Ride-sharing pioneer Lyft is heading back to the fundraising till, but its numbers may not look that rosy to investors. The company lost $127 million in the first half of 2015 on $46.7 million in revenue, according to private fundraising documents obtained by Bloomberg.
Lyft, the second-biggest U.S. ride-hailing service, is raising roughly $500 million as the company burns through tens of millions of dollars a month, according to a fundraising presentation compiled by Credit Suisse. It highlights tepid financial performance at Lyft and reveals that the company has repeatedly underperformed its own expectations.
In the first half of the year, Lyft generated less revenue, lost more money, and added fewer customers than projected in February. The numbers suggest Lyft has had to burn through cash as it chases growth in a competitive industry. The willingness to spend big on growth is a costly strategy that’s becoming increasingly common in Silicon Valley. Public market investors have expressed concern about the high valuations of private technology companies recently. Fidelity Investments, BlackRock, and others wrote down their stakes in some startups this year.
In the first half of 2015, Lyft spent $96.1 million on marketing. That’s more than twice Lyft’s net revenue during the same period. In one document, Lyft promotes its ability to attract new drivers and riders, even as it does so at a sizable loss. Customer discounts represent a big portion of Lyft’s marketing costs. This year, Lyft has also purchased billboards in New York’s Times Square and on Market Street in San Francisco, in addition to paying drivers big bonuses.
Lyft declined to comment on the numbers contained in the fundraising presentation. As a closely held company, Lyft isn’t required to report its financials publicly. The documents said the numbers weren’t audited and may not conform to Generally Accepted Accounting Principles. In the past, Lyft has reported revenue to investors as a combination of net from one part of its business and gross from another. It’s unclear how Credit Suisse calculated the numbers using Lyft’s financial data. Credit Suisse declined to comment.
John Zimmer, Lyft’s co-founder and president, said in an interview earlier this week that the company has reached a “run rate” of $1 billion and achieved 40 percent market share in San Francisco, the hometown of both Lyft and its biggest competitor, Uber Technologies. Zimmer said Lyft chose to highlight run rate, which takes one month of gross revenue and multiplies it by 12, because it reflects the impact the company is having on the transportation industry as a whole. Most of that money goes to the drivers.
Zimmer said Lyft has managed to meet and even exceed some performance projections. “I think in certain markets, we’re beyond; we’re really proud of the share gains we’ve had,” he said. Zimmer, along with bankers from Credit Suisse, met with investors in Hong Kong and Beijing about the funding round recently, said a person briefed on the meeting who requested not to be named. The New York Times reported on Tuesday that Lyft is raising a round of financing with the hopes of achieving a $4 billion valuation.
Andreessen Horowitz is currently Lyft’s largest shareholder, according to one of the documents obtained by Bloomberg. The venture capital firm holds 12 percent of shares. Bloomberg LP is an investor in Andreessen Horowitz. Japanese e-commerce company Rakuten owns 10 percent of Lyft shares, and the Mayfield Fund owns 6.6 percent.
Uber’s business last year was far bigger than Lyft’s is today. Uber had $415 million in net revenue with a loss of $470 million in 2014, according to people familiar with the company’s financials. Uber’s last private financing round valued the company at $50 billion, and it’s currently raising more money, which could increase its valuation to $60 billion to $70 billion, according to people familiar with the matter who asked not to be identified because the talks are private.
The documents show Lyft is still learning how to estimate the pace of its growth. For instance, the company predicted in February that it would facilitate 7.4 million rides in July, bring in net revenue of $25 million, and lose $14 million. It reported about half as many rides as expected, missed revenue projections by a third, and lost almost two and half times more than forecast.
Lyft’s $1 billion run rate was based on gross revenue of $83 million in October. Net revenue, which is the amount Lyft takes from rides, would be about a quarter of gross revenue, according to the company. The documents show Lyft expects to generate $26.3 million in net revenue and lose $124 million during the third quarter of 2015. Part of those losses can be attributed to subsidies for its Lyft Line carpooling service, because it often pays drivers more than it costs customers to use. “The company has a history of losses and is not projected to be profitable in the foreseeable future,” reads a disclosure in the documents.