Lyft Bulks Up With $1 Billion in Funding -- WSJ

By Greg Bensinger and Jack Nicas Features Dow Jones Newswires

Valuation rises nearly 50% to $11 billion as ride-hailing startup speeds after Uber

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This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 20, 2017).

Lyft Inc. is quietly gaining ground on Uber Technologies Inc. while its larger crosstown ride-hailing rival has been embroiled in months of corporate drama and setbacks.

The startup on Thursday said it raised $1 billion in funding led by a venture-capital fund of Google parent Alphabet Inc., giving Lyft financial ammunition as it eyes a first-time expansion beyond the U.S. and broadens its driverless-car efforts. The new financing, which comes as Uber looks to close a multibillion investment from SoftBank Group Corp., boosts Lyft's valuation by nearly 50% to $11 billion.

Over the past year, Lyft has picked up market share in some key cities while into pushing into dozens of new U.S. markets, driven in part by carefully-crafted marketing that casts it as the friendlier alternative to Uber.

Uber, meanwhile, has been beset by a series of troubling events, including sexual-harassment allegations, the resignation of longtime chief executive Travis Kalanick, a lawsuit between board members and several federal probes into its business operations. It only recently hired a new chief, former Expedia Inc. CEO Dara Khosrowshahi, who is tasked with filing the company's depleted executive ranks and is already dealing with a regulatory spat in London, one of its biggest markets.

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Uber is working to nail down a proposed investment from SoftBank that could total as much as $10 billion, including a direct investment of as much as $1.25 billion. On Monday at The Wall Street Journal's WSJD.Live conference, Uber board member Arianna Huffington said she expects the company will resolve the weekslong talks within days.

Lyft has raised some $3.6 billion in total funding since launching under that name in 2012. It is still a distant second to Uber by valuation and fundraising. Its crosstown rival has raised about $15 billion in equity and debt and landed a $68 billion valuation last year while expanding to markets around the world.

Lyft operates only in the U.S. but has been looking to Canada and overseas for possible new markets, according to people familiar with the matter. It has moved into dozens of new cities in its home country in recent months and met with officials earlier this year in London, where regulators have said they would revoke Uber's license to operate -- Uber is appealing. It is expensive for ride-hailing firms to open in new cities because of marketing expenses like incentives for new drivers and passengers.

As Uber has fought back the bad-press cycle, Lyft has stayed largely above the fray. Over the summer it added former Obama adviser Valerie Jarrett to its board and as part of the funding round is adding David Lawee -- a partner at Alphabet's CapitalG -- as its 10th director.

Lyft has attempted to capitalize on Uber's reputational problems with thinly veiled television ads that portray a scheming competitor that would use spike strips or lasers to take Lyft down. More recently it enlisted actor Jeff Bridges imploring viewers to choose their ride "with the right people, doing things for the right reasons."

The companies are scrambling to take the lead in self-driving vehicle technology as well. Lyft has joined with companies including General Motors Co., which is an investor, Ford Motor Co. and startup NuTonomy, among others, as well as opening its own Silicon Valley development center. Uber, meanwhile, has mostly eschewed partnerships in favor of working on its own autonomous cars, including passenger tests in Pittsburgh, Tempe, Ariz. and briefly in San Francisco.

With its investment, Google-parent Alphabet pulls closer to Lyft and gets more say in the ride-hailing company's direction. That could be useful as Alphabet's Waymo unit plans its own ride-hailing service with self-driving cars. Waymo sued Uber in February for allegedly stealing its driverless-car trade secrets to jump-start its own program. Uber has disputed the allegations.

While Waymo is considered by many to have the world's most advanced self-driving technology, it knows little about operating a taxi business. Indeed, Waymo and Lyft said in May they are collaborating on self-driving technology, including tests of a self-driving taxi service, a person familiar with the deal said at the time.

A CapitalG spokesman said the Lyft investment is about making a profit for Alphabet. "It's a belief in Lyft, their business model, their future growth and not strategic positioning," the spokesman said.

CapitalG invests in late-stage companies such as Snap Inc. and Airbnb Inc., unlike Alphabet's other investment firm GV, which largely funds younger firms. Alphabet already is an investor in Uber after GV invested $258 million in the ride-hailing giant in 2013.

The size of CapitalG's investment in Lyft, and how many other investors are in the round, isn't clear. CapitalG's investments typically range from $50 million to $100 million.

Write to Greg Bensinger at greg.bensinger@wsj.com and Jack Nicas at jack.nicas@wsj.com

(END) Dow Jones Newswires

October 20, 2017 02:47 ET (06:47 GMT)