
Alphabet’s CapitalG Leads $1B Round in Lyft - vthallam
https://blog.lyft.com/posts/alphabet-capitalg-leads-1-billion-round-in-lyft
======
edshiro
I wonder what is Alphabet's intent behind this massive investment? Are they
planning to use Lyft as a ridesharing platform for their autononous vehicles,
since Lyft already has a sizeable market share in the US? For Alphabet, Lyft
would be a great partner to sell/rent autonomous vehicles to, given their
current legal battle with Uber.

For riders, it's great, as prices should remain low. Interested in seeing
Softbank's next move.

However you may look at it, I just don't believe this is a winner takes all
market.

~~~
indubitable
Self driving taxis will likely end up a monopolized market, and it may become
one of the biggest industries in existence.

The thing is there is no reason that companies could not be, at least
theoretically, profitable charging rates that are actually less than it would
cost for an individual to own a car. Without a driver their only overhead is
the maintenance/insurance on the car itself. And that's something owners have
to pay as well -- with the major difference that thanks to economies of scale
the taxi monopoly could pay substantially less for. The company that has the
most cars will be able to offer faster rides and offer them cheaper.

The potential profit here is really quite incredible. Last year there were 3.2
trillion miles driven in the US alone. Imagine a taxi company is able to snag
about 1/3rd of those or about 1 trillion miles. Their profit margin translates
to $10 billion _net_ per penny/mile of profit.

So if they can, through economy of scale, operate their vehicles at $0.05/mile
less than an individual owner could. And they then sell their service at a
$0.01/mile less than what it would cost if you owned the car, then they're
turning $40billion/year net. And that's again with 1/3rd the driving market.
When you can offer taxis at below ownership prices, who would still own a car?

Tesla seems to be flirting with the possibility of taking this one step
further will full vertical integration of production itself. It's already in
their license that you're not allowed to use their vehicles (in what will be
full autonomous mode) for any ride sharing service except for their yet-to-be-
launched one. Interesting future coming up fast!

~~~
CPLX
> Self driving taxis will likely end up a monopolized market, and it may
> become one of the biggest industries in existence.

Like, where do people get this kind of argument from? I see it a lot around
here.

Those are two _highly_ contestable premises, neither of which are at all
supported.

Especially the first one. Why on earth would autonomous taxis be a monopoly?
There will always be a more profitable segment of the market and a less
profitable one, and thus always an incentive for a new entrant to cherry pick
the most profitable segment. And the most important capital investment, the
roads, by definition will be open to new users.

There's so much magical thinking around self-driving cars. You guys are aware
that the only difference between a self driving car and not is the person
driving right?

It's just replacing people. And people aren't particularly expensive or hard
to come by. It's not like we've never invented a machine to replace people
before.

~~~
losteric
The software and training data set an extremely high barrier to competition.

Once you've solved self-driving taxis, you've also solved a large chunk of
self-driving commercial transportation. AI trucks could kill off rail, in
addition to manned semis.

From there, it's a small leap to becoming the backbone of an ultra-efficient
on-demand national distribution network.

All without the _massive_ operating overhead of human labor... No sleep, no
breaks, no weekends, no healthcare, no HR, no wages, just the price of
electricity and the low/infrequent maintenance costs of electric vehicles.

Eventually. I think the taxis are 5 years away from 24/7 availability in NYC,
maybe 3 for San Francisco, and the grand vision is probably 10 years out.

But... Yeah... This is going to be huge.

~~~
CPLX
> I think the taxis are 5 years away from 24/7 availability in NYC, maybe 3
> for San Francisco

lol

That's another amusing point of view I see here a lot. The use case of taxis
in a major city is _by far_ the most challenging use case for autonomous
driving. Mark your calendars for 5-10 years _after_ you first see an actual
autonomous vehicle having any type of real world application at all. Which you
haven't.

The whole idea that taxis are the vanguard of autonomous driving is obvious
patent nonsense, why it persists remains a mystery to me.

~~~
losteric
> Mark your calendars for 5-10 years after you first see an actual autonomous
> vehicle having any type of real world application at all. Which you haven't.

What's your criteria here?

Because I have the same opinion as you... Except I've literally seen
experimental autonomous cars driving on the street... Hence +3 years for SV,
and +5 for NYC.

Taxis are not the vanguard, they're just the most visible. Autonomous trucking
is underway and will likely see mass adoption before taxis.

The revolution is close - we're seeing disruption everywhere. I could
empathize if this was an isolated Google vaporware experiment... but every
class of vehicle has promising automation, researched by dozens of companies
around the world, and implementing multiple approaches.

Most will fail, of course, but we are on the cusp of success.

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anonymoustrolol
Google is copying GE's playbook. It's fascinating to watch this tech company
turn into an investment vehicle.

