On April 2, ride-sharing startup Lyft announced that it was raising $US250 million in funding.
A little over a month later, news broke that Uber, another car service startup, was raising “under a billion” in new funding.
The timing, according to one venture capitalist we met with in San Francisco, was not a coincidence.
According to our source, Travis Kalanick, the CEO of Uber has been trying to raise big round after big round to intimidate Lyft. But, so far, it’s not working. He wants to snuff out Lyft because it’s the biggest threat to Uber’s plans to take over the world.
Kalanick’s fear of Lyft isn’t exactly a secret. On stage at the Code Conference, Kalanick acknowledged that he’s raising money and part of the reason is to fight Lyft.
“We do 10 times more trips than them and on a booking basis we’re 20 times bigger,” Kalanick said of Lyft. He added, “If they have the same amount of funding, we spend faster, so you have to make sure you have a cash advantage.”
Lyft is a startup that lets anyone with a car become a cab driver. If you need a ride, just use the Lyft app to find an available car. It was spun out of another company in 2012, and it has established itself as the chief competition for Uber.
Last August, Uber raised $US250 million in funding, which gave it over $US300 million in total funding, according to CrunchBase. After Lyft raised $US250 million, it, too, had over $US300 million in funding.
Some investors think Uber can grow into a $US100 billion company. They believe that happens if Uber successfully expands around the world, and if it moves into adjacent areas and becomes a logistics company like FedEx.
But if Lyft can establish itself as a solid competitor to Uber, the already far-fetched idea of Uber getting a $US100 billion valuation will never ever happen.
That’s why Uber is raising a giant pile of cash. It wants to bury Lyft before Lyft has a chance to bury Uber.