okay.

[586] So what happens next?

[587] Here is the official lore of how Lyft begins.

[588] I was like official lore.

[589] We'll start with the official lore.

[590] Great.

[591] So it's summer 2012, John and Logan have come to this realization.

[592] They talk to the company.

[593] They say, here's what we're going to do.

[594] We're going to hold an internal hack day to come up with new ideas and like open your mind.

[595] They're, you know, they must be inspired by audio and how Twitter started here.

[596] Yeah.

[597] And open your mind.

[598] We'll discuss ideas.

[599] We'll vote on what we want to do.

[600] three ideas come out the first one is called on my way which would be an app if you're traveling to alert friends that you were going to see like where you are kind of like a safety thing like so that friends could track you as you were traveling on your smartphone at this time feels like a feature yeah yeah feels feels like a feature that might be part of lift and uber something two the the second idea they have is called journey and what journey the vision is people using Zimride to go on these road trips together, having these social experiences, Journey would be an app that you could document a trip with like photos and videos and music that you listen to and like share a memory of a trip, you know, almost like there's still room for that.

[601] Well, I guess people use the Instagram for this now.

[602] Well, first Snapchat stories, but like, I mean, I guess like you could argue maybe this could have been stories, you know, not an obviously terrible idea.

[603] But the clear winner when the company of a. votes is the third option, Zimride Instant.

[604] Lift is a little catcher.

[605] Lift is a little catchier.

[606] But Zim Ride Instant, you know, of course, Uber, as we referred to, and not just Uber, but a company called Taxi Magic and a company called Cabulus, all of which we will cover on the Uber IPO episode.

[607] You know, they're, of course, around.

[608] They're doing trips within cities, but it's more like taxis.

[609] They're using licensed limo drivers to do this.

[610] It's not peer -to -peer.

[611] It's not car -sharing.

[612] But it's an experience that people love.

[613] It's just very expensive.

[614] And so they're like, yeah, ZimRide Instant.

[615] What if we did this in a peer -to -peer car -sharing way?

[616] And we use our network of drivers on ZimRide, but we just do it instant.

[617] Oh, brilliant idea.

[618] Inspiration has struck.

[619] Oh, incredible, you know, entrepreneurial moment.

[620] And so, of course, they decide to do this.

[621] They build and launch an MVP app in three weeks.

[622] They're going to call it Zimride Instant, but they have an intern, a design intern that's spending the summer with them named Harrison Bowden, who still works at Lyft today as a designer.

[623] He's like Zimrite Instant.

[624] Like, that's not too good.

[625] We need a new name.

[626] How about we call it Lyft ?com and we'll lift like, that's going to be hard to get the domain name.

[627] But let's just change the I to a Y. And like, it looks cool anyway.

[628] Let's call it lift.

[629] And brilliant.

[630] And the rest is history.

[631] Sidecar.

[632] So Harrison, uh, sidecar.

[633] Sidecar.

[634] Or didn't slip there.

[635] Sidebar, Harrison also designs the first logo.

[636] Do you know what color Lyft's first logo was?

[637] Yes.

[638] Seafone green.

[639] Yeah, it's funny.

[640] I dug up, in preparing for this episode, I dug up my first lift receipt.

[641] Oh, no way.

[642] That's awesome.

[643] When they were expanding to Seattle, yeah.

[644] And it was, they hadn't yet gone with the pink.

[645] What was pink was the pink balloon, but the L -Y -F -T, which that logo mark has not changed was green, not pink.

[646] Or C -foam green, I should say.

[647] Yeah.

[648] I would love to hear why they chose C -Fone.

[649] I'm agreeing, but anyway, and this is the legend, this is the lore, and even in the Lyft S1, there's a founder's letter from Logan and John in there, and in it, I quote here, in 2012, we launched Lyft and pioneered the idea of on -demand peer -to -peer ride sharing.

[650] In those early days, we were told we were crazy to think people would ride in each other's personal vehicles.

[651] One billion rides later, we're able to look back on an industry that has been defined by the products Lyft pioneered.

[652] Wow, it's like it's a humble brag, a little bit of shade, a little bit of, you know, sub -tweeting or whatever you want to call it in an S -1 there.

[653] And certainly, certainly referring to Uber there.

[654] And, you know, that appropriately said paragraph, that paragraph is not incorrect.

[655] And Lyft and the former Zimmeride deserve all the credit in the world for doing that and creating one billion rides over the last seven years.

[656] However, that's not quite the whole story.

[657] And that's what we're here at Acquired to talk about.

[658] So, Ben, do you want to hear...

[659] The story of Rosenthal has the real truth.

[660] Do you want to hear the real story of how peer -to -peer ride sharing started?

[661] Come on.

[662] Love it.

[663] Okay.

[664] So you may have heard of a company called Sidecar.

[665] You may even remember a company called Sidecar.

[666] Of course.

[667] And by the way, this story that we're about to tell is, I think, certainly the best story in this episode probably going to be the best story this season may even be the best story of all time and acquired i'm so excited here yeah baby so okay sidecar you know some people who who remember sidecar was a peer to peer ride sharing competitor from about this time and they may remember yeah sidecar was first weren't they didn't didn't sidecar invent this concept of ride sharing well yes and no let's talk about sidecar okay so sidecar was started by a guy named Sineal Paul, who's still around here in San Francisco, in September of 2011.

[668] Now, remember, it's summer 2012 when the Lyft Hack Day happens.

[669] And Sineal is a super interesting dude.

[670] He had been an original AOL guy, like way back in the day, and working out of Washington, D .C., where AOL was based.

[671] And then after AOL, he started a company called Freeloader with a guy named Mark Pinkus, which might raise...

[672] perk up the ears of some of our listeners.

[673] Mark, of course, was later the founder and CEO of Zinga and Sineal did not co -found Zinga with Mark, but was an initial investor and was actually a board member of Zinga for a long time.

[674] After that whole right.

[675] And in between, he started a company called Bright Mail that got acquired for about $400 million.

[676] So yeah, he's done a lot of stuff in the valley.

[677] He finds himself by 2009.

[678] He is teaching at Singularity University here in Silicon Valley.

[679] and he has two students in his class, Sam and Jessica, have an idea that they're all kind of working on in the class together to start a peer -to -peer car -sharing company, and that ends up becoming get -around, which is still a large and very successful car -sharing company today.

[680] And we were actually small seed investors back at Madrona, and I remember working with Sam and Jessica in the very early days.

[681] This was super fun.

[682] The distinction being that you drive that car rather than riding in that car.

[683] Yes, you own a car.

[684] put it on the platform, and then somebody can rent that car from you that they then drive.

[685] So it's basically it's Zipcar with cars that people own instead of cars that Zipcar owns.

[686] And it's a great idea.

[687] Still works really well.

[688] And Sineal was so excited about this because he's been, he had actually been thinking about this for a long time, going back to his freeloader days, and it was also percolating around in his head.

[689] He had actually filed for a patent back in 2002.

[690] and was granted a patent for the system and method for determining an efficient transportation route that he was thinking about for car sharing and ride sharing within cities.

[691] So, Sunil's like so excited that Sam and Jessica are working on this.

[692] He says, I want to be your first investor.

[693] I want to invest and I want to be executive chairman of the company.

[694] And Sam and Jessica are like, yeah, like that's like a lot of equity and a lot of control that you want.

[695] and they were worried about him parachuting in and wanting to take over his CEO, which he probably did want to do.

[696] And so they say thanks, but no thanks.

[697] And they reject his offer to invest.

[698] And Sineal gets really angry about this.

[699] And so he writes about all this later.

[700] We'll link to his bunch of media posts about all this history.

[701] And he's like, you know, it's totally the wrong thing to do.

[702] And like, I was just so, you know, upset about it.

[703] So he's like, I'm going to spite them.

[704] I'm going to go start my own company doing this.

[705] Wow.

[706] And he's like super honest in these blog posts.

[707] So he does that.

[708] He works on it himself for a while competing with Get Around.

[709] He eventually decides, you know, their challenges to the market.

[710] He's not doing as well at it as he could.

[711] He decides he needs to do something else.

[712] And so what he wants to do instead is to build, he sees the rise of smartphones.

[713] He wants to build a city transit smartphone app.

[714] So essentially what like Google Maps on your phone has become today and what he had his part of what he had that initial patent for.

[715] So he reaches out, he finds a team of computer science students in Michigan at the University of Michigan who are also working on this.

[716] He goes out, he flies out there.

[717] He convinces them to come out to San Francisco and start this company with him, including the CEO of the company from Michigan, Jahan Kana, who becomes CTO of Sidecar.

[718] And so they start this company.

[719] And right around the same time, a friend tells Sunil about this crazy.

[720] thing that's happening in San Francisco that he might want to pay attention to because it's pretty related to what he's working on.

[721] And he says, there's this, there's this group here in the city that has started recruiting ordinary people to take their cars and drive around at night and pick up people, other people, who request rides from them to get to where they're going, out to bars or home from bars.

[722] And, like, of course, there's Uber out there, but this is just like ordinary people doing it.

[723] And it's working, like, super, super well.

[724] And so Neil's like, oh, yeah, like, I'm really interested in that.

[725] Like, tell me more.

[726] You should take a look.

[727] Yeah.

[728] Maybe we should take a look.

[729] He's like, oh, yeah.

[730] So what's the service called?

[731] It's called Homobiles.

[732] Yes, you heard that right.

[733] It's called Homobiles.

[734] And the motto of Homobiles is Moes getting hose where they need to goes.

[735] And this is.

[736] And this is, you heard that.

[737] is the most incredibly amazing San Francisco -y thing that probably has ever been created.

[738] It just, I love this.

[739] This is so great.

[740] Lay it on us.

[741] So, okay.

[742] So, you know, San Francisco today, you come here in 2019, and, like, it's all techified and yuppies and, you know, there's Lyft and there's Uber and there's Airbnb and everything that's taken over the city.

[743] But, like, San Francisco was the birthplace of, you know, counterculture.

[744] Like, in the 60s, this was, you know, sex, drugs and rock and roll.

