On-demand is not a “winner takes it all” market

A bit over a year ago I was invited to invest in Lyft’s series F ($1B mega round led by GM) as part of syndicate. Even though the investment was too late stage for me I was intrigued and decided to dig in.

I learned early on that some of the existing investors are selling their stock in secondary transactions. That struck me as odd. Lyft was doing very well back then, almost quadrupling GMV in the last year. I talked to one of the investors and he told me that they believe the on-demand ride economy would behave like others in the consumer space – “winner takes it all”. Uber has won, they hoarded too much cash and control the drivers – the supply – taking everybody else out of the market. He claimed that the Marketplace network effect will prevail and will crush all competitors, including Lyft.

A year later Lyft and others are alive and kicking. Not only are they back in the game, but they are also starting to take the lead in their segments and geographies. While Uber has been self imploding here and here Lyft has quadrupled yet again and has become the more beloved brand. In China, Didi has been able to beat Uber and push them out of the country.

The “winner takes it all” dynamic doesn’t seem to hold for the on-demand ride market.

I’d like to propose a different take. How about we start thinking about Uber, Lyft, Gett, etc. like we think about Carriers. There is a place for multiple carriers players in the market, AT&T, Verizon, T-Mobile and so on. They will compete over price and service and each will capture different audiences. It will be glorious for consumers – prices will continue to drop and the service will get even better.

Will it be good for the on-demand ride companies? Can Uber justify a $70b valuation ? time will tell, but I suspect Uber’s (and others) valuation will be challenged in the next few years and it’s not going to be pretty.

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