Bayonets get fixed to slice up the mobility cake

There’s a new bet in the high-stakes poker game between US ride-sharing giants Lyft and Uber, and top autonomous tech company Waymo, owned by Google parent Alphabet. Lyft, very much the junior member of that ride-share duopoly, is receiving a $1Bn (£742M) investment for its self-driving efforts from a consortium led by CapitalG, Alphabet’s venture capital arm. CapitalG has not identified any other members of the consortium.

At this point it’s unclear how exactly Alphabet’s investment will be used, or what exact role Waymo will play. The sole official communication from Lyft is a fairly short and bland post on the official company blog. The only information it adds is that the CapitalG money will raise Lyft’s valuation to $11Bn and CapitalG partner, David Lawee, is to join the ride-share company’s board.

Lyft’s press department directed this writer to the blog post when presented with questions on the deal. CapitalG was also terse and bland on the matter. In a statement, the Alphabet unit’s most compelling utterance was that it “is honoured to work with Lyft’s compelling founders and strong leadership team”.

It’s hard to tease out why the affected companies are so tight-lipped on the new cash infusion. It’s quite possible that neither Lyft nor the members of the consortium want to release any piece of information that might help a rival gain an edge. Whatever the reason, the deal binds Lyft more tightly to Alphabet and Waymo. Lyft already has a relationship with Waymo – earlier this year, the two companies announced a formal collaboration aimed at furthering autonomous development.

John Rosevear, a senior automotive analyst at The Motley Fool, speculates that the Alphabet-led cash infusion helps clear the road for a new phase of Waymo’s development. “I think… Waymo feels that its system is ready for wider testing and it's easy to get that with Lyft, which has opened up its platform to companies that want to test self-driving systems in ride-hailing service. It's possible that Alphabet felt (or had been told) that making a big investment in Lyft would give it some sort of preferential access.”

There has also been speculation that Lyft is planning an initial public offering on the stock market. A new, private cash injection would raise its overall value, potentially helping it raise more money in an IPO. Shortly after the Alphabet news was made public, a report in The New York Times, citing “two people briefed on the discussions”, said that Lyft has held talks with investment banks about launching an IPO at some point next year.

Lyft’s management hasn’t outright admitted a desire to list on the bourse but it hasn’t exactly dismissed it either. In a recent interview with Vanity Fair, co-founder and president John Zimmer said that “one way we’re able to build better products and invest in better acquisition of drivers and passengers is through capital”.

As the distant runner-up ride-share operator behind behemoth Uber, Lyft surely tracks the activities and development of its big rival. Perhaps not coincidentally, speculation is also rife that Uber is planning a large-scale IPO. Since the company is valued at nearly seven times that of Lyft, its stock market debut would certainly be much larger, attracting gobs of capital that would allow it to power even further ahead. Lyft might be angling for first-mover advantage on the stock exchange, then.

We’re still in the pre-dawn phase of autonomous driving and, as such, there is much shifting of collaborations and alliances in this world. It’s no different for both Alphabet/Waymo and Lyft. Those tracking the development of autonomy over the past few years will recall the 2013 investment of $258M a different venture capital arm at Alphabet – then still known as Google –  poured into Uber in 2013. That relationship has come under strain, particularly following Alphabet’s accusations that a onetime Waymo employee, who subsequently headed the self-driving trucks effort at Uber, stole a clutch of its trade secrets.

Meanwhile, on the hardware side, Lyft received $500M from General Motors in a high-profile deal signed in early 2016. That arrangement, which at the time was the largest tie-up between an incumbent auto maker and a rideshare company, has fallen a bit by the wayside recently probably because GM is hatching its own robo-taxi strategy.

So, in this landscape of shifting alliances, and multi-million- (or even billion) dollar deals, where does this new arrangement leave Alphabet/Waymo and Lyft? It’s tricky to say but the Motley Fool’s Rosevear believes that it puts the latter, at least, in a fairly advantageous position.

“A year and a half ago, GM and Lyft looked like a strong contender, at least in North America,” he said. “Now it looks a bit like GM and Lyft have drifted apart and Waymo may be stepping in with Lyft. Maybe a year from now we'll be looking at another combination of companies! Waymo is probably in a good spot however this evolves but it's still way too early to name winners.”


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