~~~
skj
What else do you do with 100B in the bank? If they just paid it out to the
engineers (yes please, thank you!) half of them would retire after two years.

~~~
jdross
Well historically when a corporation couldn't reinvest its capital for an
above market rate of return, it would either buy back shares or issues
dividends so owners/shareholders can reinvest for higher return.

Hoarding this much cash is historically unprecedented, largely because it's
mostly offshore for tech companies and repatriating it would cost many
billions in taxes.

~~~
lucretian
maybe they should repatriate it and pay their damn taxes.

~~~
Veratyr
Why? Why should they pay US tax on money earned abroad? They've paid tax to
the local government where sales were made, why does the US get a cut too?

~~~
ec109685
Why shouldn’t they? Google pays sales tax here too and yet have a corporate
income tax given they are based in the US.

~~~
Veratyr
My point is why are they subject to a corporate income tax on income earned
and already taxed abroad? The US government hasn't supported that income.

~~~
skj
Without arguing for or against repatriation taxes, I don't think it is true
that "The US government hasn't supported that income."

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madamelic
It seems like larger and larger rounds are being announced. Magic just also
did a $1B round.

Is this cause for concern or innocuous? I don't remember rounds being this big
before.

~~~
godzillabrennus
Cheap capital searches for a return. Venture funds pump up valuations of
privately held companies to show mark to market valuations (paper returns)
increasing. Allows funds to show good IRR without actually returning capital
to LP’s. Allows funds to raise more capital for new funds based on prior
performance.

It’s basically an unsustainable financial mess that will collapse.

Not that big of a bubble though compared with the student loan fiasco no one
is really talking about these days.

~~~
xadhominemx
LPs are much more sophisticated than you give them credit for. LPs are not
stupid and know how VC works. They woul easily recognize the tricks you are
proposing, which is why it's not actually how the industry operates.

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lobo_tuerto
Waiting on Lyft to go international and disrupt Uber's hegemony.

~~~
TremendousJudge
I can't wait to have two 200mb apps on my phone fulfilling the same need
instead of one!

~~~
lern_too_spel
The Lyft app is 17.38 MB, and the Uber app is 35.04 MB.

~~~
bhandziuk
Lyft app size 43.33 MB, user data 1.09 MB. Android 8.0.0. I wonder why such a
spread in size?

~~~
lern_too_spel
Probably AOT compilation and extraction of some resources from the APK. I
don't have either installed, but my point was that 200 MB seems like a gross
exaggeration. At worst, you could use ride.lyft.com in your web browser.

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candiodari
I wonder how Lyft's finances compare with Uber's. Is there any info available
publicly ?

~~~
JulianRaphael
They claim that they could be profitable in 2018 in this article:
[https://www.recode.net/2017/10/19/16503628/alphabet-lyft-
rid...](https://www.recode.net/2017/10/19/16503628/alphabet-lyft-ride-hail-
investment-billion)

~~~
giarc
Profitable in their current markets. Once they expand internationally they
will need to subsidize heavily.

~~~
gsnedders
> Profitable in their current markets. Once they expand internationally they
> will need to subsidize heavily.

Why would they need to subsidize outside of the US?

~~~
giarc
Majority of the cities that they expand to will likely have a competing player
(Uber, Didi etc). Therefore to attract customers away from the incumbent they
will have to offer free rides or discounted rides. That money needs to come
from somewhere.

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smaili
For those wondering about CapitalG:
[https://www.capitalg.com](https://www.capitalg.com)

> CapitalG (formerly Google Capital) is a growth equity fund backed by
> Alphabet, Google’s parent company. We invest in companies around the world
> that drive market disruption by harnessing long-term technology trends.

~~~
tlarkworthy
that's the finest name

~~~
jgh
Although Trent Reznor may find it a little on the nose.

~~~
fenwick67
The person who named this group is either really clueless or really clever, I
don't know which.

"I used to stand for something, I forgot what that could be. There's a lot of
me inside you, maybe you're afraid to see"

~~~
GFischer
I had to Google it... not everyone knows all the music out there :) but they
definitely Googled it before settling on that name !

------
sidcool
That's a billion with a 'B'! Is this a way Google is trying to get back at
Uber?

~~~
linkregister
I seriously doubt it. Google does business with its competitors all the time.
It pays Apple billions per year to promote its search engine while engaging in
proxy lawsuits against Apple.

CapitalG also has completely different objectives than Waymo. Larry & Sergey
have 51% of Alphabet, but I seriously doubt the board of directors would
approve a $1B spend out of spite.

The Lyft deal looks to be genuinely good. The Waze Carpool app still has low
usage even in the Bay Area. Lyft can supply their network, so Waymo doesn’t
have to support every metro area, which is what they would have to do if they
just sold self-driving kits to automakers.

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koolba
As a customer of ride sharing services that's become accustomed to VC
subsidizing my rides, this is great news.

