The Lyft IPO

0:00 I I don't know about you, but I've literally like I've been like I've had trouble sleeping the last couple of nights like ear this morning. I woke up at yeah, I woke up at six thirty and like Uh went for I ran down here to the office and like I spent all last night and all today just like getting hype. Welcome to Season 4, Episode 4 of Acquired, the podcast about technology, acquisitions, and IPOs. I'm Ben Gilbert. I'm David Rosenthal. And we are your hosts.

0:43 Well, David, as Vince Vaughn once said to Owen Wilson in Wedding Crashers. It's wedding season kid. The IPO floodgates are open and we are here with the very first one of twenty nineteen. the lift IPO. And I am so excited.

0:59 I know. Well, obviously this is an important moment for lift and ride sharing broadly, but what it represents for the entire technology industry is possibly even greater. That the good times can continue. We've had a serious in big tech IPOs over the last few years, with most of these companies opting too famously Stay private longer.

1:20 There was significant risk that the public markets do not value these unicorns as high as the late stage private investment market has been. 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. Now we've still got a lot more IPOs ahead and we've just seen one day of trading, but from what we know where we sit today, People in the technology ecosystem everywhere can breathe easy. Yeah, the signs are good. I mean this is

1:55 This is huge. We've never seen anything like this before. This is a whole generation. Of of tech companies that are All gonna go public all all in the next, you know, probably two months here. And and seriously pent up demand. I mean all these companies, the the full A plus uh as as David and I were joking. You've heard of Fang. Now the the A plus. What is it? Airbnb, Pinterest, Lyft, Uber.

2:20 Slack. You know, all from different sort of eras of of uh of tech over the last, you know, decade, decade and a half. Yeah, all raising so much in the private markets and and here all in the next six months all really uh really IPOing. Yeah, here they are. Play off atmosphere. Indeed. Well uh

2:38 I do have to say the limited partner bonus show that we've been doing, uh the one that we did uh with David's partner Sarah was so timely and so awesome. uh because Sarah used to run Corpdev at Airbnb and before that at Dropbox. So on the heels of the Airbnb hotel tonight deal that um now funny enough feels sort of like old news, uh we got her inside take on Airbnb strategy with uh mergers and acquisitions. uh how to build corporate development functions within companies, and we uh speculated just a bit on where they might be going with with Hotel Tonight. So if you want to listen to that and and many other uh great LP episodes and become a limited partner. you can do that in literally ten seconds, and I promise you literally ten seconds with just two taps

3:23 And you can listen to the show right here in whatever podcast player you use for all of your podcast listening. So you can click the link in the show notes or you can go to Kimberlight.fm slash acquired to join. And uh David, I'm I'm not kidding. Ten seconds and uh and you can You can join and listen right here. So It's awesome. Man, the people behind that Kimberlight company are really talented. Mm-hmm.

3:46 Uh spoiler alert, that's that's well, us, but mostly Ben. Mm. All right listeners. Now is a great time to talk about a new partner of ours here on Acquired, Lagora. The agentic operating system that is redefining how the world's best legal teams work.

4:06 Yep. It's sort of obvious that AI is gonna completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Ligora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry? So the founders did exactly what great founders do. operate with obsessive customer focus. They embedded inside a massive law firm. For months.

4:33 They sat with the lawyers just watching how the work really gets done. And that's how you get features that customers love, like tabular review where you Drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Legor's bet here is interesting, since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time. And they recently launched Lagora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required. And Lagora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Lagora numbers essentially

5:29 speak for themselves. When they have a head to head pilot with their top competitor, they win 70% of the time. Legora now has over a hundred thousand lawyers on the platform from twelve hundred legal teams in fifty countries. And crazily, they went from one million To a hundred million in ARR. In about Eighteen months.

5:50 Yeah. truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reach for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at Lagora.com/slash acquired. And just tell'em that Ben and David sent you.

6:15 So to set the stage for David here. as he dives into the history and facts. We sit here on Saturday, March thirtieth, the day after the lift IPO. The company raised two point three billion dollars 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 twenty-four billion dollars and closed its first day of trading up above twenty-six billion dollars.

6:45 So David. How on earth did we get here? I am so excited to tell. the story and all the stories behind this. Uh So We're gonna tell the history of

6:58 Lift and how Lift, a company that became Lift, Zimride, that transformed into Lift, uh how it got here, how peer to peer c ride sharing became An industry. It's hard to believe now, but just just about seven short years ago It did not exist. Uh and is now one of the largest

7:18 you know, technology enabled markets in the entire world. What we are not gonna talk about on this show is the history of Uber Which is quite different. We will save that for the Uber IPO show, which is coming later this season, hopefully. And and Uber started differently. It was not peer to peer ride sharing to start and it wasn't until twenty thirteen, after Lyft was around when they pivoted. into that. But we'll get into it. We have a long story to tell. It is a story of of transformation, metamorphoses.

7:46 Story of betrayal. A story of good and evil. Basically your typical acquired episode. So here we go. It's a it's a nonfiction thriller. Indeed. Oh man, this is a thriller. Okay. So we begin our tale. In the nineteen nineties. with two young men who are growing up uh

8:06 at complete opposite ends of the country. But would one day be drawn together by fate. And on the one side of the country on the west coast, we have Logan Green. He was growing up in Culver City in Los Angeles. And his parents are um sort of leftover hippies. His his parents are a doctor and a veterinarian, but they're pretty they're pretty activists and and previously they had helped organize farm labor unions and they really encouraged their their children and and Logan to um take, you know, that kind of outlook on life.

8:39 Uh and Logan really takes after them. But Uh unlike them and their activist roots, he's he's pretty introverted and and focused. Um And so Logan growing up, he he teaches himself how to code. He's really interested in computers and coding. 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. Amazing.

9:09 I can't say that was me. Yeah, definitely not me either. I was like, Can we move the T V into my room? And that's why he is the CEO of Lift and We are doing acquired. Yeah, we do a podcast. So in high school, this is amazing, uh Logan ends up getting a part time job. You know, he's learned how to code. He gets a part time job working for a company in Los Angeles called U Wink. Now, what is U Wink? U Wink is the uh third or fourth, maybe even farther along company from Nolan Bushnell, the founder and CEO of Atari.

9:45 who hired Steve Jobs, uh, who then went on and started Chuck E Cheese. I had no idea that that one, I have no idea that uh uh U Wink was a no one bushnel 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 and you see like basically see like all the web two point oh logos that you're used to seeing on your browser just sort of like jump back from physical signs on each side of the sidewalk. And I remember the U Wink building. I even think I have a picture in front of the U Wink building'cause it's just so uh it just felt so like emblematic of the whole web two point oh time period. That's amazing. Uh that's amazing. Well it started down in LA'cause uh Nolan after Atari, I believe when he started Chuck E Cheese and moved down to LA.

10:31 And um Uh it's you know, incredible. Nolan hires, you know, first Steve Jobs and and and then Logan Green. And so Logan, this was in high school. He had his driver's license at this point. He his high school was in Santa Monica and U Inc's uh headquarters was in Playa Del Rey, which if you know LA, Playa Del Rey is not far from Santa Monica. I think it's about five or six miles. It's also on the west side of LA, but if you know LA traffic or LA traffic Before lift an uber.

11:03 It was a nightmare to get over there, a beast. And uh so so Logan has his high school car, an old nineteen eighty nine seven forty Volvo that his parents gave him when he got his license. Classic, classic old hippie car some. 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.

11:29 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

11:43 eliminating traffic. And as we will see, that is what he uh that is what he does and makes a big dent in it. So he goes off to college at U C Santa Barbara, about two hours north of LA. And initially he majors in computer science, but eventually he switches to economics and he's He is gonna leave his car at home and commit to only commuting back and forth from LA to Santa Barbara with public transit. And this is like insane. I mean It makes total sense to drive from LA to Santa Barbara. People do it all the time. So it's actually like kind of a huge pain that he does this.

12:21 And his sophomore year in college, he learns about Zipcar. Zipcar had just been been started uh a few years before, and he tries to get them to come to UCSB. They refuse and And he reaches out to them. And so he says, Okay, great, well I'll start my own car sharing program at UCSP. So he he convinces uh this is gonna become a theme here, he convinces the university to buy a small fleet of Toyota Prius' and And Then Logan basically reverse engineers the entire way that the zip car system works. So if you remember at the time, you had a card that was like a proxy card. You hold it up to the windshield. You hold it up to the windshield and then that unlocks the the door. So so

13:00 Logan like reverse engineers this and he installs these on the use the University of Santa Barbara's Prius that they had that they had bought. And uh he gets like a couple thousand students at the university to start using it. Pretty awesome. Yeah. But there's one thing though that that's not helpful for us. This is great for getting around Santa Barbara for students, but when they go home for breaks and when Logan's going home to LA, you can't just like take one of these Priuses down to LA. And so he has to find

13:29 find other ways to get around his lack of a car. So he tries he goes on Craigslist and Craigslist has a portion, has a board called uh ride sharing, which is meant for this purpose. And it's you know, people saying like, Hey, I'm going from Santa Barbara to LA or wherever and like, you know, if you wanna come in and join me and like pitch in for gas, like we can do it. So Logan tries this a couple of times, but he's like a serious introvert. And is is really uncomfortable doing this. So he realizes this kinda isn't Isn't the best way. Isn't the best way to do it. So Ever the missionary here, he takes the next step. He's still a student at UCSB. He joins the Santa Barbara public transit board. Like

14:08 the municipal authority that governs public transit in the city of Santa Barbara. I'm assuming he's like the youngest ever or something. He is the he becomes the youngest board member ever. And he thinks okay, maybe this is the way that I can accomplish my mission and and solve these problems. And it turns out it's not. He all he learns is basically a bunch of depressing stuff. One, he learns that seventy percent of the cost of every public transit ride in the city is subsidized by the city. So if you know people talk about lift losing money on every ride today, uh most municipalities public bus systems are And train systems lose money on every ride. Yeah. And uh and it's super hard to Get stuff done, try new things or even

14:52 incremental innovations on on the existing system. So The next year, uh, this is the summer before his senior year. He and his best friend from high school, guy named Matt Van Horn. They decide. That Matt Van Horn. That Matt Van Horn.

15:09 Best friends from high school in Santa Monica. They decide they're gonna do a big international trip. in their junior year summer before coming back for senior year. And initially they want to go to Cuba, but Matt's mom at this point in time it was illegal to go to Cuba if you were a US citizen. Matt's mom basically bribes them to go to Africa instead. So they go, they spend uh I don't know if it was a month or two months in Africa. And While they're in Africa, they go to Zimbabwe and they see this thing that just like

15:36 To Logan for his mission just like blows his, you know, twenty one year old mind. He's used to all this traffic in the US. And in Zimbabwe, which is this incredibly poor country at the time, almost nobody actually owns a car, but people get around the country and the citi super easily. Buy There are unlicensed drivers, unlicensed taxi drivers who own or at least operate minivans. And they just like have the minivan.

16:03 And the people come up to them like Hey, I'm going here. They get in the car. They wait until they fill up the minivan. And then they drive and they drop people off along the way. It's kinda like A line, you know. It's like a line. And uh and everybody pays a little bit and like the system works. There's no organization, like there's no app, there's no booking. It just sort of organically works. And so Logan's like

16:27 Man, like Matt, like this is super Cool. I I know I know I'm like throwing you off here, but like we both just for listener's 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 hanging. No, no, no. I'm well I've been I was gonna bring it up where with um because Matt actually, but not oft talked about, becomes the third co-founder of Zim Ride of the company that would become Lift. But he does not go full time. Instead, Matt was at the University of Arizona. Instead, after graduation, he joins Dig and he becomes a relatively early employee at Dig and then uh an executive at Path.

17:03 And remember Path Path was so good. It's too bad it didn't work. Still could. I think it's shut down now, right? Well an another one could. Another one could, yeah. Yeah. Private social network.

17:16 And Matt now runs June Oven, right? June Oven, yep, he is the CEO and co founder of June Oven. Uh so moral of the story, everyone should take a trip to Zimbabwe in uh in college. Well I think uh that and tech theme we often talk about here on Acquire, that is gonna become super obvious through this episode and the Uber episode. It's a small world out there. Like it's all the same people that are very incestuous in all of these industries and sub industries. So

17:43 Matt and and Logan, they come back from their adventures in Zimbabwe. And Logan starts his his senior year at at UCSB, and this idea is is percolating in his head. So much so he decides. He's gonna He hasn't figured out how to how exactly to do this by the time graduation rolls around in summer two thousand six. But he takes a job

18:05 at the university working as a sustainability coordinator, just so he can stay there and kind of keep percolating all the on all this. Meanwhile. on the other side of the country. In a in a very, very different environment from, you know, uh leftover hippie parents in uh on the west side of LA. And then certainly Santa Barbara. In Greenwich, Connecticut, another young man is growing up.