[745] And we've talked about this on this great book about the old San Francisco called Season of the Witch.

[746] So Homobiles was born out of that, not out of the tech world.

[747] It was started in 2010 by Lini Breedlove, who is a punk rocker and LGBTQ icon here in San Francisco.

[748] And as he tells it, he was going to FemCon in Oakland in the summer of 2010.

[749] And he was driving some babes to the conference.

[750] and he says he got there and all of a sudden this is this is his words this is a quote he says all of a sudden the butches and trans guys who saw me wanted to drive and all the babes and drag queens who wanted rides wanted rides and then i realized this was a serious need that had to be filled and this is awesome but like this actually was this is such a serious need because even in san francisco which is, you know, one of the most tolerant and liberal and, you know, forward -thinking cities in the country, if you were a drag queen or even not just, you know, just gay and you any member of a at -risk population.

[751] Any member of a at -risk population.

[752] And you were out at night, you were at a gay bar, you were somewhere else, and you were trying to get home or you were trying to get to another place, taxis wouldn't pick you up.

[753] And even Uber, like, you could get in an Uber, but you might still have issues.

[754] I mean, this happens all the time still.

[755] Like, you know, people get assaulted, people get attacked, people get raped.

[756] And, you know, if you're part of an at -risk population, this is like a serious worry in your life.

[757] And so Breedlove started, thought, I can do something about this.

[758] He started this organization called Homobiles.

[759] And the concept was if you were, you know, felt you needed a safe chariot from getting one place to another, you could text Homobiles and they would dispatch.

[760] you could both drive for homobiles and then they would dispatch somebody to come pick you up and take you, you know, in a safe way to where you need to go.

[761] And of course, legally you couldn't pay because they weren't a taxi company, but you could donate to your driver and to homeobiles.

[762] And turns out that worked great.

[763] And homobiles at this point by 2011 had become a big thing in the LGBTQ community in San Francisco.

[764] And it turns out they had invented peer.

[765] to peer ride sharing.

[766] Oh, that's so interesting because they get none of the credit for it.

[767] Nobody, nobody knows.

[768] The only way I found out about this was Sunil writes about it in his medium posts.

[769] And if you Google Homobiles, you'll find some articles here in San Francisco about it.

[770] But even in, we used a lot of a friend of the show Brad Stones, the upstarts, a lot of the research reporting he did.

[771] He mentions homobiles in a footnote, but nobody talks about they were the first ones to actually pioneer peer -to -peer ride -sharing.

[772] And doing it for just an extreme need.

[773] I mean, this is, you know, I got to get to work in the rain.

[774] This is an extreme need.

[775] Yeah.

[776] This is like, I might die on my way home if I don't have this service.

[777] So Sineal is here about.

[778] He says, okay, great.

[779] Well, I got to try this.

[780] So he writes, this is a quote from his medium post.

[781] I took homeobiles to the airport for a trip to New York.

[782] It cost me $20 for a trip that normally cost $50 in a taxi.

[783] Wow.

[784] this system was cheaper than taxis, never mind Uber.

[785] Homobiles had been in the press, yet hadn't been shut down.

[786] It seemed to be operating in a gray area of regulation by taking donations.

[787] We wondered, can we create a scalable technology -enabled version of homobiles that could allow us to create our shared ride vision?

[788] So that's it.

[789] That's what they do.

[790] They take the homobiles operating model, which is individual, regular people, not commercially license drivers driving for the platform and then individual regular people via a dispatch service that they build an app version of summoning them to pick them up and then the payment is a donation and for listeners if you remember back to the early days of Lyft and Sidecar when it started it was not a payment because the regulation was all donations so Sidecar takes the entire operating model from homobiles marries it up with the app interface, the smartphone app interface of Uber, and then they launch in February 2012 in San Francisco, and literally the biggest market opportunity since Facebook is born.

[791] What an incredible story.

[792] So of course, sidecar would go on to raise a bunch of money along with Lyft and Uber.

[793] They would launch intensities, but ultimately they couldn't keep up in the war of capital that we're about to get into.

[794] David, do you know my personal history with Sidecar?

[795] I know you have one.

[796] Let's hear it.

[797] Yeah, so I know Sidecar well and loved the service and was a big user in kind of the early days.

[798] And I, when I worked at Microsoft, I worked on a couple of companies on the side, one of which was called Red Ride, that I started with a few friends actually at a startup weekend here in Seattle.

[799] And it was still a side project because we had day jobs, but fairly advanced.

[800] It was basically the kayak for ride sharing, which some other great companies are trying to do now.

[801] But as we sort of got toward the end of realizing that we weren't going to start it as a, you know, I'll quit our jobs venture.

[802] We were talking with Sidecar and Sunil about an aqua hire.

[803] And ultimately, I decided not to, but, you know, what could have been?

[804] What could have been?

[805] You could have been, well, you could have been part of what happened when Sidecar ultimately did shut down.

[806] They got acquired by GM.

[807] for the assets, not the operating company, because GM simultaneously invested $500 million in Lyft and acquired sidecar.

[808] I believe they wanted the team and the patent.

[809] So remember Jahan, Kana, who's from Michigan, he goes back to Michigan to GM as part of the acquisition.

[810] He stays there about a week, and then he leaves and joins Uber, where he's still to this day.

[811] And so Jahan, do you know what he's doing at Uber now?

[812] He is head of product for new modalities, which is bike.

[813] and scooters.

[814] Always on the cutting edge.

[815] And Andrew Chapin, who was an executive at Uber at the time and is now co -founder and CEO of Waves portfolio company basis, was a big part of hiring John and bringing him back and bringing him into Uber.

[816] So, okay, back to homeobiles quickly, though.

[817] This is amazing.

[818] They are still around today and they are still super important in the LGBTQ community.

[819] So, you know, even with Lyft and Uber, you know, as advanced as they are today, Like, this is still an issue for at -risk populations.

[820] You know, you don't know, even though you can see the profile of your driver when they come to pick you up, you don't know what they're, what they think, how they behave, especially towards non -normative people like this.

[821] And so they're still giving rides at night.

[822] They're also, though, they do a lot of, they drive people to and from major life events like surgeries and they provide emotional support during that time right before you're about to go into something, you know, life -changing.

[823] So it's actually now a nonprofit.

[824] profit.

[825] It's a 501c3.

[826] And this is crazy.

[827] It still is done by dispatch.

[828] They don't have a smartphone app.

[829] And they've been trying to raise money to have enough resources to build an app.

[830] They've been trying to do it for years.

[831] And so we felt like Ben and I talked about this before the show, we felt it was important to kind of pay homage to this organization that started this incredible industry that now has resulted in, you know, one and soon to be two massive IPOs.

[832] So we're going to a $2 ,000 donation from Acquired to Homobiles, and we're going to put a link in the show notes in case anybody else wants to, too.

[833] And we think it would be super cool if the Acquired Nation could help them get enough resources to finally build an app.

[834] Yeah, let's build an app.

[835] I'm sure.

[836] I wonder if there's probably some in -kind donations that they could use to.

[837] But yeah, super, super pumped to be doing this, David.

[838] And I think glad that you broke our normal structure of not discussing anything before the show to keep it all a surprise so we could uh could talk about and do this one yeah we really really wanted to do this so definitely encourage uh other other parts of the acquired family to help too okay so back to the story so lift you know we had just told the canonical version of how lift came out of zimride uh you know and that may be true there was a hack day and you know they did decide to work on zimride instant and they did launch it as lift but um before the hack day after Sidecar had launched in February of 2012, Zimride definitely sees what's going on with them and sees them start to get a bunch of traction.

[839] And in fact, Sineal and Sidecar, they saw, you know, because they had, you know, God mode for these platforms was not yet illegal.

[840] They could see everyone who was signing up for the service and how they were using it and where they were going.

[841] They saw that actually Logan and John and Zimride board members were all like super actively using the side.

[842] side car app in the couple months before they started Lyft.

[843] So by the time the hack day rolls around that summer, you know, everyone at Zimride definitely knows everything about how sidecar works, definitely knows, you know, the donation model, whether they knew it came from homobiles or not.

[844] They now know exactly how the operational model works.

[845] And so when they launch Lyft, you know, they copy it all.

[846] But they do, to their credit, they do it a lot better.

[847] And there are two reasons why they, why they do it better.

[848] one, which we alluded to earlier, they have the existing network of drivers and supply from the Zimride product that they can onboard on to lift pretty quickly and easily.

[849] It's like rule number one in creating a marketplace product.

[850] It's like how do you cheat and bootstrap one side of the market?

[851] Yep, yep, totally.

[852] So they've got the hack to bootstrap one side of the market.

[853] And people hadn't realized yet, but would come to be known that there's a kind of magic density in ride sharing networks that, are related to time that you have to wait as a rider for a pickup.

[854] If that time is more than a couple minutes, people will abandon the service.

[855] And so by being able to bring a like a huge portion of a huge network and supply, you get over that tipping point.

[856] You get over that tipping point a lot faster.

[857] And so that was a major help to lift.

[858] The other thing that they realize, and listeners will probably remember this, they realize that like this is still kind of a crazy idea.

[859] And so they have to do a couple things to, A, make people comfortable doing this, you know, getting in cars with strangers, but also be, raise awareness that you can even do this.

[860] So they do three things.

[861] Here we go.

[862] Here we go.

[863] Here we go.

[864] First, in the app as a rider, when you sign up, they tell you to sit up front.

[865] Don't sit in the back like a taxi.

[866] You're getting, you know, this is lift is your friend with a car.

[867] This is ride sharing.

[868] You're not.

[869] This is ride sharing.

[870] Yeah.

[871] Sit up front, be friendly.

[872] And number two, as part of being friendly, give your driver a fist bump on the way in and out.

[873] I thought this was so weird back in the day.

[874] God, yeah.

[875] And, you know, you could maybe argue whether one and two helped them win or not.

[876] But certainly the - differentiation there at least.

[877] Yeah.

[878] Certainly the third thing they did helped them win big time.

[879] So they already had this supply hack, this distribution hack on the supply side.

