Google parent Alphabet has led a $1bn investment in Lyft, Uber’s biggest rival, in a move that sharply escalates the fierce competition between the two leading US ride-hailing companies.
Alphabet subsidiary CapitalG will head the investment, which values Lyft at $10bn, double its valuation at the beginning of the year.
In securing Alphabet as a backer, Lyft has signalled the changing fortunes of the two ride-hailing rivals, with the Google-owning group switching sides at a key moment following a series of setbacks at Uber.
Lyft, which has long been considered the underdog, has benefited this year as its rival has struggled. It now controls a quarter of the US ride-hailing market, an increase of nine percentage points compared to the beginning of the year, according to data from Second Measure.
“Lyft right now has a big advantage in that they are gaining market share, it is pretty popular, there are no self-inflicted wounds, and it has a lot of room to grow,” said Santosh Rao, analyst at Manhattan Venture Research.
Alphabet’s tie-up with Lyft comes at a delicate time for Uber, which is in final discussions over an investment deal with SoftBank. The deal, which has been delayed amid price negotiations, will see the majority of shares sold at a price that is lower than what Uber charged for its shares last year.
The investment values Lyft at $10bn on a “pre-money” basis, which excludes the new funds raised, 45 per cent higher than a previous fundraising just six months ago.
One Uber shareholder pointed out that the new funding for Lyft could allow it to stay private for longer, continuing the price wars that have driven down the cost of ride-hailing in many US cities.
Alphabet invested in Uber in 2013 through its subsidiary GV. The relationship between Alphabet and Uber became fraught when the companies started competing on self-autonomous vehicles, prompting Alphabet’s representative to resign from the Uber board.
Earlier this year, Alphabet’s self-driving car subsidiary Waymo sued Uber over alleged trade secrets theft, an accusation that Uber denies. That case is still ongoing.
The backing of Alphabet could also provide a boost to Lyft’s own research into autonomous cars, which it is ramping up this year. Lyft already has a partnership with Waymo, and is also working with other companies on a plan to eventually integrate self-driving cars into its network.
David Lawee, partner at CapitalG, will join the Lyft board. The fundraising round will include investment from other groups that have not been named. Lyft’s previous backers include Didi of China, Carl Icahn and the venture capital firm Andreesen Horowitz.
Lyft has been in expansion mode this year, and its chief executive Logan Green recently said it would begin growing overseas “very soon”. The company is considering London, Toronto and Mexico City as possible first international cities.