18:30 A man named John Zimmer. No relation to Zimrad. Soon to be relation to Zimrad, but no relation to Zimbabwe. Yeah, can we just like for a quick moment pause here and recognize so this only came out when I was doing the research. How crazy is it that Lif's previous name was Zimride, and that has zero to do with the fact that one of the is John Zimmer. And it has everything to do with the fact that m the other co founder went to Zimbabwe.

18:59 And also Totally ironic that, you know, compared to uh It's Lyft's big rival Uber. Lyft does not operate internationally, or it does in Canada. Um does not operate intercontinentally, despite having started in in Zimbabwe spiritually.

19:16 Yes. So John Zimmer. Granite, Connecticut, which for uh I think most of our audience probably knows, but for those who don't, Gunnage Connecticut is basically ground zero for hedge fund managers, uh, and is one of, if not the wealthiest zip code uh in the United States.

19:35 And uh for some reason it's like uh moths to a flame of like hedge fund managers to to Green living in Greenwich, Connecticut. It's a suburb of New York in uh of New York City. And uh so John's growing up there, surrounded by all this Incredible, incredible wealth, like ridiculous wealth. But for whatever reason, like that doesn't like have a A huge

19:57 attraction to him, at least at that at that moment. His dad is an executive at Dixie Cups. The uh which is incredible. It took me a little bit of digging to find that. I was trying to figure out like what did his family do? So like, you know, they're they're super comfortable, they're well off, but they're not, you know, in the same league as uh in terms of wealth as all these fun family. Cups had been flying off the shelves. I mean things were times were good. Yeah, he's a marketing executive at uh Dixie Cups. Maybe a lot of that ends up influencing uh influencing lift later. We'll see. So John, though, just like Logan, is equally as focused on what he wants his life. mission to be and and and learns it

20:37 Uh just as early in life. But Instead of traffic and transportation, it's He wants to work in hotels. Like seriously. That's his dream when he's in like middle school and high school is hotels. Ironically, he did not start Airbnb. Yeah.

20:54 But it's a different type of uh 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 of so like, Oh yeah, like I wanted to do hotels. In high school. He goes to the Hyatt Regency. In uh in Greenwich.

21:11 the hotel there. And he basically talks the man 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. This is like the uh this is the equivalent of uh of putting the TV in the garage. Exactly. This is this is his equivalent. Um so he goes there and he he ends up he answers the phone. So like this is guests calling from rooms with like, hey I've got a problem in my room, like come fix it. This is people calling to make reservations, et cetera like.

21:45 Most people would hate this job. John loves this job. 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 and close by. But most importantly, Cornell has the best hotel management program in probably the entire world. As an undergrad, you can major in hotel management at C at Cornell. And not only does John do that He ends up graduating number one in his class. This dude is like really, really good at hotels. Which is incredible. But while he's there though, he he takes this class at Cornell called Creating Green Cities and Sustainable Futures.

22:24 And I don't know if this was in the hotel management school or or Broadly, exactly. Look up the curriculum or something? I did, yeah. Uh I actually did, yeah. 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, and yet at the same time, there is this emerging mega, mega mega trend in the whole world of urbanization and people around the world uh continuing to move to cities and that this is gonna get

22:58 even more problematic. And this kind of light bulb goes off in John's head and he says, Oh wow, this is a huge problem. Everything I've learned about hotel management and literally, you know, he knows a lot. 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. And he's like, and I'm looking at like transportation in cities and I'm thinking about these cars.

23:23 And the thing about cars is Ninety some odd percent of rides. or one person in one seat in a car that's typically seats, you know, five or seven people. Yeah. Huge waste. How do I bring everything I've learned about occupancy rates in hotels? What if I move that over to Transportation. Could I make a big

23:42 Impact here. Yeah, there's there's just stale inventory everywhere. Yeah. Indeed. Indeed. It's kind of amazing that he didn't start Airbnb. That's another episode to come. So This is all percolating in John's head, but he's also not quite ready to he doesn't know what the right right thing is to do, right angle of attack. So Senior year rolls around. And he ends up doing what, you know, all

24:07 Ivy League students at the time, uh, myself included, did uh, is you go work on Wall Street and become an investment banking analyst. And so glorious, glorious uh noble cause of uh of applying the most brilliant minds to uh well, you know, a training ground. It is it is a training ground and I you know, I don't regret for a minute that I did it and and I think John probably doesn't either. because it's the summer of two thousand six when he graduates and he goes to work as an investment banking analyst at Lehman Brothers. Yeah.

24:38 And uh Great reputation. I mean fantastic firm. And really at the moment Lehman was really On the rise. Yep. Setting itself up for a big fall to come, uh to come shortly, which we'll get into. So John goes off. He's working on Wall Street at Lehman Brothers in New York City.

24:56 Logan. is you know, back from Zimbabwe, he's graduated, he's working as a sustainability coordinator at U C Santa Barbara. Mm-hmm. How on earth did these two guys get together? So Logan He he's realizing as he's thinking about this, and he's thinking about Craigslist ride share section.

25:14 And he realizes the big problem is trust. Like how do I trust when I get in a car with somebody that they're not gonna, you know do something bad. And and likewise if I'm driving, how do I trust that the person who gets in my car is not gonna Do something bad. Which frankly, looking at how big ride sharing is today, and there've been some horrific incidents, but like

25:39 basically goes off without a hitch. It it it it it's incredible. And that was not the case on Craigslist, right, Sharing. So that fall in two thousand six. Logan sees An announcement. That

25:51 Changes. Everything. And that announcement. It changes everything for lots of people. Is that Facebook

25:58 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. Th they are gonna open up their platform And

26:11 invite developers onto it and and have their first API and allow People to make Apps. That include The social graph.

26:21 And so Inspiration strikes hits Logan and he immediately realizes this is it. This is what is gonna 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.

26:39 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 uh to crack the problem. I remember how crazy it was. So first of all, it was like very easy in twenty twelve 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. 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 using this app that's my friend. It was For whatever reason it felt like the next step further that I could see

27:17 what mutual friends I had in common with the driver. Like when someone was picking me up, I was like oh it was it was the most wonderfully sort of uh humanizing thing. to see like, oh, you have two mutual friends with this person that's picking you up. It is uh it instantly takes you to a place where you're gonna treat the experience completely differently than you would a random stranger. Completely differently. Uh not just in terms of trusting that nothing bad is gonna happen. Like that's the worst case scenario, but there's also You know, how is this person gonna behave in my car? There's well there yeah, there's upside opportunities. You know, people end up meeting developing friendships, you know, relationships, getting married, like all this stuff in cars uh via via Zimrads. But yeah, there's also like is this person gonna trash my car? You know, are they Uh all this stuff. Um Logan

28:06 Sees this, he says this is the opportunity. He quickly launches an app. on the Facebook platform called Carpool. It's a Facebook app called Carpool. And he decides to call the platform behind the app Zim rides. 'Cause he's like, Yeah, the inspiration came from Zimbabwe. Like this is what I'm doing.

28:23 Great. And this was two thousand eight. This was end of two thousand six. And it's six. Okay. The company isn't officially started yet. He's just calling the platform Zim Reds. He teams back up with Matt Van Horn. the buddy from from the trip to to Zimbabwe. Uh Matt's at at Arizona and they start working on this remotely together. And then in the next Spring in May of two thousand seven is when Facebook publicly launches the they had announced that they were opening up the API in the fall of two thousand six. They publicly launched the platform. I think this was the first F eight. It must have been the first F eight when they do this. Yeah, I think so. And

28:59 And Logan had he 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. This is incredible. It just goes to show the power of being there on launch day at one of these platforms or on one of these platforms. I mean you look at the people that were initially featured as who to follow on Twitter before they built any algorithms around that, and it's like Chris Saka and Ashton Kutcher and like some of these people still have these just unbelievable followings from from getting juiced at in that early era. Yeah. I mean she in a lot of ways acquired benefited from this. Like we weren't at the beginning of podcasting, but we started acquired before the, you know. We beat the most recent rush, at least. The most recent wave, and we got featured on a bunch of podcast players and you know that uh

29:48 That growth rate. Compounds, it turns out. So Zim Ride's featured as one of the first launch apps for the Facebook platform. When this happens. A good friend of Logan's from middle school back in LA.

30:01 Named John Siegel. He sees that his buddy Logan has done this and he's like this is so cool. He Posts it on his Facebook wall. Turns out. That John Siegel.

30:11 No, these mutual friends. With John Zimmer. That's how they came together. The East Coast. This is incredible. So Where did you find this? They had met. Uh Zimmer talks about this. He does a lot of interviews. So Zimmer and Siegel had met while studying abroad, I believe in Spain in college. They've gone to different colleges. Siegel hadn't gone to hadn't gone to Cornell. And Zimmer comes home one night, he's just started at Lehman. And uh or I guess he's a couple months into Lehman. He's probably just started in his group finished training at Lehman at Lehman. And uh he comes home and home home one night and he sees this post on Siegel's wall and he's like

30:47 This has got to be fate. Like I've been thinking about this. I know how to like operationally attack this problem. It's all about occupancy rates. I've been thinking about carpooling. My name is John Zimmer. This company is called Zimride. It has to be fate. So Zimmer pings Seagull that night and he asks him to introduce him to to Logan. And Seagull does. They start talking, uh, I believe over Facebook to start a couple weeks later. Logan flies out to

31:16 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 gonna work together. Now Logan's still working as a s as a sustainability coordinator at UCSB. And obviously Zimmer's still in his analyst program at Lehman Brothers. Th they're not thinking about starting this as like a real company. It's like

31:35 The side project. Like great. Like we're both thinking about this, like Let's do it. So they uh they stay working on it. Part time. This is a total aside, but like this sounds crazy today in twenty nineteen, but

31:47 This stuff happens. 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 uh 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 S one uh they reveal that even before it was Zimride, Uh in two thousand seven the company was incorporated as Bounder Web Inc. Do you know that Bounder Web I couldn't figure out what that came from. So Yeah. Logan and John, you know, if you're listening.

32:19 Hit us up. Yeah. Hit us up. Acquired Fm at gmail.com or in the slides. Also congratulations. Yeah. Also congratulations. All right. So they're working on it part time. And Matt Van Horn, like He's he's still involved too. He's the third co founder. But Matt decides that he he's gonna stay part time. Uh he's gonna be essentially an advisor, and he goes, as we said, to work on work at Dig and and then Pat and and now June. Um but he's been in the involved with the company, you know, the whole time. So the three of them they decide You know, they have to decide go to market strategy. They have

32:52 the tech, they have the kind of product concept, but where are they gonna start? Well The natural place. is college campuses, right? Like that's where A, that's where Facebook started, and that's where Facebook's, you know user based primarily is college campuses and recent grads. Two

33:11 Logan works at a college. And three, they both, you know, recently graduated. So like okay, we're gonna focus on focus on college campuses. And that's where some people have cars, other people don't have cars. It would be nice to be able to to put those together. Totally, totally. So they launch uh they choose Cornell as the first school that they're gonna launch at. I don't know why they didn't do Santa Barbara. Maybe like Logan was worried about people finding out when he was working there. Uh uh unclear. And within six months, they've signed up twenty percent of the student body that is actively using this. And and the real use case is around breaks. 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. Yeah, load up your car and you know, share the gas money.

34:03 Mm-hmm. Randomly, they then get a bunch of other schools that start using it. I uh apparently the University of Wisconsin lacrosse, uh They didn't do any marketing there. Just like You know. Founded and started. Network effects, man. It's a thing. So the uh

34:20 They're doing this. They start doing at schools that they really want to get adoption at, they start doing these crazy marketing stunts. They go out and they buy a frog suit and a beaver suit. Like I don't I think they were just suits. I don't think they were specific college mascots, but then like they would go to campuses on the weekends and And uh parade around with signs advertising Zimride while dressed up in these animal stuff. Yeah. You can see where the DNA comes from. And uh One one uh One time they do this. Uh Zimmer does this.