[880] They needed something, though, to get demand within San Francisco and future cities that they launched.

[881] And so they came up with kind of a crazy idea.

[882] And here's where the frog in the beaver suit costume, DNA comes back.

[883] A few years earlier, John Zimmer had found out about this crazy, this company in San Francisco that made these funny, you know, bumper protectors.

[884] If you're parking on the street in San Francisco, just like in New York, like, it's super tight parking.

[885] People hit your bumper all the time.

[886] And this, you know, ironic hipster company in San Francisco had made a bumper protector that looked like a fuzzy mustache.

[887] And so you could put a mustache on your car.

[888] It was called a car stash.

[889] And so as a joke, Zimmer had started buying a bunch of these and giving them to employees and investing.

[890] I know back at Tim Ride.

[891] But then when they're launching Lyft and they realize they got to like get people aware of the service and onboard demand, they're like, oh, great.

[892] Every driver who signs up for the service, we're going to make them put a big fuzzy pink mustache on their cars.

[893] And so like summer 2012.

[894] Totally free.

[895] You're not allowed to really put a billboard on, I mean, I guess you could wrap the cars, but like, you know, this is, this stands out way more than that.

[896] Way, way, way more.

[897] and, you know, it's kind of like when scooters launched, well, scooters will come back in a minute, but the scooters are sitting on the sidewalk.

[898] Here, you've got cars driving around the city with this fuzzy pink mustache.

[899] And I remember this.

[900] Like, I remember coming down to San Francisco at the time.

[901] I'd be like, what is with all these cars driving around with pink mustaches?

[902] And the word of mouth, like, it was real.

[903] And it, uh, it Lyft started to really, really, really take off.

[904] And so in this, at this time, it was differentiation from sidecar, right?

[905] because Uber hadn't launched Uber X yet.

[906] So it was competing against them.

[907] Yep, it was competing against sidecar.

[908] But it was really competing against non -consumption.

[909] Right, right.

[910] Yeah, it's, it makes you go, what's the deal with the mustache and then you?

[911] Yeah, it's basically, it's actually, it's funny.

[912] It's not really competitive differentiation.

[913] It's more just category awareness.

[914] Yep.

[915] Totally, totally.

[916] It was probably the last thing on their minds was competing with sidecar at this whole time.

[917] But speaking of competition, Uber.

[918] is out there.

[919] You know, Uber's been around since 2009 at this point.

[920] They're doing limo, uh, licensed driver pickups via an app, basically dispatch for, for limo drivers and black car drivers via an app.

[921] They start seeing this happening and they're like, oh, crap.

[922] Like, Uber is expensive.

[923] And they're making lots of money and there's tons of demand for it.

[924] But all of a sudden, here's this substitute product out there on the streets that is massively undercutting us on price.

[925] Like, we got to do something.

[926] So now this is like, people don't remember this, but Uber, they're like, they're really mad because, you know, they're Uber, they have all the reputation.

[927] They're so aggressive, but like they have been operating within the law.

[928] And, you know, technically this peer to peer bride sharing thing, it's in a gray area, but it's not explicitly legal.

[929] And so Uber gets super pissed and they start lobbying and they try and shut down.

[930] I remember this from Brad's book.

[931] Yep, yep.

[932] So they work really hard for about.

[933] a year to try and get lift and sidecar shut down as being illegal.

[934] And they're being super principled that like, you know, we operate legally and like they're not operating legally and regulators should shut them down.

[935] Turns out though it doesn't work.

[936] Probably partially because the regulators hated Uber because they were so aggressive kind of on pushing the rules within the existing license driver industry.

[937] And so this is great.

[938] The next year, April, it wasn't until April 12th, 2013, when Uber, Uber had already launched Uber X, but it was still licensed drivers driving Priuses instead of black cars.

[939] They pivot Uber, Uber X into being a direct competitor with Lyft and side car doing peer -to -peer ride sharing.

[940] And they announce it, Travis releases a white paper entitled, principled innovation, regulatory ambiguity around ride sharing apps.

[941] And there's the money quote in there.

[942] This is so perfect.

[943] He says a couple paragraphs in, in the face of this challenge, the challenge being from these, you know, unlicensed peer -to -peer ride -sharing apps, Uber could have chosen to do nothing.

[944] We could have chosen to use regulation to thwart our competitors.

[945] Instead, we chose the path that reflects our company's core.

[946] We choose to compete.

[947] Boy, that is a -ke the Imperial Death March.

[948] Yeah, then the entire tone of the Lyft S -1 that's about sustainability and good for the world and great for riders and great for drivers and really like everyone kumbaya and hug we choose to compete we choose to compete and compete they did so they repurpose and you know that that white paper was mostly for employees like that was a that was a rallying cry it was a rallying cry a hundred percent so they repurpose uber x which again already existed but was not true peer -to -peer car sharing they repurpose it that april into peer -to -peer car sharing and the fight is like on and so it becomes it was already clear at this point but then once uber enters the market like everybody realizes very quickly that this is it like this is the biggest market that anyone has seen in silicon valley in a long long time it's big you know Airbnb was around at this point and was quite big but Airbnb is quite big because it's a winner take all winner in a market for you know home sharing which is quite large ride sharing dwarfs the market for Airbnb it's just not a winner take -all market.

[949] So the competition that this unleashes and the behavior that this unleashes in Silicon Valley is just incredible.

[950] And let's talk about this.

[951] I was going to talk about it in tech themes, but it's worth just touching on it briefly.

[952] And we talked at length with Brad Stone about this and the episode that we did with him.

[953] What episode was that?

[954] Is it AM?

[955] No, it was when we, it was Uber and D .D. And he makes this really great point that the network effect with Airbnb is super strong across markets, so it becomes winter take -all, where when you're traveling and you're used to using Airbnb in the last two vacations you took, you're going to use it on the next one.

[956] So wherever Airbnb, you know, there's going to be ultimately sort of one, one platform there.

[957] However, with Uber, or ride sharing or Lyft, whatever, when you are using it, 98 % of it is going to be in one city because it's something you use generally where you live.

[958] And so it's not really that big a deal for market by market to be owned by different players, particularly internationally, where, I mean, it kind of makes sense for, you know, Seattle and San Francisco to have the same provider.

[959] But what, but not that.

[960] Yeah.

[961] But like what totally, like there's there's very little that lift here versus the ride sharing company in China could could even share to be to be valuable as a cross market network.

[962] And so this quickly becomes, to your point, David, even within a country, even within a city, something that there's going to be multiple players in.

[963] compete with Airbnb, there's no oxygen in the room, whereas there's enough oxygen in the room, you know, internationally that you can still compete locally.

[964] And that's why, you know, you haven't seen Uber crowd outlift fully or vice versa.

[965] And another way to put that is to your point about the tipping point.

[966] As long as, okay, taking one step back, we're really in tech themes now, but taking one step back, thinking about marketplace assign business models where the supply side is undifferentiated.

[967] I don't care.

[968] who picks me up, I just need to get there, versus Marketplace Assist, which is the platform provides a bunch of different options like Airbnb does, and I get to pick which option I want from the supply side.

[969] In this marketplace assign, which ride -sharing falls into, because supply is undifferentiated, the services are relatively undifferentiated as long as there's something within three, four minutes of where I'm trying to leave from, and it can sufficiently get me where I'm trying to go to for approximately the same price.

[970] And so you do end up in this place where as long as there's enough supply for a given, a given geo, then, you know, there can be multiple players because both drivers and riders can multi -home.

[971] Yep, totally.

[972] But nobody knew this just yet.

[973] People are thinking, like, oh, this is going to be a winner take all market.

[974] And like, who are we going to back?

[975] so the fundraising race is on all three companies sidecar lift and uber start raising massive amounts of money sidecar not as much and that's mostly why they end up shutting down but uber starts raising the most amount of money and and not only that they with part of what they do with the money they've also realized the magical kind of three minute pickup time threshold they start doing this thing called slogging, which is an acronym for like supply long -term operations growth or something like that.

[976] But really what it means is that, and all the companies are doing this, they send out employees and contractors to order rides on their competitors' platforms.

[977] They get in the car and then they try and convince the driver to switch to their platform.

[978] Because the density of supply is kind of the most important factor here.

[979] Yeah.

[980] And not only that, they, they I think Uber was more famous for doing this, but ordering rides and then canceling them on competitors' platforms just to, yeah.

[981] And to be clear, Lyft and sidecar, we're doing this.

[982] Yes, but Uber built a brand around doing it.

[983] Yes, Uber built a brand around doing it.

[984] And they're much more successful, and particularly in the capital raising.

[985] So a year later, very quickly, an eternity in this market, but very quickly in absolute time, Lyft is on the ropes.

[986] Like, Lyft is about to die.

[987] and what year what year is this this is 2014 yeah everybody spending huge and huge amounts of money like there's the slogging going on but like also everybody's subsidizing rides and incentivizing drivers just to get density and compete with one another and at this point in time in 2014 Uber had raised 30 times the capital as Lyft which was the next best capitalize competitor and so I mean I remember this so clearly like I'm sure listeners do too like orthodoxy and the prevailing point of view in Silicon Valley was this is winner take all.

[988] Uber has won.

[989] Sidecar is is about to die and Lyft is going to go the same way.

[990] And there's no point in investing in anybody except Uber right now.

[991] I definitely felt this way.

[992] I mean, I can remember thinking like Uber's such a clear winner, anyone trying to compete to fools there.

[993] And it's amazing that they lost the, you know, the enormous amount of money they've already raised.

[994] Yeah.

[995] Totally.

[996] And, you know, honestly, Lyft feels this same way too.

[997] So they actually initiate merger talks with Uber.

[998] Lyft goes to Uber and waves the white flag.

[999] And so Zimmer, and at this point in time, Andrewsson Horowitz has invested in Lyft and Andrews and partner, John O 'Farrell, they go out to dinner with Travis, Kalanick and Emil Michael, who's his number two at Uber at the time.

[1000] And they say we want to merge and they ask for 18 % of the combined company.

