Logan Green and John Zimmer, the co-founders of Lyft, will each have about $500M in stock at $72.
(Edit: I miscalculated the holdings of the cofounders at $85M because I didn't account for their class B shares. However, I think my point still stands for the most part).
Google holds $900M in Lyft stock. A16Z holds $1B in Lyft stock. GM and Fidelity have $1.3B. Rakuten Europe has $2.2B.
$500M is certainly a life-changing outcome, but it's interesting how we value the capital that those companies put in far more than we value the years of work those two put in.
Edit 2: To be clear, this isn't a complaint in any way. What A16Z and Google and the rest did for Lyft is highly valuable and worthy of compensation.
This is simply a commentary on the relative value of capital vs labor.
By contrast, the 3 GitHub founders each took home about $1.25B from their $7.5B acquisition. Mark Zuckerburg's Facebook stake was worth about $20B in 2011, out of the roughly $85B market cap. Larry & Sergey own 11% of Google today, 15 years after it became a public company. Kevin Systrom netted about $400M from Instagram's $1B sale. The three YouTube founders took home around $700M of YouTube's $1.65B sale. Jan Koum and Brian Acton together took in about $11B of WhatsApp's $19B sale, including continued stock incentives (they may've forfeited some by departing FB early). AFAIK Markus Frind took home nearly all of the $575M that PlentyOfFish sold for.
I was also surprised at how low the founder ownership stakes were for Box (3% IIRC) and PayPal (Elon Musk was the largest founder shareholder at about $85M of the $1.5B purchase price). It really does pay to keep capital requirements low, profits high, and get on the hyper-growth curve before taking lots of capital rather than taking lots of capital so you can get on the hyper-growth curve.
Warren Buffett had over 25% of Berkshire Hathaway after roughly 43 years, until he began liquidating to give it away.
Michael Dell now owns 52% of the publicly traded Dell. That had been reduced to about 14% during the company's last term as a public entity (circa 2013), prior to the move to take it private. Through very clever maneuvering he now majority controls the public conglomerate of Dell + EMC + VMWare.
Another one is Larry Ellison, who still holds 30% of Oracle after 41 years.
How much of the capital raise decision due you feel falls into founder choice vs market or industry dynamics?
$700 x 3 = $2.1B. I guess one of these numbers is wrong.
And considering Lyft was/is a hugely capital intensive business that is still losing billions, I'm not surprised the capital investors came out with more equity in this one.
https://www.businessinsider.com/lyft-ipo-paying-off-big-time...
Employee #20, who joined maybe a few months in, and then put in seven years, is gonna be at order of magnitude down, $1M. Employee #50, who put in six years, is the hundred thousands, and we keep going down.
Yeah, fantastic money, but pales compared to founders.
Lesson: don't not be a founder.
They did all the work, or they hired employees to do lots of it with the capital?
The founders chose to get diluted at each round. And you're ignoring that at each "dilution", the value went up. The company didn't start at $24bn and at each round the founders got their value diluted, down to around a mere $500mm. The founders started at 100% of $0 and got "diluted" up to $500mm each.
I'd call it a fun lesson in meteoric wealth growth for 2 guys starting with just an idea. $500mm/7yrs = $70mm/year. That's remarkable.
top pay : $1.7b for 1 year for #1 spot to $100m for spot #20.
Versus two.
The capital is arguably more valuable in this case. Lyft is just a copycat of Uber, what did the founders bring to the table?
I'm playing devil's advocate [more than] a bit. I'm happy for Green and Zimmer, and they are both making FU money from this so I'm not sure what the complaint is.
Not to downplay Lyft, though... Lyft started in 2007, two years before Uber — and so was doing ridesharing beforehand. Uber snuck in with a taxi model that was legally gray which opened the doors.
At what point of seeing this same story over and over again and realising that funding growth is a viable strategy do the cynics just let go?
[0] heaven forbid you ever take investment advice from dhh https://signalvnoise.com/posts/2585-facebook-is-not-worth-33...