34:57 Back at Cornell. He's He's on a recruiting trip for Lehman. 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 running around campus in a beaver suit the other day? And uh John's like, uh yeah, let's talk about that.

35:22 outside. Which is uh which is hilarious. But but it works. And so they're trying to land on the business model for this. And what they decide is Is They're gonna go Once they get adoption at college campuses, they decide they're gonna go to these colleges directly and ask the colleges to basically buy a license from them to set up Zimrides as the official

35:45 car share on campus. So like don't work with zip car or don't do what U C S B did where you buy a bunch of Priuses yourself. You know, have it be the sharing economy, even though wasn't called that yet, and uh just buy a license from us to operate uh your own version of of Zimrads. Which they do and schools pay them like ten thousand dollars each. And at the time they're like, woohoo. Ten thousand dollars. Great. Yeah. Uh turns out that was not the right business model. But we'll get to that in a minute. So they do this for basically a year from two thousand seven to two thousand eight. gets into two thousand eight and um

36:21 Zimmer is coming to the end of his analyst program at Lehman Brothers and he's trying to decide, you know. Am I gonna go work in private equity like all my other analyst classmates who are staying in Wall Street, you know, am I gonna go full time on this sim rides thing? It seems like it's really working. What should I do? Two things happen that help him. Make his decision. One, Zimrides gets its first

36:44 Institutional investment. Ben, do you know who the first institutional investor in Zim Rides was. There was an angel investor, uh beforehand, the VP of finance at eBay, Sean Agarwal, uh, who is still the chairman of Lyft's board. Today. Interesting. But who was the first institutional investor? Uh is it before Floodgate?

37:05 This is years before Floodgate. Hm. Oh yeah,'cause that was like twenty twelve or something. I don't know. It was Facebook. So No way. Yeah.

37:15 Uh so not only did again 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. And they invested two hundred and fifty thousand dollars in Zim Rides.

37:33 To help support it because it was this, you know, growing app on the platform. And they announced the investment on stage at F eight two thousand eight. Whoa. Did they hold that for a while? Whatever happened to that. So uh unclear. It it appears it actually was a grant and not an investment. So I don't know that they got equity for it. Yeah, maybe I want that kind of funding. Yeah. Bad move by Facebook. Uh so un unclear. I don't know whether they got equity or warrants or or But uh Pretty funny. So once they get the money and Zimmer's like, Okay, we got two hundred and fifty thousand dollars like That's a lot of money. Maybe I can do this. Before he makes his final decision, though.

38:10 He meets up with A good friend's mother who works In the Lehman Brothers building. In Manhattan, uh at a at another finance firm in the building. And uh she hears about she must have heard about what he was thinking about and said, Like, I gotta sit this kid down and and set him straight. She sits him down and she's like

38:29 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.

38:39 out in Los Angeles. Now this is July two thousand eight. And he's like Yeah, I mean that is like extreme, but you know, I I really want to do this. I'm gonna I'm gonna do that.

38:51 And three months later, this story brothers goes bankrupt. Whoa, that's right. I was gonna say, even before that, I mean this this exchange of sure thing for stupid risk, like this is on ten acquired episodes. We see this over and over and over and over again. But literally this timing is such a sure thing like this august, you know, Wall Street institution. Lehman brother's been around forever, like Literally three months later, Lehman goes under, financial crisis happens. Far too big to fail. Far too too big to fail. Indeed. So but Zimmer's mind's made up before then.

39:25 He naturally uses Zimride to carpool across the country from New York out to Palo Alto. He and Logan decide they're both gonna relocate to Palo Alto. They're gonna make this a real startup, they're gonna follow in Facebook's footsteps, you know, they have all this you know, uh now money and mentorship and help from uh Facebook. funny story about that, which I will we'll come back to uh perhaps later in the episode. So they move into I think they get a temporary office for a while, but they settle into they they decide they're gonna get an apartment in Palo Alto that they're gonna both live and work out of And it turns out that it is next door to Marissa Meyer's house. And so their windows look out over Marissa Meyer's backyard. And Marissa, of course, at the time was uh one of the senior executives at Google, uh, who had been there since basically the very beginning, um and was not yet, but would be the CEO of Yahoo. Neighbor friends? Like what's the what happens here? Well, so uh they talk about you know, they'd see and hear, you know, all these Silicon Valley parties that would happen in in her backyard uh uh next door. They'd be like they'd look out the windows and try and figure out like who's out there and dream about some day they could uh

40:37 They could. You know. Reach those same heights. Uh they do. It just takes a while. So

40:43 They they basically operate this way for the next two years. Which is crazy. So like they have the two hundred and fifty K from Facebook and the little bit of angel money from Sean Agarwell. But that's Yeah. And they're not making that much money from these universities. So the two of them don't take a salary for in total for th for those

41:02 whole first two years that they go full time on this. They eventually round uh as you alluded to, Ben, from Floodgate, uh from and uh Maricho there in twenty ten. But that's two years later. And and then they would raise a series A in twenty eleven. I I think and and and Ann talks about this, I think part of the reason that they were able to raise that seed round was just that And then the other investors kinda looked at them and were like, Well

41:28 These guys are like, you know, cockroaches. They just don't die. We'll invest in that. It is incredible how uh small the beginnings were here. So both the floodgate round and then I can't remember who led the series A, but both those were Mayfield. Okay, into into the Zimride concept of Zimride, yep. Recurring revenue from universities. Yep. They were. They were. This is before lift. So Not long after the series A uh that Mayfield does in in twenty eleven.

41:57 Logan and John. You know, they're they're excited, they just raised an A and things are Going well, but If they're like really honest with themselves. They're not setting the world on fire here. Growth is

42:09 Slowing they've they've saturated universities at this point. They've opened up the product for corporate customers, but that's not that compelling. Like ride sharing back and forth to campuses for breaks. is a great use case, but like Ride sharing to work every day. It's also not daily. Like I mean, they're not building habit here. It's it's a you know low frequency event. Exactly. Exactly. So then they were like, Okay, well we'll as part of the series A, we'll open this up to everyone. So you don't have to be part of a campus or a corporate network anymore. But

42:41 Then they run back into the Craigslist problem all over again. It's like, I don't know these people. Am I gonna get in a car with them? Yep. So by mid twenty twelve six months ish after their six to eight months after their series A they realize the problem here is with the market, not the product and They need to do something different to solve it. All right, listeners, now is a great time to tell you about a longtime friend of the show, Vanta.

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44:36 So you can get$1000 off Vanta at vanta.com slash acquired. That's V-A-N-T-A.com slash acquired for a thousand dollars off. And just tell them. That Ben and David sent you. Okay. So what happens next? Here is the official lore.

44:52 of how lift begins. I always like official lore. Yeah. We'll start with the official lore. Great. So it's summer twenty twelve. John and Logan have come to this realization. They talk to the company, they say, here's what we're gonna do. We're gonna hold an internal hack day to come up

45:10 Uh and like open your mind. Like they're you know, they must be inspired by Odeo and how how Twitter started here. Yeah. And open your mind, we'll we'll we'll discuss ideas, we'll vote on what we want to do. Three ideas come out. The first one. It's called On My Way.

45:28 Which would be an app if you're traveling to alert friends that you were going to see, like where you are kinda like a safety thing, like uh 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. Feel like a feature that might be part of Lyft and Uber someday. Two. The the second idea they have is called journey.

45:50 The vision is people using Zim Ride to go on these road trips together, having these social experiences, Journey would be an app that you could document. A trip. uh with like photos and videos and music that you listen to and like share a memory of a trip, you know. Um Almost. There's still room for that. Well, I guess people use the Instagram for this now. Uh well for 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. But the clear winner

46:20 When the company votes is The third option. Zim ride. Instant. And uh instant catcher. lift as a little catchier, but Zimrite instant, you know, of course Uber, as we refer to, and not just Uber, but uh company called Taxi Magic and a company called Cabulus.

46:38 All of which we will cover on the Uber IPO episode. You know, they're of course around. They're doing trips within cities, but it's more like taxis. They're using licensed limo drivers to do this. So it's not peer to peer. It's not car sharing, but it's an experience that people love. It's just very expensive. And so they're like, yeah, Zim Ride instant. What if we did this in a peer to peer car sharing way and we use our network of drivers on Zim Ride, but we just do it instant. Oh. Brilliant idea. Inspiration has struck. Incredible, you know, entrepreneurial moment. And so of course they decide to do this. They build and launch an MVP app in three weeks. They're gonna call it Zimrite instant.

47:18 But they have an intern, a design intern, uh, that's spending the summer with them named Harrison Bowden, who still works at Lyft today as a designer. He's like Zimrite instant like That's not too good. We need a new name. How about we call it Lift and we'll lift uh L I F T dot com and the app like that's gonna be hard to get the domain name, but let's just change the I to a Y and like It looks cool anyway. Let's call it lift. And

47:44 Brilliant. And the rest is history. Sidecar. So Harrison uh s sidecar. Or didn't flip there. Side bar. Harrison also designs the first logo. Do you know what color lift's first green logo was sea foam green. Yeah, it's funny. I I I dug up uh in preparing for this episode, I dug up my first lift receipt when they when they were expanding to Seattle. Yeah, it was uh they hadn't yet gone with the pink. What was pink was the pink balloon, but the L Y F T, which that logo mark has not changed was was green, not pink. Or C foam green, I should say. Yeah. I would love to hear why they chose Seafoam Green, but anyway. And and this uh this is the legend, this is the lore, and even in the Lift S one, there's a founder's letter from Logan and John in there and and in it, I quote here.

48:32 In two thousand twelve, we launched Lift and pioneered the idea of on demand peer to peer ride sharing. In those early days, we were told we were crazy to think people would ride in each other's personal vehicles. One billion rides later. we're able to look back on an industry that has been defined by the products Lift pioneered.

48:54 Wow, it's like it's it's a humble brag, a little bit of shade, a little bit of uh uh You know subtweeting or whatever you want to call an S one there. That paragraph that paragraph is not incorrect. And lift and the former Zimmeride deserve all the credit in the world for doing that and and creating one billion rides over the last seven years.

49:19 However, that's not quite the whole story. And that's what we're here at Acquired to talk about. So Do you want to hear the real story of how peer to peer respect sharing started? Come on. Love it. Okay. So

49:36 You may have heard of a company called Sidecar. You may even remember a company called Sidecar. Course. And um Uh, by the way, this this story that we're about to tell is I think Certainly the best story in this episode.

49:50 Probably gonna 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 Sidcar was a Peer to peer.

50:02 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.

50:15 Let's talk about Sidecar. Okay. So Sidecar was started by a guy named Seneal Paul. Uh who's still around here in San Francisco. In September of twenty eleven. Now remember it's summer twenty twelve when the lift hack day happens. And Seneal

50:31 He's a super interesting dude. He had been an original AOL guy, like way back in the day. And uh working out of Washington, DC, uh where AOL was based. And then after AOL, he started a company called Freeloader. With a guy named Mark Pincus. Which might raise. Perk up the ears of some of our listeners. Mark, of course, was later the founder and CEO of Zinga. And Sunil did not co-found Zinga with Mark, but was an initial investor and was actually a board member of Zinga for a long time. After that whole ride, and in between, he started a company called Brightmail, uh that uh got acquired for about$400 million. So yeah, he's done a lot of stuff in the Valley.

51:08 He finds himself by two thousand nine. He is teaching at Singularity University here in here in Silicon Valley. 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. uh which is still a you know large and very successful uh car sharing company.

51:34 Today. And and we were actually small seed investors back at Madrona. And I remember working with Sam and Jessica in the very early days. This was super fun. The distinction being that you drive that car rather than riding in that car. Yes. You own a car, you put it on the platform And then somebody can rent that car from you that they then drive. Yeah. So it's basically it's zip car with Cars that people own instead of cars that

51:56 Zip car owns. And it's a great idea. Uh still works really well. And Sneal was so excited about this because he's been he had actually been thinking about this for a long time. Going back to his free loader days, and it was also percolating around in his head and

52:12 He had actually filed for a patent back in two thousand two 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. So Seneal's like so excited that Sam and Jessica are working on this. He says, I want to be your first investor. I want to invest and I want to be executive chairman of the company. And and Sam and Jessica are like Yeah, like that's like a lot of a lot of equity and a lot of control that you want. Uh And they were worried about him.