[1001] and that is exactly how Travis and Emile react.

[1002] They're like, we're going to win.

[1003] You're not getting anywhere near that amount.

[1004] Like maybe we would consider something a lot smaller.

[1005] They counter with 8%.

[1006] Which is still actually, at that time, it's almost surprising with those two personalities that they came back with 8 % instead of 1.

[1007] Yeah.

[1008] And equally surprising.

[1009] And this is like such a defining moment for Lyft.

[1010] equally surprising that Lyft doesn't take that.

[1011] But they don't.

[1012] So the two sides can't reach an agreement.

[1013] And Lyft decides to keep going.

[1014] But they can't raise from VCs because all the VCs are like, I'm investing in Uber or nobody.

[1015] So they go out and they raise $250 million from the hedge fund CO2 management, which CO2 is now a big player and investing in especially late stage startups.

[1016] but this was one of the first private company investments they make.

[1017] You got to wonder here, like, is their philosophy, and we're going to talk about IPO narratives here in a little bit, but are they thinking that this isn't winner take all, or are they thinking, ah, we're going to take a flyer, that these guys are going to be the one?

[1018] I don't know.

[1019] I wish I knew.

[1020] We'll have to, uh, folks at Cotou, get in touch with us and we'll have you on the LP show and we'll talk about this.

[1021] Um, the, uh, I don't know what their thesis was at the time.

[1022] because it was really contrarian at this point in time.

[1023] Side note, though, like for Uber, and we'll talk about this on the Uber show to come, this was one of the best things that ever happened to Uber.

[1024] Because had they acquired Lyft at this point in time, they for sure would have been regulated as a monopoly by this point.

[1025] Like the fact that another, a viable second player in the market was allowed to continue in the U .S., like especially given everything that happened at Uber later, there's no way that regulators wouldn't have, totally cracked down on them.

[1026] It's a great point.

[1027] So anyway.

[1028] It's like how Bing is the best thing that's ever happened at Google.

[1029] Totally.

[1030] It absolutely is true.

[1031] So after this, when, you know, Uber's like super annoyed at this point, like, these guys, they keep hanging around.

[1032] Things get, like, things were already ugly.

[1033] Things get super ugly.

[1034] Like, like, probably the ugliest, like, certainly I've ever, not that I was part of this, but that I've ever seen.

[1035] in business.

[1036] So in 2013, back a couple, back a year earlier, Lyft had acquired this company called Cherry.

[1037] Do you remember Cherry, Ben?

[1038] I don't.

[1039] Cherry was an on -demand car washing company.

[1040] So you could order a car wash while your car was parked in the parking lot.

[1041] A crew would show up and wash your car.

[1042] And then you would come out of, you know, work or.

[1043] the grocery store, wherever you were, to a clean car.

[1044] Cool, right?

[1045] Cool idea.

[1046] Turns out there's not like that much demand for car washing, but like really innovative stuff that these guys pioneered on the operations front.

[1047] And Lyft had acquired Cherry in 2013 because it wasn't viable as a business, but they're like, yeah, like, these guys are like really talented.

[1048] And the CEO of Cherry had risen up through Lyft and at this point become the C .O. of Lyft.

[1049] So like the number three executive behind Logan and John.

[1050] And that guy's name was Travis van der Zanden, which I forgot about this.

[1051] This is going to ring some bells also for listeners.

[1052] So Travis, Travis VZ, not Travis Kalanick, he's the CEO of Lyft.

[1053] And he brings a ton of innovations that he did at Cherry into Lyft.

[1054] So like driver onboarding, city launching, like he massively improves the efficiency of Lyft's operations.

[1055] But he's kind of cut from a different cloth as Logan and John.

[1056] He's not, he's not, uh, he's not, uh, he's not the mission driven founder here.

[1057] He's a little more, uh, a little more Uber.

[1058] A little more Uber.

[1059] Uh, and, uh, and he sees in 2014 as all this is going on, he sees the pendulum is swinging Uber's way.

[1060] He believes just like everyone else in the valley that there's no way Lyft can compete.

[1061] Um, so he does two things.

[1062] He goes to the Lyft board.

[1063] and tries to stage a coup.

[1064] He goes to board members and he says, I don't think John and Logan can run this company effectively.

[1065] You should fire them and make me the CEO.

[1066] And the first thing I would do as CEO is I would go reinitiate merger talks with Uber and land this plan.

[1067] And simultaneously, while he's doing that, he actually goes to Uber while he's working at Lyft.

[1068] And he kind of rogue, totally goes rogue and says, hey, I know we just shut down merger talks, but like we might want to reopen those and we the royal we the royal we yeah and now again like this is really bad of course but like you can sort of see how this could you could get crazy times can call for crazy measures right like this is you would have to believe you were you would have to be utterly insane to think that any other course of action was you know was viable here um Logan and John of course, find out about all this.

[1069] And, you know, they are utterly insane in their conviction and mission -driven zeal for the company.

[1070] And so they fire Travis immediately.

[1071] And guess what?

[1072] A couple of weeks later, Travis ends up joining Uber.

[1073] So how does this work?

[1074] And like, is this because non -competes are illegal in California?

[1075] So, like, you just can?

[1076] That's how this works.

[1077] However, of course, lawsuits abound.

[1078] So lift immediately.

[1079] sues both Travis van der Zanden and Uber.

[1080] Uber turns around and counters sues Lyft for supposedly hacking into their systems and stealing their information.

[1081] Eventually everything settles out of court because everybody realizes like we got bigger fish to fry.

[1082] Right.

[1083] We got all these guns pointed at each other and there's like an alien invasion happening above us.

[1084] Exactly.

[1085] Exactly.

[1086] Well, alien invasion that we are invading each other.

[1087] But this is not the battle front that we're going to take on.

[1088] And so now, Ben, do you know what Travis van der Zanden is doing now?

[1089] I believe he's the CEO of Bird.

[1090] Yes, he is.

[1091] He left Uber, I believe in 2017, and started and is the CEO of Bird, the scooter company.

[1092] It is incredible how incestuous all of this is.

[1093] incredible.

[1094] But yeah, and Travis Fanderzan, I mean, again, like two sides to every story, he is incredibly talented and, you know, a visionary for transportation and operations.

[1095] Like when he started bird, nobody was doing scooters, and now they're everywhere.

[1096] So anyway, that's the backdrop to 2014.

[1097] And coming into 2015, lift is big.

[1098] basically out of money.

[1099] So they're at the...

[1100] This is like the story of Lyft is like they're out of money and at the end.

[1101] And then, oh, something happens.

[1102] And then they're out of money and they're at the end.

[1103] And then oh, something happens.

[1104] Well, so the 2015 version of this is they end up getting hooked up.

[1105] So Logan and John are out there trying to raise money from anybody.

[1106] They know they can't raise from VCs.

[1107] They've raised from KOTU.

[1108] They're talking to any other alternative source of capital.

[1109] They end up convincing Rakuten, the...

[1110] Japanese e -commerce company to invest.

[1111] In March of 2015, Rakuten invests $530 million.

[1112] And Rakuten is at IPO, the largest shareholder in Lyft, larger than any VCs, much, much larger than Logan and John.

[1113] And it, you know, that saves the company totally that time.

[1114] And then they add some more money in.

[1115] This is, you really can't make this stuff up.

[1116] I remember when this happens.

[1117] They add more money into the round.

[1118] from acquired supervillain Carl Eichen.

[1119] No way!

[1120] He's in this too?

[1121] Carl Eichin, he's back.

[1122] He is like, we got to have Carl on the show at some point.

[1123] We for sure do.

[1124] Yeah, and that one we'll do in person.

[1125] Carl, we'll come to you.

[1126] We will for sure come to you.

[1127] So listeners might remember Carl from Netflix.

[1128] And what was the other episode he was in?

[1129] Marvel.

[1130] And Marvel.

[1131] Yes.

[1132] And Blizzard?

[1133] Was he also an activation?

[1134] Activision Blizzard.

[1135] Anyway, incredible.

[1136] Activist investor, Carl Icon.

[1137] Activist investor.

[1138] And what's great is, so Mark Andreessen and Carl Aiken had had this huge beef, like Twitter beef.

[1139] And Andresen was the largest VC in Lyft at the time.

[1140] And here's Carl Icon coming in.

[1141] And I think Mark was quoted in the New York Times saying like, yeah, I mean, we disagree.

[1142] but like I never said he wasn't smart.

[1143] This is great.

[1144] So Carl Eiken comes in.

[1145] They invest $100 million in as part of this round.

[1146] And that keeps the company going for another year.

[1147] And then the next year in 2016, they're running low on cash again.

[1148] And they get GM, General Motors, to invest $500 million.

[1149] That keeps the company going.

[1150] Which GM made like a quick, I don't know, like 750 million or something, because that was in what, 2016 were in?

[1151] So they turned 500 million into like one and a quarter or something over a few years.

[1152] Yeah, or maybe even more than that.

[1153] I'm not totally sure.

[1154] They are, I believe, the third largest shareholder, second or third largest shareholder in Lyft at this point.

[1155] Yeah, which is incredible.

[1156] But still like, you know, still Uber just keeps growing and growing and growing.

[1157] And, you know, this is the point where Uber's valued at $70 billion, you know, is taking over the world.

[1158] They're taking over China.

[1159] And so the summer of 2016, even though Lyft has managed to hang on, the New York Times reports that Lyft hires catalyst Frank Quatron, Frank Quatron's firm, the investment banker, to sell the company, again, to try and sell the company.

[1160] And they go and they talk to everybody.

[1161] They talk to GM who just...

[1162] Frank Quatron of the Amazon episode fan.

[1163] name who with Bill Gurley took Amazon public.

[1164] Yes, indeed.

[1165] And so they go talk to General Motors who just invested and said, hey, you should, you should buy the company.

[1166] They talk to Apple.

[1167] Apple's working on self -driving cars.

[1168] They talk to Google.

[1169] They talk to Amazon.

[1170] They go talk to D .D. in China.

[1171] They go back to Uber.

[1172] Nobody bites.