But I'm just making a commentary on the relative value of the capital vs. the work.
"We" value taking risks more than working. An investor in Lyft carries much more risk than the founders - who would quickly find new jobs. But if the company goes bust the investor's money is gone.
We lionize the “risk” of VC investors far too much.
Who is "we"? The founders are who agreed to those terms. It's how they valued the capital.
I would say this is more related to cultural understanding and values, than how to just do something profitable.
The cognitive dissonance comes from valuing work, and getting affirmation from others that your work was worth more because of your efforts.
But this has nothing to do with math and accounting.
Both companies lose a crazy amount of money, they have close to zero moat, customers have no loyalty and will go to another rideshare service if it is one dollar cheaper. The fundamentals don't make any sense, but still we read everywhere that Lyft and Uber at those prices make sense.
The VCs and founders decided to get out while the market is up (and while they still can) and they will sell their shares to the "dumb" public that will buy into another overhyped tech stocks without really understanding the fundamentals. The employees cannot sell before 6 months, they are locked out.
After a couple weeks the market will probably realize this stock is overvalued and it will start to go down, but at that point all the big fishes will be out already and who will hold those toxic assets? individual investors and employees that cannot yet sell.
Uber and Lyft are an optimistic bet. They can't generate profits right now but (Uber especially) they might find a way. Self driving cars are otw. They could be in position for that. Regulation is otw. This could give them a moat.
..also efficiency, I suppose. A lot of recent "marketplace" successes (YouTube rev-share, app stores, steam, iTunes...) are built on thick margins. Uber and Lyft take 20-25%. Uber & Lyft's main job is software and software scales. There's no inherent reason preventing them from operating within a profit producing budget, especially if growth-at-all-costs ends. It'd be hard to justify the share price though.
Remember that FB went public well before the ad business turned into the money machine it became.
Not saying it's a good investment. I suspect it's not, but there aren't many good investments around. etc.
> but there aren't many good investments around. etc.
Like, can we talk about this just a sec? I feel this too, that there just isn't a lot of room left in the economy. But, it just feels like that is crazy, right?
There is all this money, more than ever before. There is all this technology, and it's the best that has ever been out there. There is all this education and learning, we're better at teaching people than we've ever been. And there are all these people, nearly eight billion of us. Things, objectively, have never been better!
So, how can we be running out of good investments? It just feels like I'm nutz here. One one hand, we have all this potential energy, but on the other, there is just no where for the kinetic energy to go. Humans aren't just boulders on hill sides, we don't tend to sit still, we get moving on our own.
Why do I feel like I'm missing something big?
This is way more like the status quo of private equity. A bunch of people throwing money at negative cashflow businesses. I wonder if this period of time in history will be looked at as ridiculous.
Another poster in this chain made a good point, however - due to very low taxes, people have a lot of cash and there is just finite opportunity currently.
If my driver is closer, and I have scale to keep them busy, you'll have no way to compete without dumping in those same millions.
It's how Amazon worked.
Uber is a bit of a different beast. It's valuated much higher, and it banked a lot of that valuation (in my perception at least) on the perspective of getting self-developed fully automated driving capability to the market and thus having an edge (and an actual moat) to be used to finally reach profitability by eliminating the costly drivers.
Thus I would expect its valuation to stay high for a while, but drop sharply as soon as the "fully automated driving is right around the corner" bubble pops for real.
I think we'll see facebook similar treatment, comes out to immediately drop
Don't forget government pension programs that are some of the most mismanaged portfolios around.
1. Could you please not call something a ponzi scheme, just because it looks scammy? This seems to be a trend that has caught on during the crypto-bubble (where admittedly there where a lot of ponzi schemes), but not every scam is a ponzi scheme.
2. Whoever trades on the stock market knows the risks.
Whether the pre-IPO VC funding cycle is a ponzi scheme is another topic...
I was 24 when I got my driver's license and I've probably driven a dozen times total since then (rental cars in Hawaii, Colorado, or LA mostly). It's really easy, and I feel a lot better for having that ability. I'm 100% glad I did it and added that valuable life skill to my arsenal, despite still hating driving and still almost never using it.