52:47 parachuting in and wanting to take over as CEO, which he probably did want to do. And so they say thanks but no thanks and they reject his offer to invest. Uh and Sunil gets really angry about this. And so he writes about all this later. We'll link to his his bunch of medium posts about all this history. And he's like, you know, it's totally the wrong thing to do. And like I was just so, you know, upset about it. Uh so he's like, I'm gonna spite them. I'm gonna go start my own company doing this. Wow. And uh it's he's like super honest in these blog posts. So he does that, he works on it himself for a while, uh, competing with Get Around. He eventually decides You know

53:22 They're challenges to the market. He's not doing as well at it as he could. He decides he needs to he needs to do something else. And so what he wants to do instead is to build, he sees the rise of smartphones, he wants to build a city transit smartphone app. 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. So he reaches out. He finds a team of computer science students in Michigan, uh at the University of Michigan, who are also working on this. He goes out, he flies out there, he convinces them to come out to San Francisco and start this company with him, including the the CEO of the company from Michigan, Jahan Kana, uh who becomes CTO of Sidecar. And uh so they start this company.

54:05 And um right around the same time A friend tells Sunil that About this crazy 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. And uh

54:20 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

54:32 Pick up people other people who Request. rides from them to get to where they're going, out to bars or home from bars. And like of course there's Uber out there, but this is just like ordinary people doing it. And it's working like super, super well. And so Neil's like, Oh yeah, like I'm really interested in that. Like tell me more. We should take a look. Yeah. Maybe we should take a look. He's like, Oh yeah, like so what's the service called? It's called

54:56 Homobiles. Yes, you heard that right. It's called Homobile. And the motto of homobies is

55:04 Moes getting hoes where they need to goes. And this is the most incredibly amazing San Francisco y thing that probably has ever been created. It just I love this. This is so great. So okay, so you know, San Francisco today you come here in twenty nineteen. And like it's all techified and yuppies and you know, there's there's Lyft and there's Uber and there's Airbnb and everything that's taken over the city. But like San Francisco is the birthplace of, you know

55:35 Counterculture. Like in the sixties this was, you know, sex, drugs, and rock and roll. And uh we've talked about this on there's a great book about the old San Francisco called The Season of the Witch. So Homobils was born out of that, not out of the tech world. It was started in twenty ten. By Linny Breedlove, who is a punk rocker and And LGBTQ

55:57 Icon here in San Francisco. And as he tells it, he was going to Femcon in Oakland in the uh in the summer of twenty ten and he was driving some babes To the conference. And he says We got there.

56:12 And all of a sudden, this is this is his words, this is 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

56:33 This is it. 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 uh in the country. If you were a drag queen Or or even not even just, you know, uh just gay and you any member of an at risk population. Any member of an at risk population. And you were out at night, you were at a gay bar, or you were somewhere else, and you were trying to get home or you're trying to get to another place.

56:58 taxis wouldn't pick you up. And and even Uber, like you could get in an Uber, but you might still have issues. I mean, this happens all the time still. Like, you know, people will get uh assaulted, people get attacked, people get raped, uh and um You know, if you're part of an at risk population, this is like a serious worry. in your life. And so breed love. started thought I can do something about this. He started this organization called Homobil, and the concept was if you were, you know, felt

57:26 you needed a safe chariot from getting one place to another, you could text Homobiles and they would dispatch you could both drive for Homobiles and they w and then they would dispatch uh somebody to come pick you up and take you, you know, in a safe place. way to to where you need to go. And of course, legally you couldn't pay'cause they weren't a taxi company, but you could donate. to your driver and to hollows. And

57:51 Turns out. That worked great. And uh homobes at this point by twenty eleven had become a big thing in the LGBTQ community in San Francisco. And it turns out they had invented peer to peer ride sharing. So that's so interesting,'cause I get none of the credit for it. Nobody nobody knows. I the only way I found out about this was Sunil writes about it in his medium posts. And if you Google homobile, you'll find some articles here in San Francisco about it. But even in uh we use a lot of um uh friend of the show Brad Stone's uh The Upstarts, a lot of the research and reporting he did. He mentions homobile in a footnote, but nobody talks about they were the first ones to actually pioneer

58:32 Peer to peer ride sharing. And and doing it for just an extreme need. I mean this isn't you know, I gotta get to work in the rain. This is an extreme need. Yeah. This is like I might die on my way home if I don't have this service. So Sunil is here about he says, Okay, great, well, I gotta try this. So he writes this this is a quote from his medium post. I took homobobiles to the airport for a trip to New York. It cost me twenty dollars for a trip that normally costs fifty dollars in a taxi. Wow. This system was cheaper than taxis, never mind Uber.

59:03 Homobiles had been in the press, yet hadn't been shut down. It seemed to be operating in a gray area of regulation by taking donations. We wondered. Can we create a scalable technology enabled version of home mobiles that could allow us to create our shared ride vision.

59:21 Oh, I love it. That's it. That's what they do. They take the homobile's operating model, which is individual regular people, un not commercially license licensed drivers. Driving for the platform. And then individual, regular people.

59:35 th via a dispatch service that they build a an app version of, uh, 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 Lift and uh and Sidecar when it started, it was not a payment because the regulation it was all donations. So Sidecar takes the entire operating model from home mobiles. Marry it up with the app interface, the smartphone app interface of Uber.

1:00:04 And then they start la they launch in February twenty twelve in San Francisco. And literally the biggest market opportunity since Facebook is born. Like what an incredible story. So of course. Sidecar would go on to raise a bunch of money along with with Lyft and and Uber. They would launch intensities, but ultimately they couldn't keep up in the war of capital that we're about to get into. David, do you know my uh my personal history with Sidecar? I know you have one. Uh let's let's hear it.

1:00:33 Yeah, so I I know Sidecar well and and love the service and uh was a big user in kinda the early days. And I uh when I worked at Microsoft, I I worked on a couple of companies on the side, one of which was called Red Ride that uh I started with a few friends actually at a startup weekend here in in Seattle. And um it was I it was still a side project'cause we had day jobs, but fairly advanced. It was basically the the kayak for for ride sharing, which some other great companies are trying to do now. But as we sort of got toward the end of realizing that we weren't gonna start it as a you know all quit our jobs venture. Uh we were talking with Sidecar and Sunil about uh an an aqua hire and and ultimately I decided not to, but uh Um You know, what could have been.

1:01:15 What could have been. You could have been Well, you could have been part of what happened. when sidecar ultimately did shut down. They got acquired by GM. uh for the assets, not the operating company, because GM simultaneously invested five hundred million dollars in lift and acquired sidecar. Uh I believe they wanted the team and and the patent.

1:01:34 So remember Jahan, Kana, who's you know from Michigan. Uh he goes back to to Michigan to to GM uh as part of the acquisition. He stays there about a week and then he leaves and joins Uber. Where he's still to this day and and so John, do you know what he's doing at Uber now? He is Head of product for new modalities, which is bikes and scooters. And uh And always on a cutting edge. And Fred and Andrew Chapin, who was an executive at at Uber at the time and is now co-founder and CEO of of Wave's portfolio company Basis was uh

1:02:05 was a big part of hiring hiring John and and and bringing him back and and bringing him into Uber. So okay, back to home mobiles quickly though. This is this is amazing. They are still around today and they are still super important in the LGBTQ community. 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. 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 their what they think, how they behave, uh, especially towards

1:02:36 Non normative people like this. And so they're still giving n rides at night. 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. So it's actually now a nonprofit. It's a five oh one C three. And this is crazy. It still is done by dispatch. They don't have a smartphone app and they've been trying to raise money to have enough resources to build an app. They've been trying to do it for years. And so we felt like Ben and I talked about this before the show. We felt it was important

1:03:08 to kinda pay homage to to this organization that started this incredible industry that now has resulted in, you know, one and seemed to be two Massive IPOs. Um so we're gonna make a a two thousand dollar donation from acquired to Homobials, and we're gonna put a link in the show notes in case anybody else wants to too, and and we think it would be Super cool if the acquired nation could help them get enough resources to finally build an app. Yeah, let's build an app. I'm sure uh I wonder if there's there's uh there's probably some in kind donations that that they could use too, but

1:03:39 Yeah, super, super pumped to be doing this, David, and I think glad that you broke uh our normal uh structure of 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 uh 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 Zim Ride.

1:04:05 Uh, you know, and that maybe too, there was a hack day and you know, they did decide to work on Zimrite Instant and they did launch it in as Lift. But um Before the hack day the After Sidecar had launched in February of twenty twelve, Zim Ride definitely sees what's going on with them and sees them start to get a bunch of traction. So and and in fact, Sunil and Sidecar they saw, you know,'cause they they had uh you know uh God mode uh for these uh for these uh platforms was not yet illegal. They could see everyone who was signing up for the service and how they were using it and where they were going. They saw that actually Logan and John and Zimride board members were all like super actively using the sidecar app in the couple months before they started lift. So

1:04:49 By the time the hack day rolls around that summer, You know. Everyone at Zim Ride definitely knows everything about how sidecar works. definitely knows, you know, the donation model, whether they know knew it came from homobiles or not, they now know exactly how the operational model works. And so when they launch lift, you know, they copy it all. But they do

1:05:07 To their credit, they do it a lot better. And there are there are two reasons why they why they do it better. One Which we alluded to earlier. They have the existing network of drivers and supply from the Zim Ride product that they can onboard on to lift pretty quickly and easily. It's like rule number one in in creating a marketplace product. It's like how do you cheat and bootstrap one side of the market. Yep, yep, totally. So they've got the hack to bootstrap one side of the market. And people hadn't realized yet, but

1:05:38 Uh we come to be No one 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. If that time is more than a couple of minutes, people will abandon the service. And so by being able to bring a like a huge portion of a huge network to get over that tipping point. You get over that tipping point a lot faster. And so that was a major help to lift. The other thing that they realize, and listeners will probably remember this, they realize that like this is still kind of a crazy idea. And so they have to do a couple things to A make people comfortable uh doing this, you know, getting in cars with strangers, but also B raise awareness that you can't even do this.

1:06:19 So they do three things. In the app, as a rider, when you sign up, they tell you to sit up front. Don't sit in the back like a taxi. You're getting you know this is lift is your friend with a car. This is ride sharing. You're not sharing. Yeah. Yeah, sit up front, be friendly. And number two, as part of being friendly Give your driver a fist bump on the way in and out. Oh the fist I thought this was so weird back in the day.

1:06:44 And you know, you could maybe argue whether one and two helped them win or not. But certainly differentiation there, at least. Yeah. Certainly the third thing they did helped them win big time. So they already had this supply hack, uh this distribution hack on the supply side. They needed something though to get demand within San Francisco and and future cities that they launched. And um So they came up with kind of a crazy idea, and here's where the frog in the beaver suit costume DNA comes back. A few years earlier, John Zimmer had found out about this crazy this this company in San Francisco that made these funny, you know, bumper protectors. If you're parking on the street in San Francisco, just like in New York, like it's super tight parking, people hit your bumper all the time. And this uh you know ironic hipster company

1:07:29 In San Francisco, had made a bumper protector that looked like a fuzzy mustache. And so you could put a mustache on your car. It was called a car stash. And so as a joke, Zimmer had started buying a bunch of these and giving them to employees and investors, you know, back at Zimrod. But then when they're launching lift and they realize they gotta like get people aware of the service and onboard demand. They're like, Oh great.

1:07:51 every driver who signs up for the service, we're gonna make them put a big fuzzy pink mustache. On their covers. And so like Summer twenty twelve. Totally.

1:08:03 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. Way, way, way more. And um You know, it's kinda like when scooters launched, whoa.

1:08:15 Scooters will come back in a minute, but the scooters are sitting on the sidewalk. Here, you've got cars driving around the city with this fuzzy pink mustache. And I remember this, like I remember coming down to San Francisco at the time and be like, What is with all these cars driving around with pink mustaches? And uh the word of mouth, like it was real and it uh And so in this uh At this time it was differentiation from Sidecar, right? Because Uber hadn't launched Uber X yet. So it was it was competing against them. Yep, it was competing against Sidecar, but it was really competing against non consumption. Right, right, yeah. It's it's uh uh it makes you go, What's the deal with the mustache? And then you yeah, it's basically uh it's actually it's funny, it's not really competitive differentiation, it's more just category awareness. Yeah.