[1173] Nobody wants to buy the company.

[1174] This is the era where, like, the rumors are really starting to swirl around Apple and Project Titan that had, I think, rumored to be over a thousand people working on a, on a, some sort of car.

[1175] Yeah.

[1176] It was, you know, this is how much the sentiment was against Lyft at this point in time.

[1177] Even though all these people knew how important this market was viewed transportation as integral to the future.

[1178] I mean, literally in the case of GM, like, is the company.

[1179] Nobody wanted to buy them.

[1180] The problem was the valuation.

[1181] So as part of the GM round, the company was valued at $5 .5 billion.

[1182] And so that was just too high.

[1183] Nobody was willing to pay that to buy it.

[1184] Um, Later in the summer, this is, this is truly the low point for Lyft.

[1185] D .D. which had been, it's just like the body blows.

[1186] The, uh, Didi, the Chinese ride sharing giant, had been a Lyft partner, uh, international partner and, and, uh, had been fighting Uber to the nail as we talked about on the Bradstone episode in China.

[1187] And, um, it was at the end of, end of 2016 that they merged with Uber.

[1188] And so here's like Lyft's like big international partner now is getting into bed with Uber.

[1189] And it feels very Amazon Whole Foods Instacart.

[1190] Indeed, indeed.

[1191] And so so it was just really bad.

[1192] Lyfts market shares down to 20 % in the U .S. and falling.

[1193] And heading into 2017, it's like, all right, this might be it.

[1194] And for a reference check on folks, I know flashing forward, but it's now 39%.

[1195] or at least in December of 2018 was 39 % in the U .S. Yep, so doubled since then.

[1196] And so what is it, what happens?

[1197] Yeah, so what happened, David?

[1198] How did Lyft double their market share and turn this ship around?

[1199] Well, as we say so often, as I say so often here on Acquired.

[1200] What external forces could have come into play?

[1201] History turns on a knife point.

[1202] It was it.

[1203] Lyft was dead.

[1204] They were, you know, Uber had the boot on their throat.

[1205] And then, you know, one of the, The greatest unforced errors in business history, series of unforced errors, happens starting in January 2017 with the delete Uber controversy, which of course we'll get into.

[1206] Oh, it was just the start.

[1207] It was just the start.

[1208] Ultimately culminates.

[1209] It's like, what is this little water coming through the dam?

[1210] If I poke on it a little bit, what's going on back there?

[1211] Yeah, yeah.

[1212] And ultimately culminates in Travis Kalanick getting fired by the Uber board as CEO in June of 2017 and throughout all of this this is the this is the lifeline for Lyft and um they start regaining market share in October of 2017 Google via capital G invests a billion dollars in Lyft and Google had been an early earlyish investor in Uber and their big partner and the self -driving you know future was going to be Waymo and Uber and so this about face uh of Google turning their back on Uber investing in Lyft was a huge, huge turning point.

[1213] And it says a lot too here where I believe Alphabet or, you know, via capital G owns, I think a little over 5 % of the company at IPO and GM owns close to 8 % at IPO.

[1214] And you can just see the sort of sentiment reflected there where GM earlier put in half a billion dollars, and Alphabet later puts in a billion dollars, and yet GM has the greater percentage because the valuations were dramatically different at these times.

[1215] The sentiment around the company had totally, totally changed throughout all of this Uber insanity, which we will cover on their episode.

[1216] Yeah, totally.

[1217] And so much so that I don't think it was the alphabet round, but the last round of funding that Lyft raises privately before the IPO yesterday was at a 15 billion dollar valuation what a turnaround from nobody will buy the company we are dead to uh 15 billion dollars to IPO to darling of wall street so real quick yeah market share as ben said just rises starting in january 2017 uh goes from 20 percent in the u .s to just under 40 percent now uh people are switching um and uh although i feel like it's mostly stabilized now um but uh They hit a, lift hits a billion rides in September 2018.

[1218] In November 2018, they acquire Motivate, which operates the city bike share in New York City, and they launch scooters.

[1219] Side note, scooters are mentioned 159 times in the Lyft S1.

[1220] Yeah, I think the only, the only category of things that are mentioned more are autonomous vehicles.

[1221] Yeah.

[1222] And they do $8 .1 billion in bookings in the full year of 2018, $2 .2 billion in net revenue.

[1223] Friday, March 1st, 2019, they filed their S -1.

[1224] This Thursday, March 27th, they price their IPO at $72 a share or a $24 billion market cap.

[1225] And as we said at the top of the show, yesterday, Friday, March 29th, they become the first unicorn.

[1226] well, not the first unicorn, but the first of the big, big, you know, A -plus companies of the current generation to come out and be public and are finished the day trading at a $26 .6 billion market cap.

[1227] What a story.

[1228] And here we are at the end of the story, but at the beginning of the analysis.

[1229] We're like, do you think we can keep this episode like around like maybe an hour, hour, 10?

[1230] No way.

[1231] We're sort of like, what do we not talk about?

[1232] Yeah.

[1233] Thanks for bearing with us, listeners.

[1234] But, you know, these stories are too good not to share.

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[1238] Now they've got 5 ,000, some of the largest companies out there.

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[1240] Yeah, and they offer a tremendous amount of customization now for more complex.

[1241] security needs.

[1242] So if you're a larger company, and in the past, you showed Vanta to your compliance department, you might have heard something like, oh, well, we've already got a compliance process in place, and we can't integrate this new thing.

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[1244] They launched vendor risk management.

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[1251] make sure you go to vanta .com So before we sort of dive into some other stuff here, like I want to highlight a few other key facts.

[1252] One is at time of IPO, they're now 4 ,700 employees, several hundred of which are working on autonomous vehicles.

[1253] They don't sort of disclose specifically, but mentions that in the IPO or in the S1.

[1254] Their take rate is rising pretty dramatically.

[1255] So if you look at their revenue per ride is up, but if you look at the take rate, the sort of main driver of why revenue per ride is up, it's risen from the beginning of 2017 to around 20%, up closer to 30%.

[1256] It's something like 28 % now.

[1257] So what this is really proving is, you know, because they now have loyal customers, they're able to leverage that into the supply side and gain basically power over their drivers.

[1258] and up their take rate there.

[1259] And I think, you know, it, it, it, they talk a lot about, you know, rides per active riders going up and revenue per ride is going, or rides proactive rider is going up, and thus revenue per ride is growing up.

[1260] A lot of the revenue per ride going up is really attributable to, uh, to this, this increased take rate over time.

[1261] And, and so much so that they're, they're per quarter, like if you look at how down and out they were in 2016, um, $14, $14 that, per quarter, quarter, they were generating $14 of revenue, which is after the take rate.

[1262] This is sort of, you know, the amount that they get after paying out to drivers.

[1263] If you look at last quarter, it was $36 per quarter.

[1264] So, you know, they have a lot of levers at their disposal, and I don't want to index too hard on, hey, it's just the take rate, because it's definitely not.

[1265] But it's incredible how they really righted the ship and started turning everything in this direction of, you know, people are staying loyal, they're using it more often, we're able to go acquire more customers, although I'd say that's sort of the smaller the smallest of the drivers but you know 14 to 36 over the course of two and a half three years on a on a per quarter basis for revenue is huge yeah totally so so David where I want to go from here is why don't we talk about the narratives so we added this section after history and facts that is sort of the bull and the bear narratives so we used to talk about you know what What, these ones are hard to grade because you don't necessarily know, like, we're too close to it.

[1266] But it was something we had to talk about now.

[1267] But in lieu of that, like, it is interesting to talk about what are the stories that people are talking about that make this something you, you know, you want to get in on?

[1268] And what are the stories that people are talking about that make you go, yeah.

[1269] Yeah.

[1270] And I think, you know, as is normally the case here, why don't we dive in on bulls first?

[1271] So, David, what are people saying that makes this something that you should be super interested in right now?

[1272] Well, I mean, number one, the scale and the growth.

[1273] So $8 billion of bookings, you know, of commerce transacted, of transactions created is incredible.

[1274] since mid -2012, so less than seven years, and increasing leverage on the take rate side and net revenue of over $2 billion, growing incredibly fast.

[1275] That is very, very exciting, especially to public market investors that are not seeing that kind of growth anywhere else.

[1276] So I think that's one.

[1277] Two, if you read the Lyft S -1, they talk about how they're not just a ride -sharing company.

[1278] they're a transportation as a service company and they're building a multi -modal platform as they say now that's a lot of buzzwords but like one i think this started to crystallize for the industry when dara did come in and take over a CEO of uber um and dara of course the current uber CEO came from expedia and expedia uh bringing that mindset of like this isn't about one product this is about where you start your search for uh travel at expedia and for transportation for uber and lift and so this is what the motivate acquisition was about this is what why scooters are mentioned 159 times in the s one um the opportunity here isn't just as big as as ride sharing is it is all of transportation uh that they think they can take on and and that's incredibly exciting too and then i think finally the the the third piece of the um of the bull case is, you know, Lyft does include a cohort analysis in its S -1 as most companies.

[1279] Which is not required, but is becoming more and more popular and is sort of truly the way to analyze these things.

[1280] Yeah.

[1281] And if companies don't in their S -1s, you should be very suspicious these days.

[1282] And the cohorts are expanding.

[1283] So if you look at the cohort of 2015 customers, customer, rider customers that came into Lyft in 2015, they are doing more, the cohorts are expanding.

[1284] They are doing more volume of transactions and dollars worth of transactions in 2018 than they were in 2015.

[1285] Like that's, that's, you know, usually you see cohorts deteriorate over time of people use it less as they turn.

[1286] Yeah.

[1287] Expansion is, is rare and extremely powerful.

[1288] Yep.

[1289] So a couple other things that I want to touch on here.

[1290] This is the pure play bet.

[1291] If you want to sort of have some exposure to ride sharing and really domestic ride sharing, you know, Uber's in Uber eats.

[1292] they're effectively a holding company for all these other international operations.

[1293] They themselves operate internationally.

