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Lyft: One drives, the other gets rich

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The investor

Ben Horowitz and his investment company Andreessen Horowitz are one of the big beneficiaries of the upcoming Lyft IPO. According to the Bloomberg news service, his fund, based in Menlo Park, California, home to Silicon Valley's most prominent financiers, holds 15 million shares in Lyft, or 6.3 percent of the company. With a stock price of $ 62 to $ 68 the company is targeting, Horowitz's equity stake in the stock market debut would reach a value of up to $ 1.02 billion overnight. That would be a huge win for Ben Horowitz and other investors who got in early. When the now 52-year-old was one of the early financiers of the taxi app in 2013, he had paid $ 60 million for the shares.

Horowitz will share the profit with those for whom he has invested the money. Venture capitalists like him are raising capital from pension funds, asset managers, insurers and very wealthy private investors to invest in startups like Lyft. For this they receive a management fee from the investors, usually two percent. But that is only a small part of the income of companies like Andreessen Horowitz. If they succeed in selling the start-ups to a corporation or going public, the venture capitalists will have to pass the profits on to their investors. However, the partners of the fund company are allowed to keep part. Horowitz ’co-founder Marc Andreessen once stated that this accounts for up to 30 percent of the company's profits. For Horowitz, however, new incomes to secure subsistence no longer play a role. It is estimated that he has private assets in the billions of dollars.

Before Horowitz became one of the best-known professional investors in Silicon Valley, the computer scientist himself founded several companies. Together with Internet pioneer Marc Andreessen, he started a company called Loudcloud, one of the first companies to offer software from the cloud as a service for other companies. The two sold the start-up in 2007 for 1.6 billion dollars to the computer company Hewlett-Packard. Horowitz met Andreessen at Netscape in the early 1990s. The company developed one of the first browser programs that users could use to search the Internet.

When Horowitz ’Fonds joined Lyft, the app counted 120,000 trips a month. In the last quarter of 2018, according to the stock market prospectus, it was an average of 59 million per month, the market share of taxi app trips in North America is 39 percent, according to company information. Main competitor Uber, which is active in 60 countries, does not publish any business figures itself. According to calculations by Second Measure, a market research firm that evaluates card payments, Lyft came to 28.4 percent in October 2018 in the US and Uber to 69.2 percent. The remaining apps only achieved 2.4 percent.

When Lyft went public in December 2019, Uber announced that it would also go public. As a result, Lyft moved the debut forward to the end of March. Horowitz and the other Lyft investors feared that shareholder interest would decline sharply after Uber's debut in April. After all, Uber is expected to have a record market valuation of $ 120 billion. Lyft reckons "only" with 23 to 25 billion.

Lyft is not profitable. Last year, the company doubled sales compared to 2017 to $ 2.2 billion. But the losses also increased by more than 30 percent to $ 911 million. (Uber had $ 11.3 billion in revenue in 2018, up 43 percent year-on-year. Losses fell 15 percent to $ 1.8 billion.) The deficit at Lyft and Uber is mainly due to marketing expenses and grants for Trips to gain market share. It would have been even higher if management hadn't reduced driver pay. This saved the company $ 925 million.