1:09:00 Totally, totally. It was probably the last thing on their minds was competing with Sidecar at the same time. Uh But Speaking of competition, Uber is out there. You know, Uber's been around since two thousand nine at this point. They're doing Limo Uh licensed

1:09:16 driver pickups via an app, basically dispatch for for Limo drivers and black card drivers via an app. They start seeing this happening and they're like, Oh Crap. Like Uber is expensive. And they're making lots of money and there's tons of demand for it. But all of a sudden here's this substitute product out there on the streets that is massively undercutting us on price. Like we gotta do something. So

1:09:40 Now this is like People don't remember this. But Uber. They they're like They're really mad because, you know, they're Uber, they have all the reputation. They're so aggressive, but like they have been operating within the law.

1:09:52 And you know, technically This peer to peer. Pride sharing thing. It it's in a grey area, but it's not explicitly legal. And so Uber gets super pissed and they start lobbying and they try and I remember this from Brad's book. Yep. Yep. So they work really hard for

1:10:09 About a year to try and get lift and sidecar shut down as being illegal. And they're being super principal that like, you know, we operate legally and like they're not operating legally and regulators should shut them down. Turns out though it doesn't work. Probably partially because the regulators hated Uber because they were so aggressive kinda on pushing the rules uh within the existing um license driver industry. And so this is great.

1:10:38 The next year, April it it wasn't until April twelfth, twenty thirteen. When Uber Uber had already launched Uber X, but it was still licensed drivers driving Priuses instead of black cars. They pivot Uber Uber X into being a direct competitor with lift and sidecar doing peer-to-peer ride sharing. And they announce it, Travis releases a white paper. Entitled Principled Innovation.

1:11:03 regulatory ambiguity around ride sharing apps. And there's the money quote in there. This is so perfect. He says uh a couple of paragraphs in. In the face of this challenge, the challenge being from these, you know, unlicensed peer to peer uh ridesharing apps, Uber could have chosen to do nothing. We could have chosen to use regulation to thwart our competitors. Instead, we chose the path that reflects our company's core. We choose to compete. Yeah, then the entire tone of of the Lyft S one that's about sustainability and good for the world and great for riders and great for drivers and really like everyone kumbaya and hug.

1:11:44 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

1:12:01 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 when Zuber enters the market, like

1:12:15 Everybody realizes very quickly. that this is it. Like this is the biggest market that Anyone has seen it. 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

1:12:32 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. So The competition that this unleash and the behavior that this unleashes in Silicon Valley is just incredible. And let's talk about this. I was gonna talk about it in tech themes, but it's worth just touching on it briefly. And we we talked at length with Brad Stone about this and uh and the um episode that we did with him, uh what episode is that? Is it M. Uh no, it was when we um it was a Oh D Uber and D, yeah. Um and he makes this really great point that the network effect with Airbnb is

1:13:08 is super strong across markets. So it it becomes winner take all. Where when you're traveling and you're used to using Airbnb in the last two vacations you took, you're gonna use it on the next one. So wherever Airbnb you know, there there's gonna be ultimately sort of one one platform there. However with Uber the or or ride sharing or lift, whatever. When you are using it, ninety eight percent of it is gonna be in one city because it's it's something you use generally where you live. And so it's not really that big a deal for market by market to be owned by by different players, particularly uh um internationally, where I mean it kinda makes sense for you know, Seattle and San Francisco to have the same provider. But

1:13:50 Not that. Yeah. Yeah. But like what tot like there's there's very little that lift uh here versus the ride sharing uh company in China uh could could even share to be to be valuable as a cross market network effect. And so Um th this quickly becomes to your point, David, even within a country, even within a city, something that uh there's gonna be multiple multiple players in. Yeah. And and people also didn't realize this for a long time, but I know I think we'll talk about this in tech themes, but where we've gotten to now. Because that's the case, it also means it's not a winner take all market locally because

1:14:26 you can as a company, as a corporate entity get enough resources from winning in various markets that you can still compete Uh, it's like whereas if you're trying to 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. And that's why Yeah, you haven't seen it.

1:14:47 Uber crowd outlift fully or or or vice versa. And and another way to put that is uh to your point about the tipping point, as long as okay Wa taking one step back. We're really in tech themes now, but taking one step back, thinking about marketplace assign business models where you the supply side is undifferentiated. I don't care who picks me up, I just need to get there, versus marketplace assist, which is the platform provides a bunch of different options at like Airbnb does, and I get to pick which option I want from the supply side. Um

1:15:18 in this marketplace assign, which ridesharing 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. And so you do end up in this place where um as long as there's enough supply uh for a a a given uh a given geo, then You know, there can be multiple players.

1:15:47 Because Both drivers and riders can multi home. Yep, totally. But nobody knew this, uh, just yet. People are thinking like Oh, this is gonna be a winner take all market. And like who are we gonna

1:15:59 Back. So the fundraising race is on. All Three companies, Sidecar, Lyft, and Uber, start raising massive amounts of money. Uh 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

1:16:17 part of what they do with the money, they've also realized the magical kind of three minute pickup time uh threshold. They start Doing this thing called slogging, which um uh is an acronym for like uh supply long term operations growth or something like that. Uh but really what it means is that uh and all the companies are doing this, they send out employees and contractors to order rides on their competitors' platforms. They get in the car and then they try and convince the driver to switch to their platform. Uh because the density of of supply is is kind of the most important factor here. Yeah, and not only that, they they they and I think Uber was more famous for doing this, but uh ordering rides and then canceling them on on competitors' platforms just to Yeah.

1:17:03 Lift it and say, Okay, we're doing it. Yes, but Uber built a brand around doing it. Yes, Uber built a brand around doing it. And and they're they're much more successful and particularly in the capital raising. So a year later Very quickly an eternity in this market, but very quickly in absolute time. Lift is on the ropes. Like Lift is about to die. Uh and what year what year is this?

1:17:26 This is twenty fourteen. Yeah. Everybody's 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 twenty fourteen, Uber had raised thirty times the capital as Lyft, which was the next best capitalized 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 Uber has one.

1:18:00 Sidecar is is about to die and Lyft is, you know, gonna go the same way. And there's no point in investing in anybody except Uber right now. I definitely felt this way. I mean I can remember thinking like Uber's such a clear winner, anyone trying to compete to Fool's Aaron, it's amazing that they lost the the you know the enormous amount of money they've already raised. Yeah. Totally. And you know Honestly, Lyft feels the same way too. Uh so they actually initiate merger talks with Uber. Lyft goes to Uber. And uh waves the white flag.

1:18:31 And so Zimmer. And at this point in time, Andreessen Horowitz has invested in Lift and uh Andreessen partner John O'Farrell, they go out to dinner with Travis Kalanick and Emile Michael, who's his number two at at Uber at the time. And uh They say we want to merge. And they ask for eighteen percent of the combined company.

1:18:52 And Uh that is exactly how uh Travis and Emile react. They're like, We're gonna win. You're not getting anywhere near that amount. Like maybe we would consider something a lot smaller. They counter with eight percent. Um Which is still actually at that time.

1:19:10 It's a it's almost surprising uh with those two personalities that they came back with eight percent instead of one. Yeah. And Equally surprising, and this is like such a defining moment for Lift. Equally surprising that Lyft doesn't take that. Yeah. But they don't. So the two sides can't rich reach an agreement. Uh and Lyft decides to keep going. Um, but they can't raise from VCs because all the VCs are like, I'm investing an Uber or nobody. Um

1:19:37 So they go out and they raise two hundred and fifty million dollars from the hedge fund Kotu Management, uh, which Kotu is now a big player in investing in especially late stage uh startups, but this was one of the first Uh. private company investments they make. And you gotta wonder here, like, is their philosophy and we're gonna 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 gonna take a flyer that these guys are gonna be the one?

1:20:06 I I don't know. I wish I knew we'll have to Okay. Uh Folks at Co two, get in touch with us and uh we'll have you on the L P show and we'll talk about this. Um the uh I I don't know what their thesis was at the time, because it was really contrarian at this point in time. Um

1:20:21 Side note though. Like for Uber, and we'll talk about this on the on the Uber show to come. This was the best one of the best things that ever happened to Uber, because had they acquired Lyft at this point in time, they for sure would have been regulated as a monopoly by this point. Uh like the fact that another a viable second player in the market was allowed to continue in the US. Like, um especially given everything that happened at Uber later, there's no way that regulators wouldn't have Totally cracked down on them.

1:20:49 Um great point. So anyway, how bing is the best thing that's ever happened at Google. Totally, totally. Um It it absolutely is true. Uh so after this, when um you know, Uber's like super annoyed at this point, like these guys, they keep hanging around, uh, things get Like things were already ugly. Things get

1:21:10 Super ugly. Like like Probably the ugliest, like certainly I've ever not that I was part of this, but that I've ever seen uh in business. So In twenty thirteen, back a couple back a year earlier. Lift had acquired this company called Cherry. Do you remember Cherry Ben?

1:21:29 I don't. Cherry was an on demand. Car washing. uh company. So you could order uh a car wash um while your car was parked in the parking lot, uh a crew would show up and

1:21:43 Wash your car. Uh, and then you would come out of, you know, work or the grocery store or wherever you were to a Clean car. Cool, right? Cool idea. Um Turns out there's not like that much demand for car washing, but like really innovative stuff that these guys pioneered on oper the operations front. And Uh lift.

1:22:04 had acquired Cherry in twenty thirteen,'cause it wasn't viable as a business, but they're like, Yeah, like These guys are like really talented. And uh the CEO of Cherry had risen up through lift. and at this point become the COO of Lyft. So like the number three executive behind Logan. And John. And uh that guy's name

1:22:23 was Travis Van Der Zanden. Uh which this is gonna this is gonna ring some bells also for listeners. Um Travis, uh Travis VZ, uh not Travis Kalanick, um he's the COO of Lyft. And he brings a ton of innovations that he did at Cherry into Lyft. So like driver onboarding, city launching, like he massively improves the efficiency of Lyft's operations. Um But he's kinda cut from a different cloth as Logan and John. He's not he's not uh

1:22:53 He's not the mission driven founder here. Uh he's a little more uh a little more Uber. A little more Uber. Uh and uh and he sees in twenty fourteen as all this is going on, he sees the pendulum is swinging Uber's way. He believes, just like everyone else in the valley, that there's no way Lyft can compete. Um So he does two things. He Goes to the lift board and And tries to stage a coup.

1:23:17 Uh he goes to board members and he says, I don't think John and Logan can run this company effectively. You should fire them and make me the CEO. And the first thing I would do as CEO is I would go reinitiate merger talks with Uber and land this plane. And um Simultaneously though while he's doing that, he actually goes to Uber, uh while he's working at Lyft and he um he he Kinda.

1:23:39 Rogue totally goes rogue and uh says, Hey, I know you we just shut down merger talks, but like uh we might want to reopen those. And um we. The the royal we the royal we, yeah. And now and now again, like this this is really bad, of course, but Like Uh you can s sort of see how this could You could get it. Crazy times can call for crazy crazy measures. Right. Like this is you would have to believe you were you would have to be utterly insane.

1:24:06 to think that any other course of action was um you know, was viable here. Um Logan and John, though, of course, find out about all this. And uh You know, they are

1:24:18 utterly insane in their conviction and and mission driven zeal for the company. Uh and so they fire Travis immediately. Um And Guess what? A couple of weeks later Travis.

1:24:30 ends up joining Uber. So how does this work? And like is this because non competes are illegal in California, so like you just can That's that's how this works. However, Of course lawsuits abound. So Lift immediately sues uh both Travis Understand and And Uber.

1:24:48 Uber turns around and counters Sue's Lyft for supposedly hacking into their systems and stealing their information. Uh Eventually everything settles. Um uh out of court because everybody realizes like We got bigger fish to fry thanks to the guns pointed at each other and there's like a you know an alien invasion happening above us. Exactly. Exactly. Well, alien invasion that we are invading each other, but this is not the battlefront that we're gonna die on. Um

1:25:16 And uh So now Ben. Do you know what Travis Van Der Zanden is doing now? I believe he's the CEO of Bird.

1:25:25 Yes he is. He left Uh left Uber I believe in twenty Seventeen?

1:25:32 Um And uh started and is the CEO of Bird. The scooter company. It is incredible how incestuous all of this is. Uh incredible. Uh but yeah, and and

1:25:44 Travis Van D'Azan. I mean. Again, like uh two sides to every story. He is incredibly talented and, you know, um A visionary for Transportation and operations. Like when he started Bird, nobody was doing scooters and now they're everywhere. Um

1:26:00 So anyway, that's the backdrop to twenty fourteen. And uh Uh. Coming into twenty fifteen, lift is Basically out of money.

