I am a Lyft driver. Last week, I got an email from co-founder John Zimmer proclaiming that Lyft would no longer take commissions. Lyft has officially become a nonprofit startup.
This message came right after Lyft closed a $250 million Series D, which pretty much dwarfs the pocket change they were collecting from my rides.
This $250 million is effectively bankrolling discounted rides in Lyft’s flagship cities, where subsidized public transportation is probably least needed.
Whom do we have to thank for this public service?
Lyft backer Andreessen Horowitz… has gotten investments from the Imperial County, California, Employee Retirement System and the University of Michigan.
VC money is raised not just from the 1% but also institutional coffers such as public pension funds, foundations endowments, family offices, and corporate pension funds.
This money is funneled into trendy startups, who in turn provide ridiculously cheap services to hipsters in SF and NY.
It’s a kind of benevolent Ponzi scheme, one that results in a lot of very cool services being provided at or below cost to a select group of urban consumers, and a lot of traditional businesses being forced to paddle hard to stay afloat. The profitless start-up model should worry us about the future of commerce and competition, even as we take advantage of its gifts.
The Problem With Profitless Start-ups –NY Mag