Lyft and the bet on the millennial mindset
I’ve been following Lyft going public, and its clearly nuts. For an analysis of the S1, do read some Fred Wilson: The IPO Price and the S1.
My belief is that people are excited by tech IPOs, rather than the prospects of Lyft. When is it expected to be profitable? Do not use the Amazon argument, one is an Everything Store (a great read by Brad Stone), and the other is a provider of transport in limited markets.
Personal journey with Lyft: had not installed it in March 2015, still not in May 2016, tried it (i.e. downloaded it) July 2016 and deleted it a week later! There was at some stage a partnership where you could order a Lyft from within the Grab app, but that never worked (July 2016, March 2017).
What helped Lyft grow might have been the #DeleteUber campaign of 2017, though I still continued to use Uber. It was quite prevalent in San Francisco. Uber rates going up 10% in San Francisco still failed to push me to become a Lyft user.
However, a16z was betting on the “millennial mindset” when they poured money into Lyft, read their thesis/blog post. As I said in 2015:
“The bet on Lyft has always been that ridesharing wins” read the investment thesis. A real bet on “millenial mindset”
Did it pan out well? Sure, millennials on the Robinhood app traded it a lot upon IPO. San Francisco folk (maybe with some virtue signalling?) traded it 3x more than those in New York City. Fascinating piece in Axios: How millennial investors reacted to Lyft’s IPO. Maybe millennials treat Lyft (and tech IPOs?) like cryptoasset investing?
Anyway, FT has covered it best: But today, it seems Mr Market has woken up to realise Lyft is trading at 10x sales with negative 44.3 per cent ebitda margins and is operating in a market with no proof of profits. in Lyft is nuts, and it’s crashing.
The future will be very exciting, I expect more consolidation in this space (don’t all long tentacles go back to SoftBank?). If you have access to The Information, they’ve got an exclusive on Lyft’s Biggest IPO Winners. Just one highlight:
Sean Aggarwal, Lyft’s first outside investor, who put in $30,000 in 2007 and has a stake now worth $100 million. The biggest venture capital winner may be Floodgate Ventures, a seed investor which has seen a nearly 10,000% return on its roughly $1 million investment. Then there is Mayfield Fund, which invested a total of nearly $15 million in the first four venture rounds, giving it a stake likely to be worth about $600 million at the IPO.