1:26:12 Um so they're at the and this is like the story of lift, is like they're out of money and at the end, and and then oh something happens and then they're out of money and they're at the end. And then and then oh something happens. Um Well so the twenty fifteen version of this is They End up getting hooked up. Logan and John are out there trying to raise money from anybody. They know they can't raise from VCs. They've raised from Kotu. They're talking to any other alternative source of capital. They end up convincing Rakuten, the Japanese e-commerce company, to invest. In March of twenty fifteen, Raccoutin invests five hundred and thirty million dollars. Uh, and Raccoon is at IPO the largest shareholder in lift, larger than any VCs, much, much larger than Logan and John. Um

1:26:58 And uh It uh You know, that saves the company. Totally that time. And then they add some more money in. This is you really can't make this stuff up. I remember when this happens. They add more money into the round.

1:27:11 Uh from acquired supervillain Carl Aiken. No way. He's in this too. Carl Aiken. He's back. We he is like we gotta have Carl on the show at some point. Yeah. We for sure do. Um Yeah, and that that one we'll do in person. Carl, we'll come to you. We we will for sure come to you. So um Listeners might remember Carl from from Netflix. Uh and uh what was the other episode he was in? Um Marvel. And Marvel, yes. Uh and Bli Blizzard?

1:27:43 Is he also an activation lizard? Anyway, uh Incredible. Activist investor, Carl Aiken. Activist investor. And and what's great is so Mark Andreessen and Carl Akin had had this huge beef, like Twitter beef. Uh And um and Andreessen was the largest VC in lift at the time, and here's Carl Iken coming in. And I think I think Mark was quoted in in the New York Times uh saying like Yeah, I mean we disagree, but like I never said he wasn't smart. Um This is great. Uh so

1:28:15 Carl Aiken comes in. They invest a hundred million dollars. uh in as part of this round. And that keeps the company going for another year. And then

1:28:26 The The next year, in twenty sixteen, they're running low on on cash again. And uh they get GM, General Motors, to invest five hundred million dollars. That keeps uh that keeps the company going. Um GM made like a quick uh I don't know, like seven hundred and fifty million or something,'cause that was in what twenty six twenty sixteen we're in? Twenty six. So they they they turned five hundred million into like one and a quarter or something over a few years. Yeah, or maybe even more than that. I'm not I'm not totally sure. They are, I believe, the third largest shareholder, second or third largest shareholder in lift. At this point. Um

1:29:02 Yeah, which is incredible. But still, like, you know, still Uber just keeps growing and growing and growing. And you know, this is the point where Uber's valued at seventy billion dollars, um, you know, is taking over the world, they're taking over China. Um And so the summer of twenty sixteen, even though Lyft has managed to hang on They had the New York Times reports. That Lift Hires Catalyst, uh Frank Quatron, um uh Frank Quatron's firm, uh the investment banker to sell the company uh again to try and sell the company. And they go and they talk to everybody. They talk to GM who just Frank Quatron of uh of the Amazon episode fame who uh with Bill Gurley uh took took Amazon public. Yes indeed.

1:29:41 And um So they go talk to General Motors, who just invested and said, Hey, you should you know should buy the company. They talk to Apple, Apple's working on self driving cars, they talk to Google, they talk to Amazon, they talk to they go talk to D D in China, they go back to Uber. Nobody bites. Nobody wants to buy the company. 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 uh some sort of car. Yeah. Uh it was

1:30:09 You know, this is how much of the sentiment was against lift at this point in time. Even though all these people knew how important this market was, viewed transportation as integral to the future. I mean literally in the case of GM, like is the company. Nobody wanted to buy them. Um the problem was the valuation. So as part of the the GM round, the company was valued at five and a half billion dollars. Uh and so that was just too high. Nobody was willing to pay that uh to buy it. Um

1:30:36 Later in the summer, this is this is truly the low point for lift. Uh D just keeps going there. It's just like the body blows. The uh Didi, the the Chinese ride sharing giant, had been a lift partner, uh international partner, and uh had been fighting Uber tooth and nail, as we talked about on the Brad Stone episode in China. And um At it was at the end of end of twenty sixteen.

1:31:02 that they merged with Uber. And so here's like Lyft's like big international partner. now is getting into bed with Uber and uh Feels very uh Amazon Whole Foods Instacart. Indeed, indeed. And so um So it was just really bad. Lifts market chase down to twenty percent in the US and falling. Uh and

1:31:24 Heading into twenty seventeen, it's like All right, this might be it. And and for a reference check on folks, I don't flashing forward, but it's now thirty nine percent, uh, or at least in December of twenty eighteen was thirty nine percent in the US Yep, so doubled since then. And uh So what is it what happens? Yeah, so what happened, David? Why how did did Lyft double their market share and turn the ship around? Well, as we say so often, as as I say so often here on Acquired. What external forces could have come into play? Uh It was it. Lift was dead. They were they were you know, Uber had the boot on their throat.

1:32:00 Um And then you know, one of the Greatest. Unforced errors in business history. Series of unforced errors. Um happens starting in January twenty seventeen with the delete Uber controversy.

1:32:15 Which of course we'll get into the start. Ultimately culminates. Like what is this little water coming through the dam? If I poke on it a little bit, what's going on back there? Yeah, yeah. And um ultimately culminates in Travis Kalenick getting fired by the Uber board uh as CEO in June of twenty seventeen. Um and throughout all of this, this is the this is the lifeline for Lift. And um they start regaining market share.

1:32:42 In October of twenty seventeen Google. uh via capital G invests a billion in Lyft. And Google had been an an early earliest investor in Uber and their big partner. And the self driving, you know, future was gonna be Waymo and Uber.

1:32:58 And so this about face uh of Google turning their back on Uber and investing in Lyft was um A huge, huge turning point. And it says a lot too here where um Um I believe

1:33:13 alphabet or g you know via capital G uh owns I think the a little over five percent of the company at IPO, and GM owns close to eight percent at IPO. And you can just see the sort of sentiment reflected there where GM earlier put in half a billion dollars and uh uh Alphabet later puts in a billion dollars, and yet GM has the greater percentage because the valuations were dramatically different at these times. The the sentiment around the company had totally, totally changed um throughout all of this uh Uber insanity, which we will cover on their episode. Yeah, totally. And um Uh

1:33:51 So much so that I don't think it was the alphabet round, but the last round of funding that Lyft raises privately before before the IPO yesterday, uh was at a fifteen billion dollar valuation. What a turnaround from nobody will buy the company, we are dead to Uh. fifteen billion dollars to IPO to Darling of Wall Street. Yeah.

1:34:14 Market share, as Ben said, just rises starting in January twenty seventeen. uh goes from twenty percent in the US to just under forty 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 twenty eighteen.

1:34:36 Um In November twenty eighteen, they acquire Motivate, which operates the City Bike Share in uh New York City, and they launch scooters. Uh side note, scooters are mentioned 159 times in the lift S one. Yeah, I think the only the only category of things that are mentioned more are uh uh autonomous vehicles. Yeah. Um And uh They do eight point one billion dollars in bookings in the full year of twenty eighteen, two point two billion in net revenue.

1:35:08 Friday, March first, twenty nineteen, they filed their S one. This Thursday, March twenty seventh, they priced their IPO at seventy two dollars a share or a twenty four billion dollar market cap. And As we said at the top of the show, yesterday. Friday, March th March twenty ninth, they become The first

1:35:24 Unicorn. 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 uh our finish the day trading at a twenty six point six billion dollar Market cap.

1:35:38 What a story. Ooh, and here we are. At the end of the story, but at the beginning of the analysis. They were like, Do you think we can keep this episode like around like maybe an hour, hour ten? And we're sort of like uh What do we not talk about? Thanks for bearing with us, listeners. But um You know, these stories are too good not to share.

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1:37:37 Who's managing them all? So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, go check out service now.com slash acquired and tell them that Ben and David sent you. So before we sort of dive into some other stuff here, like I wanna highlight a few other key facts. One is at time of IPO there are now forty seven hundred employees. Um several hundred of of which are working on autonomous vehicles. They don't sort of disclose specifically, but mentions that in the IPO. Um or in the in the S one. their take rate is rising pretty dramatically. So if you look at uh their

1:38:14 Um you know revenue per ride is up, but if you look at the the the take rate, the sort of main driver of why revenue per ride is up, it's risen from the beginning of twenty seventeen to around twenty percent, um up closer to thirty percent. Something like twenty eight percent now. So what this is really proving is you know, they're because they now have loyal customers, they're able to leverage that into the supply side um and and gain basically power over their drivers and uh and and and up their take rate there. And I think you know it it they talk a lot about, you know, rides per active rider is going up and revenue per ride is going up or rides per active rider is going up and thus revenue per ride is going up. A lot of the revenue per ride going up is really attributable to uh um to this this increased take rate over time and and so much so that they're they're per quarter. Like if you look at how down and out they were in in twenty sixteen Um

1:39:09 fourteen dollars that the uh per quarter they were generating fourteen dollars of revenue, which is after the take rate. This is sort of, you know, the amount that they get after paying out to drivers. If you look at last quarter, it was thirty-six dollars. per quarter. So you know, they're all they're 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. Um, but it's incredible how they they really writted the ship and started p turning everything in this direction of, you know, people are staying loyal they're using it more often, were able to go acquire more customers, although I'd say the th that's sort of the smaller the smallest of the drivers. Um but you know, fourteen to thirty six over the course of Two and a half, three years.

1:39:51 um on a on a per quarter basis for revenue is cr is huge. Yeah. Totally. So so David, uh where I wanna go from here is Why don't we talk about the narratives? So we added this section after history and facts um that is sort of the bull and the bear narratives. So we used to talk about uh Uh

1:40:10 You know, what um Um These ones are hard to grade. Because you don't necessarily know Like we're too close to it. But i in in lieu of that, like

1:40:24 It is interesting to talk about what are the stories that that people are talking about that that make this something you you know, you want to get in on and what are the stories that people are talking about that make you go, Uh Yeah. And I think uh um You know, as as is uh normally the case here, why don't we dive in on on bulls first. So David, what are what are people saying that makes this uh something that you should be super interested in right now? Well, I mean um Number one. The scale

1:40:51 And the growth. So Yeah. billion dollars of Bookings, you know, of of Commerce transacted of of

1:41:00 Um Transactions created. is incredible. uh in since mid twenty twelve, so less than seven years. Um

1:41:09 And increasing leverage on the take rate side and net revenue of over two billion dollars uh growing Incredibly fast. Uh, that is very, very exciting, especially to public market investors that are Not

1:41:22 seeing that kind of growth anywhere else. Um so I think that's one. Uh two, you know, if you read the Lift S1, They talk about how They're not just a ride sharing company. They're a transportation as a service company. And they're building a a multi modal platform, as they say. Now that's a lot of buzzwords, but like One.

1:41:43 I think this started to crystallize for the industry when Dart. did come in and and take over as CEO of Uber. Um And Dara uh of course the the current Uger Cio came from Expedia, and

1:41:54 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.

1:42:04 At Expedia. And for transportation for Uber and Lyft. 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 bullcase.

1:42:30 Is you know, Lyft does include a cohort analysis in its S one as most companies. sort of truly the way to analyze these things. Yeah. companies don't in their S ons, you should be very suspicious uh these days. And the cohorts are expanding. So if you look at the cohort of twenty fifteen customers, customer writer customers that came into lift in twenty fifteen, um, they are doing more. The cohorts are expanding. They are doing more uh volume of transactions and dollars worth of transactions in twenty eighteen. than they were in twenty fifteen. Like that's that's you know, usually you see

1:43:09 cohorts deteriorate over time if people use it less as their turn. Um expansion is is rare and extremely powerful. Yeah. Mm. So a c a couple other things that I wanna touch on here. Uh this is the peer play bet, if you wanna sort of have some exposure to ride sharing and and really domestic ride sharing. You know, Uber's in Uber Eats, they have a they're effectively a holding company for all these other international operations. They themselves operate internationally.

1:43:36 You know, if you want to bet as a it's not quite pure play'cause it's multimodal, but if you want to bet transportation um in the US this is a uh you know, this is the the way to do that without mixing in that sort of basket of other things. Um the other thing and it's i y you can't be a bull here without knowing the bear case first As has been much, much uh covered all over the place. the company is losing a lot of money.

