Jan 5, 2016 ยท 5 minutes

What do Carl Icahn, Peter Thiel, Marc Andreessen, the Kingdom of Saudi Arabia, the largest Chinese and Japanese business moguls in the world and General Motors all have in common?

They all fervently want to live in a world where there’s a strong American competitor to Uber, and are willing to collectively put billions behind Lyft -- the best hope, if an unsettling option. [Disclosure: Peter Thiel and Marc Andreessen are investors in Pando]

Yesterday Lyft announced the latest in the odd bedfellows club: GM. The car giant has invested half of Lyft’s recent $1 billion round and will take a board seat.

We’ve known for weeks that Lyft was raising capital, and I was curious to see what the valuation would be. Lyft has long been one of the comparative bargains, not only compared to Uber, but in the Unicorn club generally, valued at just $2.5 billion.

Lyft has never sought to maximize for price of fundraising. This round saw the price climb to a post- money valuation of some $5.5 billion-- double the price, but hardly priced for absolute perfection.

And that’s emblematic of either the genius or the weakness of Lyft. Lyft is the David that everyone is rooting for, and waiting for, but who just keeps shuffling around, sizing up different rocks, almost putting one in the slingshot and then shrugging and tossing it back to the ground.

“I dunno, I’m just gonna do my own thing down here...Goliath is gonna do his own thing up there… there’s room enough in the Valley of Elah for both of us… *fistbump*...”

In the genius camp, Lyft has succeeded where other ride-sharing also rans have failed by sticking to what it does well and not trying to be Uber. Its brand is the friendly and quirky not meant to be “Baller.” Drivers love Lyft. And in sticking with its original Zimrides roots, Lyft was the pioneer of the carpooling services. It sees LyftLine as the high-volume future of its business which disrupts bus systems more than it disrupts black cabs and taxis.

But the downside is that Lyft refuses to throw any sort of punch. The company’s ineffectual San Francisco billboard campaign is evidence of that.  

The closest Lyft ever came to throwing a punch at Uber was its joint press conference with Didi back in September and that came more from the Didi team’s coordination of the event.

With every funding round, insiders have told me that additions like Rakuten, Alibaba, Icahn and more would finally make Lyft more aggressive. And so far, it hasn’t. The one thing Lyft is aggressive about is the one thing everyone is this space aggressive about: Paying huge subsidies to continue to grow.

Another thing in the announcement matched this “almost aggressive” Lyft quality: The rhetoric around GM and Lyft’s plans to co-develop a self-driving car service. For years, Uber has boldly expressed its Mr. Burnsian delight at disrupting its own drivers it currently relies on. But Lyft has taken another tack: Arguing that what people love about Lyft is the community, sitting in the front seat and meeting new people.

But a lot of the GM partnership was about the two entering the much hyped self-driving car game. In every write up I saw, it was carefully phrased: Lyft would simply power a network to hail self-driving cars that GM would build. Not that Lyft would replace its own fleet. Presumably if drivers get pissed, Lyft can point at GM and say “We’re just enabling their network! It’s different! Don’t be mad! ...*fistbump*...”

Even if Uber weren’t so dominant, with this not-quite-go-for-the-jugular management style, Lyft is destined to be a market number two. The only thing left to play out is how large of a player that number two is and whether or not Lyft stays independent or is eventually bought by someone like Google or even Didi.

But this round-- as with so many recent Lyft funding rounds-- is less about Lyft and more about a coalition to spoil Uber. GM talked a good game in the press about its willingness to disrupt itself with this move. It could also be seen as a move against what Uber and Google and Tesla and Apple might eventually do to it.

And it shouldn’t just be these billionaires, Asian giants, and car companies that fear an all-Uber world. Nor should it just be publications like ours that Uber has directly threatened to “go after.”

Uber’s most ardent fans should worry about an all Uber world. Ride sharing isn’t a network effect business like Facebook. Sure, drivers benefit by their being more riders and riders benefit by their being more drivers on the system. But there’s no evidence that either benefit by all of that happening on one platform. Most riders I know have both Lyft and Uber on their phones. If one is surge pricing, they’ll try the other. Drivers two have both services in their cars. They’ll pick up the closest fare. The easy ability to toggle back and forth is what makes payouts for drivers as high as they are and fares as low as they are.

Sustainable? Who knows. But unlike a traditional network effect business, riders and drivers both benefit from there being two almost identical services with the same inventory, similar UIs and maps all brought to you by billions in venture capital dollars.

Put another way: Does anyone believe Uber is spending billions in subsidies to make rides affordable for users because it wants to? It’s doing it because it has to. In an all Uber world the free market takes over, drivers make less, riders pay more until this magical moment Travis Kalanick fantasizes about where every car on the road is not only an Uber, but a robot Uber with no expensive driver mucking things up or whining in driver forums.

He promises then the prices will be even lower. Ubers will of course be safer because there’s no driver to assault you. And because Uber will then control the entire urban transportation grid of every major city in the world, Uber will deliver everything that anyone needs in a city, displacing Postmates, Doordash, couriers, Grubhub. It’s the ultimate “just push a button” future being paid for by billions in subsidies and thousands spent buying one state legislature at a time. A future where dislodging Uber is as likely as paving new roads. Make no mistake: That’s success to Uber.


And it’s the nightmare behind every dollar Lyft raises.