I recommend it.
I suppose you can just shrug and be OK with pretty much staying in or near cities but that seems to close off a lot of options.
I also couldn't deal with day-to-day things without a car but that's at least somewhat manageable depending upon where you live and work.
ADDED: I'm not a typical Silicon Valley developer to be sure, but I couldn't even have done my first job absent a drivers license. It may be worth asking if you want to be employable outside of certain bubbles where you'll be the weird person who always needs a ride because they can't drive even though they don't have a disability.
On second thought, I guess experience differs a lot based on location. Not having a drivers licence is pretty unimaginable for me where I live.
Your college friends are not going to give you rides forever. And your work options, living options, and vacation options are going to be quite limited. Obviously some people do it, but it's hard to imagine for a typical middle-class professional over the long term.
Even people I've known in Manhattan who put it off for a few years learned to drive eventually.
A large part of their losses are down to expansion. The markets they've become established in are profitable.
https://www.google.com/search?q=groupon&tbm=fin#scso=_X0-dXJ...
Ultimately, depends on what you mean by success. I don't know of any companies that were VC cash burners, IPO'd, and then delivered great results over the next 5 years. I'd say that some must exist, surely, just don't know which they are.
Twitter's current stock price sits at ~75% of their IPO and their number of active users peaked at Q1 2018 (most likely boosted by Trump) and have been decreasing since. Twitter's situation may be worse than people think.
Hardly a success.
They are losing a billion a year and have the worst self driving tech.
Their self driving tech is built on top of Baidu's open source platform and another open source platform with only 1 year of development with a huge team. A recipe for disaster.
They only have 1 year of development and scant few of their technical leaders - including their VP - worked in self driving before starting at Lyft.
I don't see how they survive.
I would invite you to come to Minnesota in the winter and drive a car for a few weeks, and then proceed to make the same (implied) claim.
Can't make it, but thanks for the invite
I assume you're talking about Apollo [0]. Out of curiosity, what's the other open source platform you've mentioned? Do you have any sources?
Everyone is talking about the “easy money” of selling a home as soon as “all those new millionaires are willing to pay top dollar for a new home”.
The problem with this plan is threefold: First, the basic supply and demand rules. Second, all the people selling homes are going to need to live somewhere else, right? So they too are going to have to pay an inflated price for a new home, which will eliminate any gains (the exception is if you own a home in SF and are planning on either leaving town or majorly downsizing). Third, just because someone is newly wealthy doesn’t mean they suddenly decide that paying 20, 30, 40% more for a home is rational. Many folks will keep renting or stay in their current homes if there’s a sudden rush to buy.
I wouldn’t be surprised if prices tick down a bit in 6-12 months from the oversupply before continuing on their regular scheduled steady march upward :)
People were saying we were at the top 5 years ago, but housing prices are way up since then.
They've certainly suffered since Uber and Lyft came back to Austin, but they have showed that if Uber and Lyft went away tomorrow it would be trivial to fill their place.
I'm more interested in what will happen after. Will local city Taxi apps fill in the gap? There are a few companies that brand/sell apps for multiple cities that could potentially offer multi-city service.
I think eventually, the price of rides will go back to where it was in the pre-Uber Taxi days, or at least fairly close. It will be several years though.
I think it may be the company with the largest IPO, that is still this neck deep in losses.
Slack is immensely viral, in Silicon Valley it's basically used by almost every single tech person, its network effect is gigantic. When I glimpse at people's phones on public transportation, a large portion of folks are interacting with Slack. And that's not only used in startups, also in massive companies, both big "old" enterprises such as IBM as well as "new" enterprises like several FAANGs.
At $72 per share I'm sure they can afford to invest in the company they made so valuable. :-/
This doesn't take away from your comment completely though, most Lyft drivers wouldn't have the spare income to invest into the company, it's just not because the share is $72 that they can't invest.