[1294] You know, if you want to bet as a, it's not quite pure play because it's multimodal, but if you want to bet transportation in the U .S., this is a, you know, this is the way to do that without mixing in that sort of basket of other things.

[1295] The other thing, and it's, you can't be a bull here without knowing the bear case first, as has been much, much covered all over the place, the company is losing a lot of money.

[1296] And, you know, you.

[1297] You know, they, I think, David, check me on my math here, but they, they lost almost a billion dollars last year.

[1298] I think that's right.

[1299] Yeah.

[1300] And, you know, so, so you got to look at that and go, and we'll talk more, I think, about that in the bear case.

[1301] But they talk a lot about autonomous vehicles.

[1302] And, you know, they've got hundreds of people working on it.

[1303] They're spending a lot, a lot of money on it right now.

[1304] I think it's something like, I don't have it right in front of me, but they, uh, uh, uh, You know, Lyft believes that they can materially flip their economics to become a profitable company when self -driving comes into play.

[1305] And they intend to be a leader in that space.

[1306] And so I think if you believe that too, then there is reason to believe that that they could get profitable.

[1307] They do list it as a key risk that they're not profitable and may never be.

[1308] So that, of course, is a little bit of a dangerous, a little bit of a dangerous proposition.

[1309] You know, the other thing...

[1310] Oh, come up.

[1311] We don't value companies on the discounted sum of future cash flows anymore.

[1312] That's so, you know, old school.

[1313] It is scary that the public markets are looking more and more like seed investors where people are valuing on a multiple of revenue instead of a multiple of earnings, or perhaps just buying in on a story, or perhaps valuing growth over profitability.

[1314] Like, these are things that you typically see in the earlier stages of a company.

[1315] In the acquired Slack, there was talk of a seed PO.

[1316] that is becoming more and more common you know no comment there but I do think one other thing for me on the bull case is you know Uber's bleeding seems to have stopped but I think for a lot of people Uber's brand is solidified as at the very best highly transactional at the very least a lot worse than that and lift over and over and over and over again and our S1 beats the drum and did all throughout their roadshow on being a sustainable company, on being a company that sort of does right by by its people, be it riders or drivers, um, that, uh, I'm just pulling up a, an email that they sent to, uh, um, to riders, uh, shortly before their, I think actually yesterday during their, uh, um, during their IPO.

[1317] And it's titled, for once the good thing, the right thing, the business thing can all be the same thing.

[1318] And they sent this to all of their riders.

[1319] I mean, they are doubling down hard on...

[1320] And they didn't they have a blog post and Twitter campaign yesterday about being a responsible corporate citizen as a...

[1321] I'm sure.

[1322] Now a public company.

[1323] Yeah.

[1324] I'm sure.

[1325] The anti -Uber.

[1326] Yes.

[1327] Or anti how Uber is perceived by some people.

[1328] Yeah.

[1329] And you know, the other reason why there's sort of a pure financial analysis here, too, that's, um, um, I think there was a lot of fear that late stage private investors were not being rigorous and that, that, uh, the public market.

[1330] when you apply more sort of rigorous discounted cash flows or I don't know exactly how people are modeling this one out, but would not be able to continue the valuation rise on a round by round basis.

[1331] But that at least from pricing and trading yesterday appears to not be a big concern.

[1332] And I would say one last piece on the bull piece, which we really should have put in the history and facts.

[1333] But has been a big change really, really since the delete Uber, you know, campaign.

[1334] Lyft has been hiring incredible people here in Silicon Valley.

[1335] And like, this isn't talked about as much of, you know, I think on the nationwide and Wall Street type narratives around the IPO.

[1336] But like, we feel it and we see it here.

[1337] Like lots of great people who Riley and Sarah worked with at Airbnb and elsewhere and, you know, our friend Preet at Lyft, like are really, really talented people.

[1338] who were not working at the company during, you know, the earliest days of Lyft and during the, you know, the down days, they know are coming there and doing incredible things.

[1339] So like there's a, there's a strong talent story around the company too.

[1340] Yep.

[1341] Yep.

[1342] And I think there's, you know, there is much more analytical and sort of financially fundamentally oriented analysis.

[1343] And we've been putting those in the Slack and can you, can you, continue to put those in the slack over time.

[1344] But I think the key takeaway for us here is that the way that the company has positioned itself with its riders and drivers, the leverage that they're starting to see where they actually do have a little bit of pricing power in the marketplace, the differentiation that they have and the talent that they have, as well as the sort of wind that they're back from growth over the last few years, makes it a super interesting company and not in a winner -take -all industry.

[1345] Yep.

[1346] And, you know, to put a fine point on the bulk case, you know, we can debate the merits of valuing public companies on a revenue multiple versus a profit multiple.

[1347] But it is, you know, it does happen.

[1348] And certainly it happens in the SaaS world.

[1349] You know, Lyft's valuation is not crazy at IPO.

[1350] So where they finished trading yesterday, they are trading at a 12x revenue multiple of last year, 2018's net revenue.

[1351] Now, typically you would trade on a forward revenue multiple.

[1352] I don't know.

[1353] know what they're projecting for 2019 net revenue.

[1354] So that's what they should trade off of.

[1355] But presuming there's continued growth, they will be trading at a less than 10x forward net revenue multiple.

[1356] That's not crazy.

[1357] No, David, let's do a whole LP show on this.

[1358] This is a good.

[1359] We'll do that in the next few weeks and maybe have a public equities investor on too.

[1360] Yeah, that'd be fun.

[1361] Okay.

[1362] Should we shift to the to the bear case?

[1363] Yes.

[1364] This is the largest ever net loss for a company entering the public markets for the first time, full stop.

[1365] Boom.

[1366] And so there's that.

[1367] And then there's a, you know, that's the headline.

[1368] I think there's a, as a marketplace investor too, you know, this was one of the things that stood out to me reading the S1.

[1369] I don't care as much about net income losses because that's how tech companies work.

[1370] Like you invest a lot in fixed costs as you're growing.

[1371] And then as engineers and, you know, product and, you know, operations and infrastructure to do stuff.

[1372] Yep.

[1373] You know, read any Ben Thompson article and he talks about this all the time, and I think he is totally right, which is this is how software and the tech industry works.

[1374] Incredible investments in fixed costs, but then as you scale revenues, those costs are fixed.

[1375] Your variable costs are much lower.

[1376] And so you will become wildly profitable a la Google and Facebook and whatnot over time, Airbnb, what have you.

[1377] The scary thing about Lyft is that when you do the math and add up all their variable costs relative to their net revenue, they are losing money on a variable, variable basis, too.

[1378] So not only are they not paying down their fixed costs.

[1379] They are each, each dollar of revenue that comes in is, is even ignoring fixed costs, you know, a net negative for them.

[1380] And so the way you, with the way you look at this is you add up their cost of goods sold, the cogs, their line item, their cost item, for operations and support, and their cost, their line item for sales and marketing, because sales and marketing, you're having to spend to acquire and retain drivers and writers, it's a variable cost, as is operations and support, and obviously as is cogs.

[1381] When you add all those three line items up for 2018 on their income statement, it is larger than net revenue.

[1382] And that's a scary place to be.

[1383] Now, certainly the rebuttal to that is that we are in such a large market and growing so fast that we're spending so much on sales and marketing, that, yes, that is true, but, like, we need to spend to realize the full totality of the opportunity.

[1384] Right, that the spend is, uh, in sales and marketing is primarily, uh, for speed purposes, for expansion.

[1385] And when we back down sales and marketing just to a rate where the market is at steady state, all of our unit economics look good.

[1386] Yep, yep.

[1387] And actually, John and Logan in some of the interviews they did yesterday around the IPO and they were asked this question.

[1388] They said this.

[1389] Like, you know, we're doing the thing that we think, you know, we should responsibly be doing as managers of this company, which is investing for future growth and that the future is so bright that we need to do this.

[1390] Now, of course, the other piece of the bear case here is, like, you need to spend this much on sales and marketing because you're locked in a knife fight, in a bazooka fight with Uber.

[1391] And so you're still - Does the market ever actually hit SETI state without you spending aggressively and subsidizing every ride?

[1392] Exactly, exactly.

[1393] So this is, I think this is the biggest bear narrative on, on the company, and we'll probably weigh on Uber as well.

[1394] Now, one thing, though, if you look at sales and marketing expense as a percentage of net revenue, it is declining for Lyft.

[1395] So that's a really good sign.

[1396] So in the fourth quarter of 2018, it was 32 .7 % of net revenue they spent on sales and marketing.

[1397] they spent over 40 % in the third quarter.

[1398] So, like, they are growing while spending less proportionally.

[1399] So that's a good sign.

[1400] But it's still concerning.

[1401] Yep.

[1402] And I think, David, I appreciate your thoughtfulness as a marketplace investor.

[1403] There are many articles that are quoting people who have expertise in various things that, well, I'll just give you one that is much less kind than you are here.

[1404] Hubert Horan, a transportation expert who has long been a critic of Uber and Lyft, suggests that they have nothing in the document that suggests how this could be fixed.

[1405] I mean nothing.

[1406] And so I think just to fully represent what the bears are saying, it's that when you read the S -1, people do believe that this will never turn right -side up.

[1407] Well, it's not now, and they are public.

[1408] so yeah it is interesting i mean i thought a lot about so this sort of subsidizing every ride concept um i wrote a piece on geek wire years ago i think i'm four years into it at this point uh of how i sold my car and went full uber and uh i basically did all the cost modeling and i can't remember what it was but i saved somewhere between five and eight thousand dollars a year even if i'm aggressively taking ubers and lifts everywhere and just not having a car living in the city.

[1409] And, you know, zip car or car to go for longer weekend trips, whatever it is.

[1410] And I can't help but wonder, like, that cost difference feels too big.

[1411] Like, it does feel like if you don't have a car and are ride sharing everywhere, it shouldn't be that dramatically different than owning a car.

[1412] Other, like, that these pricing inefficiencies sort of work themselves out and the market it becomes more efficient over time.

[1413] And so it does feel like, you know, how is it that I can get from Seattle to Bellevue for, you know, $16, you know, in a ride -sharing situation?

