Over the last two months, ride-sharing service Lyft says it has gone from giving 14,000 rides a week, to more than 30,000 rides a week. The burst in popularity is the reason Andreessen Horowitz, one of Silicon Valley's most influential venture capital firms, is betting big time on the startup, said Scott Weiss, an investing partner at the firm. And the massive infusion of cash — $60 million — couldn't have come at a better time as Lyft is planning a push into international markets, a fight with New York City regulators, and a marketing campaign to make catching a ride with a total stranger seem socially acceptable.
"By the end of 2014, we have definite plans to go international," said John Zimmer, Lyft's co-founder. "We need to capture the hearts and minds of new communities, and we need to win over regulators too. This investment will allow us to do all that, and a lot more." Lyft launched in May 2012 in San Francisco and has since rolled out to Seattle, Chicago, and Los Angeles. In its first year, Lyft found substantial government resistance to its ride-share business, which relies on someone with a car picking up and transporting around a person they don't know. The California Public Utilities Commission handed down $20,000 in fines for public safety violations.
To enter New York and global markets, Lyft has a fight on its hands
California regulators have now mostly come to terms with ride-sharing services like Lyft. "We work collaboratively with regulators when we can, like we're doing in California now," Zimmer said. "But that's not always the case." Two places pushing back against ride-sharing services are Austin and New York, though at this point, Lyft has avoided those locales rather than publicly clash with regulators. Meanwhile, its competitor SideCar is in the midst of suing Austin for the right to operate there. Zimmer wouldn’t say what specific international markets are next for Lyft, but he did say he has his eye on New York City, which is currently taking the stance that ride-sharing services such as Lyft are illegal. Zimmer said Lyft doesn’t believe its business is inherently illegal, though the company does knows that in order to operate in New York and many overseas markets, it will have to spend some of its new $60 million in funding, the majority of which is coming from Andreessen Horowitz, on legal hurdles with regulators. "We believe we can launch in New York and we want to launch in New York," he said. "Hopefully, by the end of 2014, we will have done so."
Another challenge facing the company is Uber, which is cooking up a ride-sharing service of its own specifically to smother Lyft, SideCar, and others. Zimmer said he didn’t want to comment on Uber, and instead merely focus on what Lyft is doing. Weiss, on the other hand, said he believes the two can coexist. "Uber is about black cars, it's going for the upper end of the market," he said. "Lyft is for anybody who has a car. It could be like Neiman Marcus versus Walmart. They're both good businesses, but Lyft may prove out to be a bigger market." Just how big Lyft can get will be contingent on how much its marketing efforts will be able to normalize the concept of ride sharing.
If Uber is Neiman Marcus, Lyft is Walmart
"Picking up someone you don't know is a little dodgy," Weiss said. "It's not for everybody, but they’ve reached a critical mass. They've figured out how to get over the trust barrier." Weiss said the key for Lyft winning the trust of new riders is letting them know about the process the company uses to vet drivers, which includes DMV and criminal background checks, as well as credit checks and a scrutinization of a driver’s Facebook profile. Weiss, who was appointed to Lyft's board of directors after this latest investment round, said the company digs deeper into who its drivers are than any typical taxi service or limo service. "I've been looking at this general market for a long time," he said. "I've been tracking these guys. Over 50 percent of their passengers are female, which is crazy for a business like this. It speaks to the trust, the community they've built up."
Now the company needs to find a way to communicate this process through marketing, so it can sell new cities on the idea that a car adorned with Lyft's signature pink mustache is safe to get into, even if driven by a stranger, Zimmer said. "If you think about all the other services you use, there's a black car or a yellow car and you see it and think, 'oh, I trust it,'" he said. "But why do you trust it? Because it's a social norm. We have to build our social norm. We need to raise awareness about all we're doing to build security into our community of drivers."