But it's because they've pushed so much into this share price, that surely they could've put more money into drivers pay, instead of lining their corporate overlords pockets.
If you consider a $40 ride will only yield about $25 for the driver, there is a lot of room to give more to drivers.
Sad to see this sort of cash grab by the current Lyft shareholders.
It's P/E does... because there's no earnings.
However, the point I was trying to make is that a driver could not afford to buy shares even if they wanted to.
If yes, and this is such a clear cut case (again, I know very little about finances, just going of the comments here), shouldn't this be easy money? Hell, I would bet against it if I had any betting money.
Yes, there are a few ways to do it.
>As in someone promising you to buy stock X at price Y at future date Z? So when the stock dips, you make money.
This would be either a put option or a future (depending on whether you have the option or the obligation to sell it on date Z), but it carries the risk that the market will not lower the price prior to date Z. Put options also aren't available at the same time as IPO, I believe LYFT puts won't be available until late next week.
You can also short the stock, which is simply borrowing shares from someone else, selling them, then buying back the shares at a hopefully lower price to repay the loan at a later date. The advantage is that you don't have to specify a certain date, but you may be forced to pay back the loan earlier than you'd like if the price increases beyond your collateral or more people want to borrow the stock than lend it.
>If yes, and this is such a clear cut case
The reality is that this isn't actually such a clear cut case. There are many people with billions of dollars at their disposal betting both ways. Some will be right, some will be wrong. The price they (and everyone else) have agreed to bet against each other with will be the market price.
I would say around 50% of our trips are rideshare and the rest are local transportation companies; While Lyft isn't perfect I can't help but wonder if they are going to alter operations greatly whether it is to phase out their healthcare operations or buy us out.
I am curious if anyone has some insight as to how Lyft plans on continuing their operations.
Here is a link to some of the services Lyft offers if you are curious: https://www.lyftbusiness.com/healthcare
Prior to rideshare companies entering this market, there were legacy transportation "brokers" that coordinated and provided NEMT services - the largest and most well-known being Logisticare.
Recently, newer companies have been started in the NEMT space. One example is Circulation [1]. These companies may provide transportation services directly, but also sit on top of existing rideshare companies like Lyft. Circulation and Lyft formed a partnership in December 2017 [2]. Circulation was actually recently acquired by Logisticare.
So the answer to your question - rather than relying on a single rideshare company for your NEMT, consider using a broker (either old-school or new-school) that diversifies your rideshare exposure and abstracts away the actual rideshare companies from your workflow.
(Disclaimer: the VC fund I work for was an investor in Circulation before they were acquired, but we're no longer invested.)
[0] https://www.uberhealth.com/ [1] https://www.circulation.com/ [2] https://www.businesswire.com/news/home/20171205005862/en/Cir...
Brutally honest on why they are into this business.
I would say the latter mostly. See page 17 of their S-1: https://www.sec.gov/Archives/edgar/data/1759509/000119312519...
Honestly, I like Lyft as a rider, but this feels like a total pump-and-dump. I predict their stock looking like Groupon's trajectory at best.
Uber has ~15 millions daily trips, while Lyft has ~2 million daily trips.
A company that hasn't made money is making its founders generational wealth, as well as the investors. (Actually is this wrong? Googling seems to suggest they lost money in recent years. Point is the same though.)
Lyft might never make money, and yet people involved are making out like bandits. I get that some things will lose money before they make money, and it's not up to me to decide whether a particular thing should be invested in by other people.
But it seems if this trend continues, making money becomes more about getting investors to think they're gonna make money than about making a profitable business?
If we push this logic to the extreme, what would prohibit a stock to be completely uncorrelated to the company it represents? What if at some point a stock is traded based purely on the hype and the idea that someone else will eventually buy it for even more eventually later on? This seems to be what's going on with this IPO, it is 100% speculation that someone dumber than you will eventually buy it for even more. Back in the days dividends and voting rights were used to keep the stock inline with the company's fundamental, but in this specific case, why is the stock related at all to the company since there are no voting right nor dividends?