[1414] Like, I understand the economic argument for like, well, your car is just sitting there for most of the time.

[1415] So it makes sense that you're way overpaying for it and insurance and all this other stuff.

[1416] But like, it is crazy the degree to which it saves money for me personally.

[1417] And you've got to just wonder, like, are we in a. are we being overly subsidized here?

[1418] And how long will that go on?

[1419] And, you know, are we now subsidized from the public markets?

[1420] Yeah, right.

[1421] Almost assuredly, yes.

[1422] You know, the true cost of your ride to Bellevue is more than $16.

[1423] Yeah.

[1424] Okay.

[1425] What would have happened otherwise?

[1426] I feel like we explored some of the paths along the way.

[1427] I mean, lift would die.

[1428] Yeah.

[1429] I mean, all these companies would die.

[1430] They needed, is 2 .3 billion going to be enough?

[1431] Like, are we going to have to see additional public offerings from all these companies?

[1432] Or I'd say, I should say Uber and Lyft or just on this episode, do you think in the next 18 months we'll see additional public offerings to get more cash into Lyft when they feel that the windows at their backs for a good time to do another issue?

[1433] Well, and I think this is, you know, Zoom filed to go public.

[1434] last week as well, and we can't wait to cover that one.

[1435] Everybody's so excited, they're profitable.

[1436] It's the rare tech unicorn that is profitable.

[1437] So, yeah, is this the normal?

[1438] Like, good question.

[1439] Yeah.

[1440] There's actually a really good, I'm going to, this is in tech themes, but since we're heading there anyway, there was a finance professor cited by the Wall Street Journal that said that 83 % of U .S. listed IPOs that took place during the first three -quarters of 2018 lost money in the 12 months leading up to their debut.

[1441] The journal goes on to note that the previous record for the statistic was that when 81 % of stock market debutante's were unprofitable.

[1442] So, previous record 81%, this was 83 % of the first quarters of, three quarters of 2018.

[1443] That's a lot of companies going profitable, sorry, going public that are unprofitable.

[1444] We're in any world.

[1445] it's also hard to square that with the these companies are staying private longer you would think if you're staying private longer you would also get to profitability by the time you go out to go public um i mean i understand all the arguments especially as a venture investor why growth is better but um yeah it's a it's a brave new world we live in yeah for how long that's the question you know what shouldn't the this is a good philosophical question but should the public markets exist in a fairly risk mitigated ways so that individual investors don't lose their shorts.

[1446] I mean, this is why we have accreditation for private investors, you know, should 83 % of companies that are creating offerings for the United States public be doing so unprofitably?

[1447] Or have we reached a point where we're now using the public markets for something that is suboptimal?

[1448] Well, a philosophical debate for another day, but I would just say that risk and return are inversely correlated, and that is a law of finance.

[1449] So, you know, if you want high return, you need to take high risk.

[1450] Yep.

[1451] So, all right.

[1452] Tech themes.

[1453] All right.

[1454] So I'm just going to roll through five here real quick that were listed in the S -1.

[1455] There's something kind of cool about the fact that the S -1s, you know, they list out all these risk factors that are just like, it's great to read how honest everyone has to be and upfront everyone has to be.

[1456] But then they also list like, hey, what are the key trends and themes that have enabled you to do what you're doing?

[1457] So they talk about sharing versus ownership, on -demand services, flexible work, their mission -driven brand appeal, which I do think is actually on the rise.

[1458] I feel strongly that people care more than ever about the work that they're doing and need that to motivate them intrinsically.

[1459] What certainly has made a huge difference in attracting talent for them and writers in the wake of, you know, know, the delete Uber fiasco.

[1460] Absolutely.

[1461] And multimodal transportation.

[1462] And I think one that they don't list in there that is super interesting to me is these companies became possible because the iPhone 3G or 3GS launched with an embedded GPS that could be used by third -party applications and do things like summon a car to you wherever you are and in total create like close to half a trillion dollars in value or or am i over no it's like half a trillion to a trillion if you add up all these companies internationally that all basically do this thing of bring a car to me right now when i push this button like crazy that that that that adding that sensor and API uh to smartphones just enabled all this to happen totally totally um i mean i guess that's one thing that's the only thing i'll highlight because we talked about so many along the way in history and facts but um you know logan and john and logan in particular thought that the wave they were going to arrive that would enable zim ride was social um but the real wave that enabled lift was mobile and um and um You know, uh, not to discount, you know, that social wave is big and two whatnot.

[1463] And they're very interrelated.

[1464] But, um, yeah, like, you just can't underscore how big the mobile computing and smartphone, uh, wave was.

[1465] And, you know, ride sharing being, uh, only one industry of half a trillion plus dollars worth of value unlocked by it.

[1466] Yep.

[1467] Yep.

[1468] It's a great point.

[1469] Um, okay.

[1470] And it's locked by sensors, GPS.

[1471] And if you think about Instagram, camera.

[1472] features on smartphone hardware yeah okay all right i've got a few here uh two points i want to make in one point of discussion so uh this one we said craigslist like five to six times earlier this episode there are so many companies founded by slicing off a piece of craigslist and i think it's really interesting that there's large businesses on their own on Craigslist, but when you add more trust, safety, and efficiency to the marketplace by making it a vertically specific application rather than whatever is happening on Craigslist, they can become a massive business.

[1473] And so ride sharing, while big on Craigslist, wasn't as big as it could have been because, you know, you couldn't see who was picking you up.

[1474] It didn't have all these, you know, vertical specific features and sort of real timeness necessary to enable that application.

[1475] And so I think we'll continue to see even more companies that are something that used to exist on Craigslist, but are a vertical slice that it has unique functionality.

[1476] Totally.

[1477] We've talked about this one before, both on the main show, especially in this era of seed POs.

[1478] But I guess it's more like an I seed O, like an initial seed.

[1479] I don't know what the right terminology there is, but seed stage style storytelling in in your IPO, you're always storytelling.

[1480] And, you know, had a great, great, you know, the art of pitching, a limited partner show too, where, you know, you're just always, always storytelling.

[1481] So much of this S -1 is about the problem with the world as it is today and a little bit less about Lyft's particular solution.

[1482] Like, you read through all the pros in, like, the first, I don't know, 25 % of it.

[1483] and you're like, okay, like, I get all the stuff that's wrong, like, can you please talk about your product and your solution?

[1484] Like, I understand the trends.

[1485] I understand, you know, why things need to get better.

[1486] It's, it's, it's really this huge narrative of beating the drum of there's all these problems in the world.

[1487] We're going to be the ones to fix them all eventually.

[1488] Sure, yeah, let's talk about this stuff that we're doing right now and how it's going.

[1489] I mean, yeah, it's a, it's a marketing document.

[1490] And S -1s always have been, but like, in recent years, people have really, embraced the fact that they're a marketing document.

[1491] There's a quote in there that, like, come on, guys.

[1492] There's a quote that says, the land devoted to parking in the United States could fill an area larger than the state of Connecticut.

[1493] It's like, okay.

[1494] So great.

[1495] So great.

[1496] Yeah.

[1497] All right.

[1498] So one discussion I wanted to have with you before we sort of go into value creation, value capture, and then grading is, was it a good idea?

[1499] or not for Lyft to go first, and is it, on top of that, is it even better that Lyft has IPOed before we've even seen Uber's S -1?

[1500] I mean, it's my answer to this, I've been thinking about this, is yes from every angle.

[1501] Certainly yes for Lyft, because do the game theory otherwise.

[1502] Uber comes out first, they're bigger, they're monster, you know, does great.

[1503] Uber comes out first, does great, then Lyft comes out second and nobody pays attention.

[1504] Uber comes out first and does terribly, then Lyft still is going to do terribly because everything, so definitely from Lyft's perspective, better to go first.

[1505] From Uber's perspective, actually better for Lyft to go first, right?

[1506] Because Uber gets to see the reaction to Lyft, which has been very positive, and now they can tailor their pitch accordingly.

[1507] And I think, you know, I was joking with the friend yesterday.

[1508] I think the happiest people yesterday in San Francisco were not Lyft employees, but Uber employees, because they're like, oh man, if Lyft is worth $26 billion, like, how much is Uber worth, you know, a lot more than that?

[1509] We will find out.

[1510] Yep.

[1511] I completely agree with all of that.

[1512] All right.

[1513] So this was a section that we have, that I think we'll keep fairly brief.

[1514] here that was brought up by listeners several times over the last year.

[1515] That is, hey, you guys often talk about was a transaction good for the acquirer or was a transaction good for the company that IPOed and raised that money.

[1516] But like less about was it good for the world and not enough about the ratio between value creation and value capture.

[1517] And so I think we thought it was important, particularly in this one where there's so much discussion around minimum wage and around the contractor versus employee relationship to talk about this.

[1518] Because I think less so much on the value creation versus value capture side, I think Lyft has figured out a phenomenal way to capture the value they're creating.

[1519] But it is interesting to try and think about sort of like net value for the world.

[1520] Is it a good thing?

[1521] And, you know, are the masses sort of, receiving enough value versus the company receiving a lot of value.

[1522] And David, like, I'll, I'll turn it over to you.

[1523] How do you feel about where it lifts sits in this relative to a lot of other companies that are also sharing economy companies and then sharing economy companies broadly?

[1524] Totally.

[1525] This is such a complicated question.

[1526] Yeah.

[1527] And, you know, the cop -out, we will talk about this now and give some answers.

[1528] but like deserves way more airtime than we have for it now.

[1529] As a marketplace investor and a true believer in marketplaces, which I am, you know, I believe in economics and I believe in the concept of expanding the efficient frontier and that what these marketplaces are doing relative to the status quo is expanding the price at which supply meets demand for or expanding the point on the curve where the demand and supply curves meet.

[1530] when you do that, it is better for all participants in the economy.

[1531] So, like, I truly believe that.

[1532] And I think ride sharing is that case, too.

[1533] You know, now drivers are very upset and have a lot of things and have perspectives on that.