1:43:59 And um You know, they I I think David, check me on my math here, but they they lost almost a billion dollars last year. I think that's right. Yeah. And You know, so so you gotta look at that and go, Uh and and we'll we'll talk more uh I think about that in the bear case, but um Th they talk a lot about autonomous vehicles and you and you know, they've got hundreds of people working on it. They're spending a lot, a lot of money on it right now. I think it's something like um

1:44:27 I don't have it right in front of me, but they uh uh You know you Yeah. Lift believes that they can materially flip their economics to become a profitable company.

1:44:39 when self driving comes into play and they intend to be a leader in that space. And so um I think if if uh um if you believe that too, uh then there is reason to believe that uh that they could get profitable. They do list it as a key risk that they're not profitable and may never be. So that of course is uh a little dangerous a little bit of a dangerous uh proposition. You know the the other thing. We don't value companies on the discounted sum of future cash flows anymore. That's so You know, old school though. It is 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 a multiple of uh of earnings. um or perhaps just buying in on a on a story or perhaps growth over profitability. Like these are things that you typically see in the earlier stages of a company. Uh in the acquired Slack there was talk of a seed PO um that uh that is becoming more and more common.

1:45:33 Um you know, no comment there. But I do think uh one other thing for me on the bull case is uh Uh you know, Uber's bleeding seems to have stopped. Uh, but I think for a lot of people, um, Uber's brand is is solidified as at the very best highly transactional, at the very least a lot worse than that. And Lyft over and over and over and over again in their S one beats the drum. um and and did all throughout their road show 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 I'm just pulling up a an email that they sent to uh um two riders uh uh shortly before their or I think actually yesterday during their uh

1:46:18 Um during their IPO. And it's titled For Once, The Good Thing, The Right Thing the business thing can all be the same thing. And they sent this to all of their writers. I mean they they are doubling down hard on the um Blog post and Twitter. uh campaign yesterday about uh being a responsible corporate citizen as a now a public company. Yeah. I'm sure it's a anti Uber.

1:46:43 Yes. Yeah. Yeah. And you know, the other reason why there 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 markets when when you apply more sort of rigorous uh discounted cash flows or

1:47:05 I don't know exactly how people are modeling this one out, but um would not be able to uh uh um, you know, continue the uh the the valuation rise on a round by round basis. But that at least from pricing and and trading yesterday appears to uh uh not be a big concern. And and I would say one last piece on the on the bull piece, which we really should have put in the history and facts. Um But Has been a big change really

1:47:31 Really since the the delete Uber, you know, campaign. Uh Lift has been in hiring incredible people here in Silicon Valley. And like this isn't talked about as much of uh, you know, I think on the The nationwide and Wall Street type narratives around the IPO, but like we feel it and we see it here. Like lots of great people who Riley and Sarah worked with at Airbnb and elsewhere, and you know, our friend Preetlift, like are really, really talented people.

1:47:56 You were not working at the company during, you know, the earliest days of lift and and during the you know the down days. Um They know are coming there and doing incredible things. So like there's a there's a strong talent story around the company too. Yeah. Yep, and I think there's uh you know, there there is much more uh analytical and and sort of uh um

1:48:19 financially fundamentally oriented uh analysis and um uh we've been putting those in the Slack and can continue to put those in the Slack over time. But I think the key takeaway uh for us here is that um the way that the company has positioned itself with its riders and drivers, the leverage that they're starting to see where they they actually do have a little bit of pricing power in the marketplace, the differentiation that they have and the talent that they have, um, as well as the sort of wind at their back from growth over the last few years. uh makes it a super interesting company and and uh, you know, not in a winner take all industry. Yep. And

1:48:57 You know, to to put a fine point on the bull case. Um you know, we can debate the merits of valuing public companies on a revenue multiple versus a profit multiple. But it it it is, you know, it does happen and certainly it happens in the SaaS world. Um You know, Lyft's valuation is not crazy uh at IPO. So where they finished trading yesterday, they are trading at a twelve X revenue multiple of last year, twenty eighteen's net revenue. Um now typically you would trade on a forward revenue multiple. I don't know what they're projecting for twenty nineteen net revenue, so that's what they should trade off of, but Presuming could there's continued growth, they will be trading at a less than ten X forward net revenue multiple. That's not crazy.

1:49:38 No. David, let's do a whole LP show on this. This is a great. We'll do that in the next few weeks and have uh um. Maybe have a public equities on too. Yeah, that'd be fun. Um Okay. Should we shift to the to the bear case? Yes. This is the largest ever net loss for a company egg entering the public markets for the first time full stop.

1:49:56 Boom. There's that and then there's there's a you know, that's the headline. 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 S one. Um I don't care as much about net income losses.

1:50:13 Uh, because that's how tech companies work. Like you invest a lot in fixed costs as you're growing and then engineers and you know, product and and you know uh uh operations and infrastructure to do stuff. Yep. All the you know, read any Ben Thompson article and he talks about this all the time, and I think he's totally he is totally right, which is this is how software in the tech industry works. Incredible investments in fixed costs, but then as you scale revenues, those costs are fixed, your variable costs are much lower. And so you will become wildly profitable a la Google and Facebook and whatnot over time. Uh Airbnb, what have you. Um the scary thing about lift is Is that there when you do the math and add up all their variable costs relative to their net revenue. They are they are losing money

1:50:58 on a variabl variable basis too. So not only are they not paying down their fixed costs, um, they are each each uh dollar of revenue that comes in is Is even ignoring fi fixed costs, you know, a a net negative for them. Um and so the way you with the way you look at this is you add up They're Cost of goods sold, the Cogs. They're

1:51:20 line item the 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. When you add all those three line items up for twenty eighteen on their income statement. It is larger than net revenue. And that's a scary place to be. Mm-hmm. Certainly the rebuttal to that is Is that

1:51:49 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. Right. That the the spend is uh in sales and marketing is primarily Uh for speed purposes for expansion, 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.

1:52:15 Yep. Yep. And and actually John and Logan in some of the interviews they did yesterday around the IPO, and they were asked this question, they said this. They were 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 Uh we need to do this. 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 and so you're still the market ever actually hit steady state without you spending aggressively and subsidizing every ride. Exactly. Exactly. So this is I think this is the biggest

1:52:53 bare narrative on on the company, and we'll probably weigh on Uber as well. Um Now one thing though, if you look at sales and marketing expense as a percentage of net revenue. It is declining for lift, so that's a really good sign. So in the fourth quarter of twenty eighteen, Um it was thirty two point seven percent of net revenue they spent on sales and marketing. They spent over forty percent in

1:53:18 in the third quarter. So like they're they are growing while spending less proportionally. So that's a good sign. Um But it's still concerning. Yeah. And I think uh David, I appreciate your thoughtfulness as a marketplace investor. There there are many articles that uh uh

1:53:36 um are quoting people who are have expertise in in various things uh that Well, I'll just give you one that is much less kind than than you are here. Um Hubert Horrin, a transportation expert uh who has long been a critic of Uber and Lyft, uh uh suggests that they have nothing in the document that suggests how this could be fixed. I mean nothing. And so I think uh uh uh just to fully represent what the bears are saying, it's that when you read the S one people do believe that this will never turn right side out.

1:54:10 Yeah. Well, it's not now and they are public, so Yeah. It is interesting. I mean I I thought a lot about so this sort of subsidizing every ride concept. Um, I wrote a piece on Geekwire years ago. I think I I'm four years into it at this point, uh, of uh how I sold my car and went full Uber. And I I basically did all the

1:54:32 cost modeling. I can't remember what it was, but I save somewhere between five and eight thousand dollars a year, even if I'm aggressively taking Ubers and Lyfts everywhere and just not having a car living in the city. Um and you know z uh zip car or car to go for longer weekend trips, whatever it is. And I Can't help but wonder. Like

1:54:53 that cost difference feels too big. Like it does feel like If you don't have a car and our ride sharing everywhere, it shouldn't be that dramatically different than owning a car. Other like the th these pricing inefficiencies sort of work themselves out and the market becomes more efficient over time. And so it does feel like

1:55:13 you know, how is it that I can get from Seattle to Bellevue for, you know, sixteen dollars, uh uh you know, in a ride sharing situation. Like I I understand the economic argument for like, well, your car is just sitting there for most of the time, so it makes sense that you're way overpaying for it and insurance and all this other stuff. But like it is crazy the degree to which it it it saves money for me personally and and you gotta just wonder like Are are are we in a Uh are we being overly subsidized here? Yeah. Um

1:55:43 And how long will that go on? And you know, are we now Subsidized from the public markets. Yeah, right. Almost assuredly.

1:55:51 Yes. You know, the true cost of your ride to Bellevue is more than sixteen dollars. Yeah. Um Okay. Uh What would have happened otherwise? I feel like we explored so many paths along the way. Uh live to a die.

1:56:08 Yeah. I mean all these companies would die. They they needed I how Is two two point three billion gonna be enough? Like are we gonna have to see uh uh additional public offerings from from all these companies? Or I'd say I should say Uber and Lyft or Just on this episode, um, do you think in the next eighteen months we'll see additional public offerings to get more cash into lift um when they feel that the wind is at their backs for um

1:56:34 Uh a good time to do another issue. Well, and I think this is, you know, Zoom filed to go public uh last week. Um as well. And we can't wait to cover that one. Everybody's so excited. They're profitable. It's the rare uh rare tech unicorn that is profitable. So um Yeah, is this the new normal? Like I Good question. Yeah.

1:56:54 Uh there's actually a really good I'm gonna this is in tech themes, but we're since we're heading there anyway. Um There was a finance professor cited by uh the Wall Street Journal that said that eighty-three percent of US listed IPOs that took place during the first three quarters of twenty eighteen lost money in the twelve months leading up to their debut. The journal goes on uh to note that the previous record for the t statistic was that when eighty-one percent of stock market debutantes were unprofitable. So wow. Uh

1:57:25 Previous record eighty one percent. This was eighty three percent of the first quarters of three quarters of twenty eighteen. That's a lot of companib sorry, going public that are unprofitable. Yeah. Um We're in any world. 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 uh better. But um

1:57:54 Yeah, it's a uh It's a brave new world we live in. For how long? That's the question. You know what Shouldn't the p this is a good philosophical question, but should the public markets exist in a fairly risk mitigated way so that individual investors don't lose their shorts. I mean, this is why we have accreditation for private investors.

1:58:14 Um You know, should should eighty three percent of companies that are uh creating offerings for the the United States public Doing so unprofitably.

1:58:26 Or or or have we reached a point where uh we're now using the public markets for something that uh Is is sub uh suboptimal. 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 of finance. So You know. If you want.

1:58:45 High return. You need to take high risk. So tech themes. All right, so uh I'm just gonna roll through five here real quick that were listed in the S one. There's something kind of cool about the fact that the S one's you know, they they list out all these risk factors that are just like just it's great to read how how honest everyone has to be and upfront everyone has to be. But then they also list like, hey, what are the what are the key trends and themes that have enabled you to do what you're doing. Um So they talk about sharing versus ownership.

1:59:14 On demand services. Flexible work. their mission driven brand appeal, which I do think is actually on the rise. I feel strongly that people care more than ever about the the work that they're doing um and and need that to to motivate them uh intrinsically. Uh. attracting talent for them and and writers in the wake of you know the delete uber. Um

1:59:36 Fiasco. Absolutely. Um and multimodal transportation. And uh um and I think one that they they don't list in there that is is super interesting to me is These companies.

1:59:49 became possible. Because the iPhone three G or three G S 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 and

2:00:03 In total create like Uh uh close to half a trillion dollars in value or more I mean. 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

2:00:21 Adding that sensor and API. uh two smartphones Just enabled. All this to happen. Totally.

2:00:32 Totally. Um I mean I guess that's one thing that's the only thing I'll highlight'cause we talked about so many along the way and history and facts, but um You know L Logan and John And Logan in particular thought that the wave they were going to arrive that would enable

2:00:48 Zim Ride was social. Um Mm. The real wave that enable Lift.

2:00:56 was mobile. Um You know, uh not to discount, you know, the social wave is big in two one. They're very interrelated, but um Yeah, like you just can't underscore how big the mobile computing and smartphone uh wave was and you know ride sharing being uh

2:01:16 Only one industry of half a trillion plus Dollars worth of value unlocked by it. Yep. Yeah, it's a great point. Um it locked by sensors.

2:01:27 GPS and if you think about Instagram cameras. Features on smartphone hardware. Yeah. Um Okay.

