Lyft losing as much as $50M a month, president confirms • Hacker News Board

Re: Lyft losing as much as $50M a month, president confirms

#21

Post by stormbrew » Wed, Jul 13, 2016, 6:39 AM UTC

femto wrote: post #19

stormbrew wrote: post #10

Earlier quoted context omitted.

I think the play is more or less to strangle the higher priced and over-regulated patchwork taxi industries and build a more uniform national/international regulatory framework that's more amenable to these kinds of businesses. At that point prices will probably rise, and (they hope, and I think they're right) customers will see value in the better product that keeps them in.

Or they are looking forward to the introduction of self-driving cars? Rather than waiting for self-driving cars to actually arrive, by which time the horse will have bolted, they are trying to lock the customer base in now at a high cost, banking on the money lasting until self-driving cars arrive. Once self-driving cars arrive, costs fall, competitors are locked out, and they make a big profit.

I just don't think that'll come soon enough for the amount of money and resources they're pumping into it. But obviously this is part of the long play, at least and especially for Uber.

Re: Lyft losing as much as $50M a month, president confirms

#22

Post by tedmiston » Wed, Jul 13, 2016, 6:44 AM UTC

tastynacho wrote: post #5

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

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.

Re: Lyft losing as much as $50M a month, president confirms

#23

Post by tedmiston » Wed, Jul 13, 2016, 6:46 AM UTC

youngButEager wrote: post #3

$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. Althoug…

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

Re: Lyft losing as much as $50M a month, president confirms

#24

Post by argonaut » Wed, Jul 13, 2016, 6:48 AM UTC

_Codemonkeyism wrote: post #13

stormbrew wrote: post #10

Earlier quoted context omitted.

I think the play is more or less to strangle the higher priced and over-regulated patchwork taxi industries and build a more uniform national/international regulatory framework that's more amenable to these kinds of businesses. At that point prices will probably rise, and (they hope, and I think they're right) customers will see value in the better product that keeps them in.

You've picked my interest, how would lowering regulation increase customer prices?

In the abstract, breaking up monopolies is the canonical example.

Re: Lyft losing as much as $50M a month, president confirms

#25

Post by abrkn » Wed, Jul 13, 2016, 6:52 AM UTC

tedmiston wrote: post #22

tastynacho wrote: post #5

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

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.

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.

Re: Lyft losing as much as $50M a month, president confirms

#26

Post by jahnu » Wed, Jul 13, 2016, 6:59 AM UTC

niftich wrote: post #17

liquidise wrote: post #7

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…

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 EDIT: after the introduction of courier services, picking up passengers serves as a baseline load…

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.

Re: Lyft losing as much as $50M a month, president confirms

#27

Post by cft » Wed, Jul 13, 2016, 7:02 AM UTC

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

Re: Lyft losing as much as $50M a month, president confirms

#28

Post by Bromskloss » Wed, Jul 13, 2016, 7:09 AM UTC

niftich wrote: post #17

liquidise wrote: post #7

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…

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 EDIT: after the introduction of courier services, picking up passengers serves as a baseline load…

Why would a courier service work so great for them? Are people prepared to pay more for that than for taxi trips? Btw, isn't their courier service already active?

Re: Lyft losing as much as $50M a month, president confirms

#29

Post by _Codemonkeyism » Wed, Jul 13, 2016, 7:15 AM UTC

argonaut wrote: post #24

_Codemonkeyism wrote: post #13

Earlier quoted context omitted.

You've picked my interest, how would lowering regulation increase customer prices?

In the abstract, breaking up monopolies is the canonical example.

Breaking up monopolies raises prices? You've lost me :-)

Re: Lyft losing as much as $50M a month, president confirms

#30

Post by kalleboo » Wed, Jul 13, 2016, 7:17 AM UTC

jahnu wrote: post #26

niftich wrote: post #17

Earlier quoted context omitted.

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 EDIT: after the introduction of courier services, picking up passengers serves as a baseline load…

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.

Especially for the city, rain and night-time driving situations where Uber will find itself a lot of the time