[1534] But if you look at, you know, how economically, how taxi drivers did in the previous system versus how drivers on ride sharing platforms do, I suspect it is marginally more positive on ride sharing platforms.

[1535] Now, that said, obviously they're problems and their unintended consequences of all these platforms, you know, from Airbnb to Rover to Lyft and Uber.

[1536] A super interesting thing, though, again, back to the best thing for Uber happening was that they didn't buy Lyft because otherwise they would be regulated as a monopoly.

[1537] Lyft being a viable second player in the marketplace keeps either Lyft or Uber from exploiting drivers.

[1538] And so, like, you could say, like, you know, we were talking about subsidizing your ride to Bellevue.

[1539] Like, that's a net economic gain to drivers.

[1540] And that is happening because there is viable competition.

[1541] Like, this is how economics works.

[1542] This is the value of competition in the marketplace.

[1543] So, like, on a while certainly I recognize all the problems and unintended consequences, I think net on the whole, like, if you believe in economics and Adam Smith, like, it's working as it, you know, should, which does not mean there aren't problems.

[1544] Right.

[1545] And to, to, um, um, paraphrase a little bit, you're basically arguing that, look, if there's people that have a problem, but can't find anybody to satisfy that problem.

[1546] And then you introduce an efficient marketplace where suddenly people who have that problem can pay for it being satisfied and then somebody can make money by satisfying that need, then you've created net new, you know, Well, before ride sharing, creating efficient markets.

[1547] There were two problems with the city transportation marketplace.

[1548] One was with the taxi system.

[1549] One was just, it was hard to access for demand.

[1550] So the ride sharing innovations have made the market much bigger by expanding the ease with which demand can access it.

[1551] But also for supply, there was a middleman.

[1552] Like the taxi companies and the medallion companies were middlemen that were taking economic rents in the market, and they don't exist anymore.

[1553] So Net, it is, you know, versus a driver that was working for a taxi company or a driver who is driving on Lyft and Uber, more of the economic value should be flowing directly to the drivers in this more streamlined system.

[1554] That's kind of interesting.

[1555] We should do an analysis or some, I'm sure somebody has.

[1556] is like if you go aggregate all the taxi companies were they taking more than 28 % of a Vig?

[1557] Mm -hmm.

[1558] I would assume they must.

[1559] Well, yeah, I don't know.

[1560] It would be we should, I'm sure there been studies doing the math.

[1561] Yeah.

[1562] But even just if I think they would have had to have been because the cost of medallions like in New York City or any city were so high.

[1563] So you had to be paying back those fixed cost as a taxi company operator.

[1564] Right.

[1565] Right, right.

[1566] The only point that I want to make here is that what has been just striking and amazing to me is that if you are someone, let's say you're immigrating to the United States and you're plopped down into a city where you don't know anyone, it is unbelievable that you can go and make a wage by walking into a Lyfts or Uber's office, renting, you know, having the full service car lease, rental, whatever that apparatus is.

[1567] and then boom, you're off sort of making a living wage.

[1568] And someone would argue that, of course.

[1569] But, you know, having a job instantly, even if you, you know, none of your skills translate from whatever you were previously doing, I do think that is.

[1570] And compare that to the taxi system where that was not the case.

[1571] Yep.

[1572] Yep.

[1573] It's totally amazing.

[1574] Totally amazing.

[1575] Okay, cool.

[1576] um okay so the way that we grade let's bring this one on home yeah uh is is uh rather than just issuing hey it was an a um what do you have to believe five years from now or 10 years from whatever for for this to be an a plus and and what uh what happens that makes it less than that and i think um just to be quick about this uh i think if they can figure out first of all if so there's a chance autonomy hurts them more than it helps them if the advent of autonomous vehicles just introduces relationships with car manufacturers that disintermediate Uber Lyft, you know, a lot of these providers.

[1577] But let's say that they play nice with this ecosystem and that Uber or that Lyft actually comes out with their own self -driving vehicles and oh my gosh.

[1578] They they currently are giving what's 72 % of the of the of the of the of the of the of the of the of the ride to the drivers the business looks a lot different if they have if they have autonomous vehicles obviously the question is you know in the next two three years before autonomy comes which could be who knows a decade or more you know are they going to be able to get profitable and I think they need to do a lot more than just get a little profitable in order for the enterprise value to be fulfilled.

[1579] So I think it's can the big pivot for me is does autonomy actually help lift and get them to a place where at infinitum, you know, many, many years from now, they're a wildly profitable company.

[1580] Yep.

[1581] Yeah, I think I would reduce it even further.

[1582] Like forget autonomy.

[1583] Maybe it happens.

[1584] Maybe it doesn't.

[1585] I think actually I thought that the one of the interviews that John and Logan did yesterday was quite thoughtful about autonomy and also in relation to what we were just talking about with value creation and value capture.

[1586] Even as autonomy comes, it's going to be useful for some use cases and will still need human intervention.

[1587] The driver isn't going anywhere anytime soon for the majority of use cases, whether that driver is in the car or monitoring it virtually from a command center.

[1588] or, you know, what have you.

[1589] So autonomy is like a, who knows how it will impact the business.

[1590] And, but I think the simple, the, the A plus case is they solve the concerns of the bear, the bears, which is like they, they get unit economic profitable.

[1591] Yep.

[1592] Yep.

[1593] Yep.

[1594] And then I think the downside cases, they don't.

[1595] And they're, this, this competition with Uber is too intense.

[1596] and everybody keeps losing money.

[1597] Very fair.

[1598] I will say operationally, a plus IPO, like the way that they actually, you know, they needed to access the public markets for capital.

[1599] And they did so in a highly non -dilutive way and in a way that got cash into the company and a way that propels every bit of the company forward with a lot of momentum.

[1600] So, you know, I don't think they could have asked for it to go more smoothly than it went.

[1601] Totally.

[1602] Totally agree.

[1603] All right.

[1604] Carbouts.

[1605] Well, yeah.

[1606] Listeners, that was our, we'll move to Carbots to say, but that was a lot.

[1607] Thanks for bearing with us.

[1608] We know that was a lot.

[1609] But, you know, just to underscore again, like this is such a huge moment for Silicon Valley.

[1610] Like both lift itself, this whole market of peer -to -peer ride sharing and as the first of the, you know, this generation of companies to come out and operate in the public markets.

[1611] So, um, very much a perfect storm here.

[1612] We, we, we couldn't help ourselves from digging in deeply.

[1613] So thanks for bearing with us.

[1614] Yeah.

[1615] Yeah.

[1616] Yeah.

[1617] All right.

[1618] My carve out is, uh, uh, I, I, I had two choices.

[1619] And I'm going to go with this one because I mentioned Bill Gurley earlier.

[1620] Uh, Bill Gurley is a, uh, a tremendous venture capitalist, one of the best of all time, uh, at, at benchmark.

[1621] Um, he has a talk up on YouTube that he recently gave called Running Down a Dream, how to succeed and thrive in a career you love.

[1622] It is one of the best, if you are a college student, if you're getting your MBA, you know, if you're, even if you're just thinking about a career transition, it is one of the most thoughtful and amazing talks about the world that we live in today and how you can work collaboratively with your peers to build knowledge and leverage that knowledge.

[1623] And he gives these three amazing stories and they're, I'm not going to say who they're about because it's wonderful how he reveals them and story tells the whole thing.

[1624] But these three very unrelated non -tech sort of use cases and stories about people who were artists and visionaries and sort of pursued their dream and became the best in their field that the thing that they were doing and it is just really well done.

[1625] So I really enjoyed it and I think you will too and we'll put a link in the show notes.

[1626] Cool.

[1627] I can't believe I hadn't heard of that yet.

[1628] I'm going to run, not walk to go to go watch that.

[1629] So great.

[1630] My carve out also in video format very different, lighthearted.

[1631] I got recommended on Netflix.

[1632] I love the Netflix algorithms.

[1633] Cricket Fever, which is a documentary they did on, have you seen this in your feed?

[1634] No, but I'm just worried that you're going to get recommended something on YouTube and I'm going to lose you.

[1635] I'll never emerge again.

[1636] Cricket fever about the sport of cricket and about the Mumbai Indians, which is one of the premier teams in the India Premier League cricket, which is, I've always been sort of fascinated by cricket, but in 2008, the India Premier League, the IPL launched, it is a new form of short form cricket called T20.

[1637] It is much more exciting and fast pace than traditional cricket matches last two to three hours.

[1638] And it's incredible.

[1639] They have like cheerleaders and fireworks and like it's the XFL of it's the XFL of cricket.

[1640] But the IPL is now the sixth most valuable sports League in the world and rising quickly.

[1641] And it's so exciting and fun to watch.

[1642] And so this documentary that Netflix did follows the Mumbai Indians, which are owned by the family of the founder of Reliance, I believe the wealthiest man in India.

[1643] And throughout the season, it's just so fun.

[1644] Wow.

[1645] All right.

[1646] Well, obviously, you'll put it in the show notes.

[1647] I'll have to check it out.

[1648] cool our sponsor for this episode is a brand new one for us stat sig so many of you reached out to them after hearing their CEO vj on acq2 that we are partnering with them as a sponsor of acquired yeah for those of you who haven't listened vj's story is amazing before founding stat sig vj spent 10 years at facebook where he led the development of their mobile app ad product which, as you all know, went on to become a huge part of their business.

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[1670] You can click the link in the show notes or go on over to stat sig .com to get started.

[1671] And when you do, just tell them that you heard about them from Ben and David here on Acquired.

[1672] Well, listeners, if you aren't subscribed and you like what you hear, you should.

[1673] We'll be gloriously covering all of the big upcoming IPOs.

[1674] And if you want to go deeper on what it's like to build a startup, get interviews with expert operators and vCs, and explore some of David and my personal investment thesis, you should consider.

[1675] are becoming a prestigious Acquired Limited Partner.

[1676] You can click the link in the show notes or go to kimberlite .fm slash acquired.

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[1678] Ben is multi -talented and a great product manager in addition to everything else.

[1679] Thanks, David.

[1680] All right, listeners, with that, we will see you next time.

[1681] We'll see you next time.