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Hello Frens 👋,
Last two issues, we jumped into two early-stage companies that are near and dear to my heart: Clay & MarketerHire. I plan to continue venturing more into more early-stage companies (I think they’re more fun, tbh).
Today, however, we are back to cover one of the OGs. A defining company of the last decade that is worth over 12 billion...and that is in a turmoil market condition.
Today we are diving into Lyft.
Founding Story - Zimride
The year was 2006. A young Logan Green had just graduated from the University of California Santa Barbara who had taken on the job of a sustainability coordinator at his alma matter saw an announcement that would change his life forever. The hottest company in town, the social network that connected university students, is planning to open up their APIs next year for anyone to build apps on top of their social graph.
The Facebook meteoric rise coincided with Logan’s last couple of years in university, and with the ability to build on top of their Facebook Connect platform, Logan saw a window of opportunity to pursue a life mission: eliminate traffic.
You see, Logan had always had a thing for transportation. He was the youngest member ever to get elected to the local transportation municipality of Santa Barbra. He was still a student at the time.
When he traveled to Zimbabwe, his biggest takeaway from the trip was the public transit system — which relied heavily on private citizens operating minivans and dropping customers on and off the unofficial routes drivers had set to for their private vans.
And throughout his university years, he decided he would rely solely on public transit to commute from LA(where his parents lived) to Santa Barbara (where he went to school).
Logan didn’t just preach sustainability. He lived it too! ** When Logan saw the Facebook Connect announcement, he signed up to be an early user/tester, and he knew he had to do something in sustainable city transportation.
His idea: a carpool service for friends, powered by the Facebook social graph named.
Go To Market - Zimride
The value Zimride was to offer was something Logan lived and breathed. Throughout his university years— when he refused to take his car with him to university and relied primarily on public transport— Logan ran into a few problems of his own. Sometimes, during peak university holiday periods (and out of complete desperation), he had to rely on Craigslist to hitch a hike back home to his family’s place in LA.
Going on a two-hour ride with a stranger was..lets’s just say, a hit or miss. What if one could use social cues (as in who are the common friends I have with this person on Facebook) to assess whether I would be willing to spend two hours locked in a metal box with that particular human being.
It’s a weak signal, but still better than going in blind! Maybe a side-project worth hacking on with this new Facebook APIs, or so thought Logan!
Acquiring (the first 1000) Customers
Little did young Logan know how powerful it is to be early on Facebook. When Facebook officially launched Facebook Connect, Logan and Zimride were featured in the first-ever Facebook F8 keynote event giving the young indie-maker much-needed credibility to sell his solution to one of the most bureaucratic institutions: Universities.
But it was through the aftermath of this, Logan would come to meet John Zimmer. After a mutual friend posted on Logan’s Facebook wall congratulating him on the Facebook feature and the official launch of Zimride on Facebook Connect, John reached out for an intro from the mutual friend.
John and Logan met in New York City a couple of weeks later and decided to work together on nights and weekends to get this Zimride Facebook app off the ground!
The natural place for Zimride to start was University campuses. Universities had a few interesting features to make it a good starting point for the project:
The first and foremost feature was the prevalence of Facebook on university campuses. Remember, this was 2007! Facebook had just opened up the floodgates to non-students a year prior.
The majority of the need for carpooling came in a short period around spring, fall, and winter breaks. Brief windows of peak demand are Word of Mouth's best friend.
Trust was easier to establish between fellow students (even if they did not know each other) than it was between complete strangers.
Logan worked at a university.
John and Logan had both just graduated a year earlier
The testing ground for Zimride was Cornell University, where John had gone to study Hospitality Management.
For the first few months, John and Logan, and Zimride and a singular mission. To sign up as many Cornell students as possible to offer seats in their cars to trips back to New York City, Connecticut, and New Jersey ahead of the upcoming break.
Six months in, 20% of the Cornell student body signed up to use Lyft. It was a campus phenomenon! How, you may ask?
The answer may surprise you, but it had something to do with Frogs and Beavers.
To this day, I am still fascinated by the fascination of American universities with Mascots. I never got the appeal. But what I can understand is that if I ever see a person wearing a Bear custom roaming around my university campus, it will catch my attention.
That is what John did to get 20% of the Cornell population onto Zimride. He bought two customs, one of a beaver and one of a Frog, went to the university campus around special events (recruiting days, celebrations..etc.). He flushed out his old Cornell Student ID card and got past the security guard. Changed into one of the Frog or Beaver customs. Opened up the trunk of his car and got himself hundreds of Zimride flyers, and it was go time!
The business Model of Zimride was a licensing fee that the university paid for Zimride to operate these mini-carpooling networks on their campuses.