~~~
trhway
VC (at that scale) are just a pipe for the Fed's cheap money, ie. we all
subsidize your rides. Strangely, it does seem to result in overall improvement
to the society and economy.

~~~
Mefis
Can you explain how VCs are a pipe for Fed money?

~~~
Afforess
The federal reserve is keeping the federal funds rate low to try and run the
economy "hot", and grow inflation. This is in the hopes that a "hot" economy
will also grow wages and decrease unemployment further. Inflation is seen as
less of a problem in recent years, as its been too low* for a long time.

The low federal funds rate (federal reserve interest rate) results in new
Treasury bills being issued at very low interest rates. Large banking
institutions must maintain certain capital reserves, which they hold in these
TBills, and the low interest rates mean the banks earn tiny returns on the
capital.

Banks, being commercial ventures, are expected to return a certain profit. The
low interest rates from the TBills are too low of a rate, and won't cover
inflation or operating expenses. So banks must chase riskier investments (in
general, risky investments return higher interest rates) with their remaining
capital to return high enough profits.

The riskiest investments are startups. Very high returns, if a startup
succeeds and exits in an IPO, but failure is more common. Banks don't invest
in startups though, they are too risky, but banks end up investing in all the
less risky assets available. This demand for "medium" risky assets (sovereign
debt, corporate or municipal bonds) drives other investors out of the market,
they can't compete with the volume banks can purchase at, and are forced to
chase the even riskier assets banks won't touch.

So low rates -> low interest tbills -> banks chasing risky assets -> investors
chasing startups

~~~
bogomipz
Except that the Fed is not keeping the federal funds rate low. The Fed has
raised the rate twice already this year as well as once at the end of 2016.
They have also signaled that another increase is coming in December. See:

[http://thehill.com/policy/finance/337790-fed-raises-rates-
fo...](http://thehill.com/policy/finance/337790-fed-raises-rates-for-second-
time-in-2017)

and

[https://www.nytimes.com/2017/09/20/business/economy/fed-
bond...](https://www.nytimes.com/2017/09/20/business/economy/fed-bond-
buying.html)

~~~
xtacy
It's still low by historical standards:
[https://fred.stlouisfed.org/series/FEDFUNDS](https://fred.stlouisfed.org/series/FEDFUNDS)

~~~
bogomipz
Yes but I was responding to the assertion that "The federal reserve is keeping
the federal funds rate low ...", when that hasn't been the policy for almost a
year now.

So the _current_ Fed policy is not in fact indirectly subsidizing ride
sharing.

~~~
toomuchtodo
The Fed is still keeping rates low because inflation isn't moving up, even
with a tightening labor market (and they don't know why).

(Video) [https://www.bloomberg.com/news/videos/2017-09-27/what-
yellen...](https://www.bloomberg.com/news/videos/2017-09-27/what-yellen-
admits-she-doesn-t-know-about-inflation-video)

~~~
bogomipz
The Fed has in fact raised the rates twice this years and once last year, how
is that keeping rates low?

These rates are moved slowly and incrementally. You can't just raise the rate
3%.

That video in your link says nothing about keeping rates low, its about the
nature of inflation.

~~~
dragonwriter
It has raised the rates from extremely low to very low, which is still keeping
rates low.

Now, you can argue that that is in part because a rapid increase to non-low
rates would be disruptive given the status quo ante, but that's a
justification for keeping rates low, not a rebuttal to the claim that that is
what the Fed is doing.

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bmmayer1
Isn't Google also an investor in Uber?

~~~
gxs
These companies generate billions of dollars a year in profit. They, quite
literally, have nothing better to do with their money than invest.

Interestingly, this is what will make these companies so entrenched for
decades to come - anything that would ever come close to being a
competitor..they will be part owners of.

~~~
tyleraldrich
I'm pretty sure they both operate at a loss or at least come very close to
breaking even. There is a 0% chance Uber or Lyft make "billions" in _profit_
every year.

~~~
huac
he means Google

~~~
tyleraldrich
Hah wow my reading comprehension is apparently not working at all today, my
bad OP. Gunna just leave my comment up so I can be properly shamed :p

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jtchang
CapitalG is such a gangsta name.

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akyu
So much for that "winner take all" narrative.

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maxfurman
That's the same amount they want Uber to pay Waymo. What a coincidence!

------
mailarchis
This is interesting. And about a 4 years back Google Ventures
[https://www.gv.com](https://www.gv.com) had invested in Uber

Ref : [https://techcrunch.com/2013/08/22/google-ventures-
puts-258m-...](https://techcrunch.com/2013/08/22/google-ventures-
puts-258m-into-uber-its-largest-deal-ever/)

