Lyft Gets a Lift From Activist Investor Carl Icahn

May 16, 2015
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The ride-sharing industry is changing the way Millenials get around. Led by Uber a few years ago, ride-sharing has taken the world by storm, albeit not without controversy and obstruction from taxi unions.

Resistance aside, this is a massive industry, with what appears to be limitless potential. First-mover in the space, Uber, led by gutsy entrepreneur Travis Kalanick, is already established in 58 countries (250 cities) and rumored to be seeking a new round of funding which would value the company at $50 billion. It currently has a valuation of roughly $40 billion.

 

Lyft’s Second-Mover Advantage

Many of the United States’ biggest venture capitalists and activist investors took a pass on Uber when it was initially seeking funding as a startup. Much to their frustration, they’ve now watched the company, led by Kalanick’s innovative ideas, redefine the taxi industry, achieving a monstrous valuation in the process.

That said, missing out on Uber has been a benefit to second-mover in the space Lyft, a ride-sharing startup we wrote about nearly two years ago. Thanks to Uber’s massive success, VCs are now looking to the earlier-stage Lyft to get on the ride-sharing highway of profits.

Just yesterday, famed activist investor Carl Icahn, who has left his fingerprint on Apple, eBay and Netflix by making significant investments in the companies in years past,  stated, “I believe that ridesharing is poised to become a fundamental component of our transportation infrastructure.”

 

Carl Icahn Invests $100 Million in Lyft

Putting his money where his mouth is, in traditional Icahn fashion, he took down $100 million of Lyft’s $150 million funding round reported this week. And, as I’ve explained before, when seeking funding capital, securing your lead order from a prominent investor — in Lyft’s case it was Carl Icahn — is the most important step to generating significant demand for your offering. Needless to say, after Icahn’s investment was secured, Lyft had no problem closing the remaining $50 million.

This new round of funding now puts Lyft’s valuation at roughly $2.5 billion, still light-years away from its bitter rival Uber. Icahn stated in his reasoning for buying a stake in Lyft that its $2.5 billion valuation is a “tremendous bargain” when compared to Uber.

With Lyft’s latest funding complete, we have once again seen a second-mover in a disruptive industry capitalize on its biggest competitor’s higher valuation. This is a true second-mover advantage, otherwise known as piggybacking.

Clearly, Icahn sees opportunity in substantially improving upon Lyft’s valuation given what Uber has done. Most likely, improving Lyft’s valuation will come down to the company using this $150 million to rapidly roll out in other cities and countries.

Long before either  companies became household names, two years ago we covered both the Uber and Lyft business models in detailed SWOT analyses. Click here to view our report on Uber, and here for Lyft’s.

Stay hungry,
Aaron Hoddinott signature

 

 

Aaron

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Like all of you entrepreneurs and investors out there, Aaron has been in the trenches. He is the founder of an influential online media and PR company. From oil wildcatters to mining prospectors, tech gurus to medical doctors, and even celebrities, Aaron has helped market and expand brand awareness for a diverse range of publicly traded companies ran by entrepreneurs from all walks of life.

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