The founding of Lyft
John and Logan spent 4 years pursuing the university (and later corporations) private carpooling networks. The company turned profitable. Both co-founders quit their jobs to work on this full-time. John left the Lehman brothers just a few months before the 2008 crash, and Logan left his job at UC Santa Barbara.
Zimride expanded into over 150 universities, enabling thousands of carpools every week. But the times were changing right under their feet. This time with the rise of Mobile.
With the rise of Uber, Sidecar, Taxi Magic, et al., John and Logan began to wonder what might Zimride look like if it had been built mobile-first. What if instead of the days you currently had to plan ahead for a scheduled trip on the Zimride network, you could do that instantly using the phones in our pockets.
The rise of Sidecar had a particularly outsized impact on the decision to go down the mobile route. Just a few months before the Launch of Lyft, Sidecar came out of stealth to announce the launch of their beta.
Sidecar was Zimride built for mobile. It was inspired by Homobiles, an organization committed to providing peer-to-peer safe rides for members of the LGBTQ+ community in the San Francisco area. Sidecar took the operational model from Homobiles (peer to peer) and built it in a beautiful app that seemed heavily inspired by a limousine ride-sharing service at the time...UBER.
Sidecar had a better business model (commission on every “donation,” it was still a legal grey area to accept money for rides), a better operational model (instant v.s. planned ahead with Zimride), and better technology (Mobile, GPS, Route tracking..etc., Zimride had none). Logan & John knew if they did not want anyone to eat their lunch....they had to act now!
A company hackathon was organized. The purpose of the hackathon was to come up with Zimride for mobile. Three ideas emerged out of this hackathon:
On my way: an app to alert friends where you are going, friends. Whenever someone is hitching a ride with a stranger, they can use On My way to make them feel a little bit safer.
Journey: an app to document a trip on Zimride. Share a memory of a trip: photos, music, and everything in between. It was the Lyft/Uber stories we never got!
Zimride Instant: A peer-to-peer ride-sharing concept. eerily similar to Sidecar
Zimride instant won (no surprise here)! The app was built in 3 weeks, and it took less than that to rebrand the concept to something that rolls a little bit easier on the tongue: Lyft. (thanks unacknowledged design intern who came up with the name, logo, and branding)
Go To Market - Lyft
Despite being second to market, Lyft was able to quickly overtake the competition: Sidecar. (Funnily enough, Uber came in third to market and was able to outcompete both).
Lyft relied on its existing network, experience, and marketing stunts (again) to win the market, at least for a few months before Uber launched its own version of more affordable peer-to-peer ridesharing.
Lyft started emailing some of the most active Zimride drivers who lived in the Bay Area and invited them over to the office. Throughout these sessions with Zimride drivers, they pitched the concept of Lyft, did app walkthroughs, and explained the business model (which was “donations” at the time to get around the legal barriers to launch.)
An unintended benefit of those meetings was, however, the establishment of a sense of community. Drivers meeting fellow drivers and the team behind the app amd getting all their questions answered first hand by the founders all helped establish a sense of community among the tight-knit first cohort of drivers.
The second lever that Lyft competed on experienced. Lyft had 4 years’ worth of data on its Zimride drivers. They went above and beyond on security, DMV record checks..etc. Only la creme de la creme of drivers was invited to participate in the Lyft experiment. Sidecar had to bootstrap supply from scratch; they did not have that luxury of choice Lyft did!
Stunts Last but not least is the Pink Mustache bumper protector they bought every driver. Each Lyft car was a billboard for the company. Not any kind of Billboard, it was a billboard that was funny, intriguing, and so out of place that one couldn’t help but google what those were!
Within a year, the Lyft app was downloaded by 10s of thousands of riders. The pink mustache was the new Frog and Beaver custom.
Nicely done @Logan & @John 🙏!
Lessons & Takeaways:
Short windows of peak demand fuel word of mouth. A product takes a life of its own when solving a problem that everyone faces at the same moment of time.
Grabbing attention: do whatever it takes to catch people’s attention, especially in the early days! Do whatever competitors are not (or can not do) even if that means spending tens of hours walking around in a Frog custom every week.
Focus: Logan & John sold off the profitable Zimride business just within a year of launching Lyft. They directed 90% of the company resources to Lyft within a couple of months of launching! Big risk == Big reward
Seize the right moments: Logan could not have predicted the benefits of being early on Facebook Connect. It gave him a launching pad (by getting promoted in the keynote), it facilitated him meeting John, and even the first institutional check into Zimride came from Facebook. It’s hard to underestimate the power of being early. And even after 4 years, when the shift to mobile was happening, John and Logan gave everything up to be early in the space! I think it worked out alright
Until we meet next week,