
Lyft losing as much as $50M a month, president confirms - prostoalex
http://www.siliconbeat.com/2016/07/12/lyft-losing-much-50-million-month-president-confirms/
======
liquidise
What shocks me about both Lyft and Uber's enormous burn rates are that they
suggest the companies are heavily subsidizing their drivers. This subsidy is
in part to spur penetration in new markets (as all marketplace apps must do),
but also suggests that they have reason to believe customers will simply not
pay a rate that makes the business profitable.

Assuming the latter is the case, i'm not sure if they have reason to believe
this will change over time. Instead, it feels like the human drivers are
really just plays to keep the company growing until hypothetical fleets of
automated driving cars. In theory, such a fleet would deliver massive profits,
but those fleets will be enormously expensive to assemble. Even when they are
assembled each company should expect tumultuous legal battles in many areas.

When i try to make all the monkey math work, it doesn't seem to add up. Maybe
i'm not enough of a gambling man, but i really don't understand how the
venture market still supports business models like these.

~~~
niftich
They are absolutely excited about the time when self-driving cars will be
actually here.

But the real play here is to use taxi service as a pretext/generator for
building up an on-demand courier service [1] with superior returns -- and
performance that vastly dwarfs any incumbents.

[1] [https://rush.uber.com/how-it-works](https://rush.uber.com/how-it-works)

EDIT: after the introduction of courier services, picking up passengers serves
as a baseline load [2] (to borrow from electricity distribution terminology)
to keep drivers incentivized to be on the roads, but the real prize will be
the courier tasks.

[2]
[https://en.wikipedia.org/wiki/Base_load_power_plant](https://en.wikipedia.org/wiki/Base_load_power_plant)

~~~
jahnu
I'm probably in the minority here but I'm not convinced we are particularly
close to real self-driving cars. It's definitely possible but I strongly
suspect there are more challenges ahead than most people believe.

~~~
puranjay
I feel that the hype for self-driving cars is the same as it was for VR in the
90s

We had to wait another 15-20 years for those feverished VR dreams to become a
reality

I reckon it'll be the same for self-driving. We are 20-25 years away, not 5-10

~~~
Noseshine
In addition, only a few days (one or two weeks) ago we had a much commented
story linked here on HN that VR is way too hyped. Supprted by quotes from
actual executives and/or investors in that business if I recall correctly, so
not just the usual negativism that can always be found for any topic if you
choose your source well.

~~~
puranjay
I don't think VR will ever be mainstream unless hardware costs come down
drastically and they can figure out a way to make VR headsets look less dorky

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ejcx
This might be a dumb question. How does that compare to Uber? I see Uber has
been raising like a billion dollars every month I'm guessing their spending is
a lot higher (especially having something ridiculous like 5000 non-driver
employees).

~~~
Noseshine
I just googled "uber financials" and here is one link:

[http://uk.businessinsider.com/uber-financials-
for-2014-and-2...](http://uk.businessinsider.com/uber-financials-
for-2014-and-2015-2016-1)

This one might be relevant too:

[http://www.forbes.com/sites/briansolomon/2016/06/02/uber-
is-...](http://www.forbes.com/sites/briansolomon/2016/06/02/uber-is-breaking-
all-the-rules-in-its-25-billion-arms-race/)

\-----

EDIT: This is ridiculous. Why am I getting downvoted? I think the linked sites
clearly answer the question of the parent as well as is possible. If it's
about the "I googled" I was merely trying to show what search I used in case
the reader has a better idea for a search string that results in better links.
Some people here IMHO show ridiculous voting behavior. I made a serious effort
at trying to answer the question - with a very usable result IMHO.

------
yladiz
I'm somewhat more optimistic that Lyft will fare better in certain cities than
Uber because they seem more willing to work with governments and seem like
less of a "bully" (although they did act the same as Uber in Austin
recently...), but they also seem to wait until Uber goes into a city and kind
of lets them take the brunt of the assault in the hopes that they will fare
better.

However, hearing that they're losing up to 50MM per month is quite
disconcerting, and it makes me wonder how much time they have and if they will
break even. Even at a large valuation ($25 billion if I remember right?) they
seemingly can't continue at such a loss without a drastic change to their
business model or continuous large outside investment. I think one of better
things they could do is really use their positive PR as a strong advantage,
because they don't have major blunders like Uber (e.g. Uber gets $3 billion
investment from Saudi Arabian investment fund and adds one of their managers
as a board member).

~~~
dawnerd
I've been seeing nothing but ads around here for 50 dollars free and I know
some people that have been taking advantage of it. Maybe they should scale
that back.

~~~
stephengillie
Could they be giving away 1 million of these a month?

~~~
yladiz
It's probably a combination of those $50 free ride deals, which are likely
only available in specific markets, and the loss from having semi low cost
rides, as well as heavy marketing.

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tastynacho
Can someone please explain how its possible to lose that much money? What
exactly does that 50M constitute?

~~~
tedmiston
1\. Giving generous discounts to get people to establish the habit of Lyft-ing
regularly.

2\. Subsidizing the cost of rides with VC money. For example, paying the
driver more than the customer is charged for a normal ride. Also, I'm not sure
if it's still this way but at one point Lyft Line in SF was a flat rate ~$5
even for long distances.

Tune the discount percentages to arrive at the maximum "losable" amount.

~~~
abrkn
It's working on me. I can't remember when or why I switched from Uber to Lyft.
Maybe it's the capped Lyft Line prices they used to have, or perhaps the
billboards. It's certainly not the fist bumps.

------
cft
Today marks the _fifth_ $50 subsidy that I got from Lyft in the last 12
months.

~~~
cuchoi
How did you manage to get that?

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kin
It's kind of crazy that they lose so much money just so people could start
using Lyft but as soon as they can't afford to do that anymore Uber is just
going to capitalize. Unless there's some sort of Loyalty program (like
airlines) I'm just going to go with whichever is cheaper at the very moment
I'm interested in getting a ride. If one has Surge then I switch and vice
versa.

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youngButEager
$50 million burn rate per month? Time to go public!

That president broke a cardinal rule of VC-backed startups -- never reveal
your numbers. Although some do, admittedly.

But at that rate of burn, it's pretty surprising he got approval to disclose
that. If I'm an LP -- looking at the #2 in the space -- and they're treading
water against #1 while losing $50M a month -- I'd rather check out the #1 in
the space.

Although Uber's burn rate is also quite high -- losing $1 billion dollars in
China alone: [http://money.cnn.com/2016/02/19/technology/uber-
losing-1-bil...](http://money.cnn.com/2016/02/19/technology/uber-
losing-1-billion-china/index.html)

~~~
tedmiston
Their burn rate is probably even higher than $50MM: presumably they are making
_some_ money.

Also, remember they've raised $2B [0].

If that is the burn rate, it's 40 months ~= 3.3 years of runway with
everything else constant (admittedly a bad assumption). That's a lot more
runway than most startups have. I'd suspect they have multiple alternative
burn rates paths to go down that are more/less conservative with burn rate,
like a 5- or 10-year runway before being profitable.

[0]:
[https://www.crunchbase.com/organization/lyft](https://www.crunchbase.com/organization/lyft)

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dotcoma
I thought 50 a week. 50 a month is "almost profitable" ;-)

