Lyft became the first ride-hailing app to go public on Friday, skyrocketing to a $23.4 billion valuation.
But don’t get too excited for drivers. Investments in Uber and Lyft are basically big bets on future products like autonomous vehicles, not the people behind the wheel.
As we’ve seen, Lyft isn’t profitable. Last year it lost nearly $1 billion. So it’s not Lyft’s cash flow bringing in investors — it’s the company’s growth and the potential of its platform.
“Wall Street is infamous for caring more about growth than profits,” said Investing.com senior analyst Clement Thibault in an email. “Lyft is likely to get a pass on profitability if it can manage to continue its impressive growth streak.”
Autonomous vehicles are already a major part of Lyft’s strategy. It partnered with self-driving company Aptiv and opened a research facility in Silicon Valley called Level 5. Self-driving Lyfts are on the streets of Las Vegas.
Lyft has partnerships with companies to develop self-driving car tech, but unlike Uber and Alphabet’s Waymo, it isn’t building its own fleet of self-driving cars. Instead, it’s showing how its platform can be incorporated into self-driving systems.
So it makes sense as autonomous vehicles (slowly) become a driving option — as we’ve seen with Waymo’s self-driving taxi service in the Phoenix area — that Lyft, Uber, and other ride-sharing platforms are in a great position to offer autonomous service to customers.
GM’s Cruise says it will launch a self-driving car service in San Francisco by the end of this year — that means it needs a consumer-facing app and dispatching service for passengers to catch those rides. Lyft has been doing exactly that for years now — the perfect partner for a company like GM.
The “self-driving car area will develop into future growth and it will bring significant profitability,” said Georgetown McDonough School of Business professor Jason Schloetzer.
But Lyft isn’t about to throw out all its drivers — some of which were at the opening event Friday and will be offered stock in the company — for self-driving vehicles. It’ll be a mix, along with other “mobility” services” that will help the company expand. On the same day as its IPO, Lyft launched its “ in Los Angeles, promising to invest $50 million in city transit and sustainable energy systems.
This all isn’t very reassuring to drivers who have been protesting the Lyft IPO in San Francisco and Southern California, where Uber changed driver pay for the worse, resulting in a 25-hour strike in the LA area. Lyft’s new investors are going to want to see profit — and self-driving vehicles don’t demand higher pay.
We’re outside Lyft HQ flyering on the day of their IPO, when the company is set to make billions, telling employees to remember us drivers.
We make the app run, we provide the service, we take the risk, but we get almost none of the reward.
— Gig Workers Rising (@GigWorkersRise) March 29, 2019
Georgetown’s Schloetzer sees thoughtful expansion into transit planning, city data sharing, and medical service rides as just some of the ways Lyft could become more than just a taxi service. You could theoretically use an app like Lyft to see a bus schedule or pay a subway fare. Doctors could arrange rides for elderly patients. Lyft could also provide data about ride-sharing, biking, and public transit usage — for a cost.
Beat riding-hailing app CEO and founder Nick Drandakis sees Lyft’s historic IPO as good news for the entire ride-sharing industry. In an email he wrote, “It means that riders trust the model and the industry has matured enough to go public. Ride-hailing is here to stay, changing forever the way people move in their cities and constantly evolving.”
Lyft’s IPO shows that even without profits, people want an app that can connect them to a ride. Soon, the question will be whether a human or robot picks you up.