Uber’s US rival Lyft is seeking $500m in a new fundraising round to provide fresh ammunition as the transportation company takes its fight with Uber to a growing number of US cities, according to two people close to the process.
The fundraising comes at a time when Uber has been struggling with a series of public relations crises, including allegations of sexual harassment and a video of chief executive Travis Kalanick berating an Uber driver.
San Francisco-based Lyft has previously raised approximately $2bn from investors including Andreessen Horowitz, Carl Icahn, Peter Thiel’s Founders Fund, and Didi Chuxing, the Chinese transportation upstart. Its most recent fundraising, which closed at the beginning of 2016, valued the company at $5.5bn.
Given Lyft’s much smaller size — it operates in 300 cities in the US, while Uber is in thousands of cities and 70 countries — investors will be focused on what valuation Lyft is seeking. A person close to the deal suggested the valuation could be between $6bn and $7bn, above its previous level but nothing like the astronomical valuations of Uber.
Amid bruising competition with its rival, Lyft markets itself as a nice-guy alternative — one that allows in-app tips for drivers and gives them a bigger share of the fare.
That strategy has been paying off, particularly over the past two months as Uber has gone from crisis to crisis. In January, when political protesters launched a #deleteUber campaign due to Mr Kalanick’s role on President Donald Trump’s business advisory council, the surge of riders switching to Lyft pushed its app to the top of the app download charts.
However, one of the crucial challenges for Lyft is the deep pockets of its rival. Uber has raised more than $15bn in equity and debt, making it the best capitalised start-up in Silicon Valley, and it has not hesitated to deploy this capital to offer discounted rides in markets where it sees Lyft succeeding.
This year Lyft has embarked on an expansion spree, launching in nearly 100 new cities since the beginning of the year. The company has also been working on self-driving cars in conjunction with GM, which invested half a billion dollars in Lyft at the start of last year.
In previous fundraisings, several of Lyft’s most high-profile financial backers have been Chinese tech companies, including Didi Chuxing, Alibaba and Tencent. However, these relationships have been complicated after Didi acquired Uber’s China unit and invested in Uber, raising questions about its commitment to Lyft.
The company is also backed by Prince Alwaleed bin Talal of Saudi Arabia, who invested $250m in the previous funding round.
Lyft declined to comment.
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