2:01:36 All right, I've got a few here. Uh uh Two points I might want to make in one point of discussion. So uh This one, we said Craigslist like five to six times earlier this episode. There's so many companies founded by slicing off a piece of Craigslist. Yep and

2:01:54 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. 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. It didn't have all these, you know, vertical specific features and sort of real timeness necessary uh to to enable that application. And so I think we'll continue to see even more companies that are are something that used to exist on on Craigslist, but are a vertical slice that it has has unique functionality. Totally.

2:02:36 Um, we've talked about this one before, uh both on the main show, especially in this era of uh of uh C P. O's but um Um I guess it's more like an I seed O, like an initials. I guess it's I don't know what the right terminology there is, but seed stage style storytelling uh in in your IPO. You're always storytelling. And and we you know, it had a great, great uh um

2:03:01 you know, the art of pitching uh limited partner show too. Where You know, you're just always, always storytelling. So much of this S one is about the problem. with the world as it is today, and a little bit less about Lif's particular solution. Like you read through all the pros Um

2:03:20 In like the first I don't know, twenty five percent of it. 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? Like I understand the trends. I understand, you know, why things need to get better. I it's it's it's really this huge narrative of beating the drum of there's all these problems in the world. We're gonna be the ones to fix them all eventually. Sure. Yeah, let's talk about this stuff that we're doing right now and how it's going. I mean, yeah, it's a

2:03:47 It's a marketing document. And S one's always have been, but like In recent years. People have really embraced the fact that they're a marketing document. There's a quote in there that like Come on, guys. There 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.

2:04:06 It's like okay. Like so great. Yeah. All right, so one discussion I wanted to have with you before uh we sort of go into uh value creation, value capture, and then grading is Was it a good idea or not for Lif to go first

2:04:26 And is it On top of that, is it even better that Lyft has IPO'd before we've even seen Uber's S one? I mean it's My Answer to this, I've been thinking about this.

2:04:39 Is Yes. From Every Angle.

2:04:45 Uh certainly yes for lift,'cause do the game theory otherwise. Uber comes out first, they're bigger, they're Monster, you know, does great uh Uber comes out first, does great, then Lyft comes out second and nobody pays attention. Uber comes out first and does terribly, then Lyft uh still like is gonna do terribly because every s you know so uh Definitely from Lyft's perspective, better to go first.

2:05:07 From Uber's perspective, actually better for Lyft go to go first, right? Because Uber gets to see The reaction. to lift, which has been very positive, and now they can tailor their pitch uh accordingly. And I think, you know I was joking with with uh with a friend uh yesterday. 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 twenty six billion dollars like

2:05:37 How much is Uber worth worth, you know, uh a lot more than that. Uh we will find out. Yeah. I completely agree with all of that. All right. So this was a section that uh we have that I think we'll keep fairly brief here, um, that uh was brought up by listeners several times over the last year, that is, hey, you guys often talk about Uh Was a transaction good for the acquirer or was a transaction good for the company that IPO'd and raised that money? But like

2:06:04 less about was it good for the world and not enough about the ratio between value creation and value capture. And so I I think uh we thought it was important, um, particularly in this one where there's so much discussion uh around minimum wage and around the contractor versus employee relationship um to talk about this because I think Uh less so much on the value creation versus value capture side. I think Lift has figured out a a phenomenal way to capture the value they're creating. Um but it is interesting to try and think about sort of like net value for the world. Uh is it a good thing? And uh you know, are the masses sort of Uh receiving enough value uh versus the company receiving a lot of value.

2:06:50 Um and and David, like I'll I'll I'll turn it over to you. How do you feel about um where Lyft sits in this relative to a lot of other companies that are are also sharing economy companies and then sharing economy companies broadly. Mm-hmm. Totally. This is Such a complicated question. Um the cop out uh

2:07:11 W we w we will talk about this now and give some answers, but like deserves way more air time than we have for it now. Yeah. 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.

2:07:28 and that what these marketplaces are doing relative to the status quo is expanding the Price at which supply meets Demand. Uh for um or expanding the point on the curve where the demand and supply curves meet. And when you do that, it is better for all participants in the economy. So like I truly believe that. And I think ride sharing

2:07:50 Is that case too, you know? Um Now drivers are very upset and have uh uh about a lot of things and have perspectives on that. But if you look at, you know, how um economically how taxi drivers did in the previous system versus how drivers on ride sharing platforms do. Uh

2:08:08 I suspect. It is. P marginally more positive on ride sharing platforms. Now that said Um

2:08:15 Obviously they're problems and they're unintended intended consequences of all these platforms, you know. from Airbnb to rover to Lift a new beer. A super interesting thing though, again, back to the best thing for Uber uh happening was that they didn't buy lift,'cause otherwise they would be regulated as a monopoly. Um

2:08:34 Lift being a viable second player in the marketplace. Keeps either lift or Uber from Uh exploiting drivers. Uh, and so like you could say like, you know, we were talking about subsidizing your right to Bellevue, like that's a net

2:08:47 economic gain to drivers. Um And uh that is happening because there is viable competition. Like this is how economics works. This is the value of competition in in a in the marketplace. Um 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

2:09:09 economics and Adam Smith, like it's working as it You know, should we get it. Which does not mean there aren't problems. Right. And to to um Um

2:09:20 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, 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, then you've created net new you know the ride sharing. Creating efficient markets. There were two problems with the city transportation marketplace. One was it with the taxi system. One was just uh it was hard to access for demand. Um so the ride sharing Innovations have made the market much bigger by expanding the uh ease with which demand can access it. But also for supply, there there was a middleman. Like the taxi companies and the medallion companies were middlemen that were taking economic rents.

2:10:10 In the market. Uh and they don't exist anymore. So Um So net it is, you know, the versus a driver that was working for a taxi company. Uh

2:10:23 or a driver who is driving to Uber, um, more of the economic value should be flowing directly to the drivers in this more streamlined system. Mm-hmm. That's kind of interesting. I we should do an analysis or some I'm sure somebody has. Like if you go aggregate all the taxi companies were they taking more than twenty eight percent of a Vig. Mm-hmm.

2:10:45 I would assume They must well yeah, I d I don't know. It would be we we should I'm sure there've been studies doing the math. Yeah. 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. So you had to be paying back those fixed costs as a taxi company operator. Right. Right, right.

2:11:08 Um The only point that that I wanna make here Uh is that What has

2:11:17 striking and amazing to me is that If you are someone, let's say you're immigrating to the United States and you're plop 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 Lyft's or Uber's office, renting you know, having the full service car lease, rental, whatever that uh apparatus is, and then boom, you're you're off sort of making a making a living wage. I s and some would argue that of course, but um you know having a job

2:11:47 it instantly. Even if you, you know, it none of your skills translate from whatever you were previously doing. Um I I do think that is and compare that to the taxi system where that was not the case. Yep. Yeah, it's totally amazing. Told anything.

2:12:03 Okay, cool. 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 w what do you have to believe five years from now or ten years from now, 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 Uh just to be quick about this. Uh I think if they can figure out first of all if

2:12:31 Yeah. So there's a chance autonomy hurts them more than it helps them, uh if uh the advent of autonomous vehicles just introduces uh uh relationships with car manufacturers that disintermediate Uber Lyft, you know, a lot of these providers. Um, 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 um Oh my gosh. They they they currently are giving uh what eight uh seventy two percent of the Um of the

2:13:05 of the ride to the drivers, um, the business looks a lot different if they have uh if they have autonomous vehicles, obviously. Uh the question is, you know, in the next two, three years before autonomy comes, which could be, who knows, a decade or more, um you know, are they gonna be able to get profitable? And I think uh um They need they need to do a lot more than just get a little profitable in order for the uh uh the enterprise value to be fulfilled. So I I think it's uh Can the big pivot for me is does autonomy actually help lift and get them to a place where

2:13:40 at infinitum, you know, many, many years from now, uh they're a wildly profitable company. Hm. Yep. Yeah, I think I would reduce it even further, like

2:13:50 Forget autonomy. Maybe it happens, maybe it doesn't. Uh actually I thought the the one of the interviews uh that John and Logan did yesterday was quite thoughtful about autonomy and and also in relation to what we were just talking about with um value creation and value capture. Uh

2:14:09 Even as as autonomy comes It's gonna be useful for some use cases and will still need human intervention. Like the driver isn't going anywhere anytime soon for the majority of use cases. Yeah. Whether that driver is in the car or driving uh monitoring it virtually from a command center or, you know, what have you. Um so Autonomy is like a who who knows how it will impact the business. Um

2:14:34 And uh but I think the simp the simple the the A plus case is they solve the concerns of the bear uh the bears, which is like they they get unit economic profitable. Yeah. Yep, yep. Um

2:14:49 And then I think the downside cases they don't and uh uh they're this this competition with Uber is too intense. And um Everybody keeps losing money. Very fair. I will say operationally A plus IPO. Like the way that they actually uh

2:15:06 Um you know, they needed to access the public m public markets for for capital and they did so uh 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. So um you know, I don't think they could have asked for it to go more smoothly than it went. Totally. Totally agree. Well, yeah.

2:15:30 Listeners, that was our we'll move to carbon the site, but that was uh That was a lot. Thanks for bearing with us. We uh we know that was a lot, but um You know, just to underscore again, like this is such a huge moment for Silicon Valley. Like Um both lift itself, this whole market of peer to peer ride sharing

2:15:50 And as the first of the you know, this generation of companies to to come out and operate in the public markets. So um Very much a perfect storm here. We we couldn't help ourselves from digging in deeply. So thanks for bearing with us. Yeah.

2:16:05 Yeah, yeah. Right my carve out is uh uh I I had Two choices and I'm gonna go with this one because I mentioned Bill Gurley earlier.

2:16:14 Uh Bill Gurley is a uh a tremendous venture capitalist, one of the best of all time uh at uh at benchmark. Um he has a talk up on YouTube that he recently gave Um called Running Down a Dream, How to Succeed and Thrive in a Career You Love. It is

2:16:32 one of the best if if you are a college student, if you're getting your MBA, you know, if you're um Even if you're just thinking about a career transition. It is one of the most thoughtful and amazing talks. About Uh

2:16:48 the world that we live in today and how you can work collaboratively with your peers to build knowledge. um and uh and and and leverage that knowledge. And I and he gives these three amazing stories and they're Um I I'm not gonna say who they're about'cause that it's wonderful how he reveals them and and storytells the whole thing. But these three very unrelated non tech uh Uh

2:17:11 s um sort of use cases and stories about um people who were uh artists and visionaries and um sort of pursued their dream and and became the best in their field at the thing that they were doing and it is it is just really well done. So um I really enjoyed it and I think you will too, and we'll put a link in the show notes. Cool. I can't believe I hadn't heard of that yet. I I'm gonna run, not walk to go. To go about that. Um

2:17:37 Mm. So great. Uh my carve out. Also in video format. Very different. Lighthearted. Uh

2:17:46 I got recommended on Netflix. Uh Love the Netflix algorithms. Cricket Fever, which is a documentary they did on uh have you seen this in your feed? No, but I'm just worried so that you're gonna get recommended something on YouTube and uh I'm gonna lose you. I'll never emerge again. Um

2:18:05 Uh Cricket fever about the sport of cricket and about the Mumbai Indians in the uh which is one of the premier teams in the um uh India Premier League which Uh is I've always been sort of fascinated by cricket, but um

2:18:21 In two thousand eight, the India Premier League, the IPL, launched it is a new form of sh short form cricket called T twenty. Um it is much more exciting and fast pace than traditional cricket. Uh matches last two to three hours. And it's incredible. They have like cheerleaders and fireworks and like um of uh cricket, but uh the IPL is now the sixth most valuable sports league in the world. Um and rising quickly. And uh It's so exciting and fun to watch. And so this this documentary uh that Netflix did follows the Mumbai Indians, uh, which are

2:19:00 um owned by the uh family of the founder of Reliance, the the I believe the wealthiest man in in India. Um And uh Throughout the season is just so fun. Wow. All right. I got it. Well you obviously you'll put in the show notes, I'll uh to check it out. Cool.

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2:20:17 Well, listeners, if you aren't subscribed and you like what you hear, you should. We'll be gloriously covering all of the big upcoming IPOs. 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 theses. you should consider becoming a prestigious acquired limited partner. You can click the link in the show notes or go to Kimberlight.fm slash acquired, and seriously, as I mentioned at the top of the show, I promise you will be overjoy with how buttery smooth it is to get more acquired right there in your favorite podcast player. Ben is multi talented and a a great product manager in addition to everything else. Thanks, David.

2:20:58 We will see you next time. We'll see you next time.

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