The future of the ride-hailing industry depends on the capricious largesse of two internet billionaires on opposite sides of the globe. Alphabet Inc., led by Larry Page, just backed Lyft Inc., while SoftBank Group Corp. chief Masayoshi Son is set to take a big stake in larger rival Uber Technologies Inc. Alphabet unit CapitalG led a $1 billion investment in Lyft on Thursday that valued the No. 2 US ride-hailing company at $11 billion. SoftBank is expected to put a fresh $1 billion into Uber, and spend billions more buying shares from existing investors. It wasn’t always this way. In fact, it’s a stunning role reversal. Four years ago, Alphabet’s venture capital arm co-led a $258 million investment in Uber when the company was worth about 4 percent of its most-recent $70 billion valuation. David Drummond, Alphabet’s chief legal officer, sat on the board.
The investment — which back in 2013 was shockingly large — came when Uber was just beginning to evolve from a black limo business into the globe-spanning, law-bending transportation network it is today. Alphabet had made a prescient bet and seemed to have picked a winner in a market made for monopolies or at least duopolies. Uber hired a string of top Alphabet executives including Brian McClendon, Amit Singhal and Rachel Whetstone.
But the alliance withered and then turned ugly over a technology that could transform the ride-sharing business and transportation more broadly. Page gave Uber the cold shoulder when the startup’s co-founder Travis Kalanick tried to partner on self-driving cars. So Uber launched its own autonomous vehicle project.
Any amity that still existed evaporated in August 2016 when Uber announced that it was purchasing Otto, an autonomous trucking company run by former Alphabet self-driving car employees. That month, Drummond officially left Uber’s board — even though he’d stopped attending meetings many months prior. In February 2017, Alphabet sued Uber for stealing its trade secrets.
Now Lyft is more a part of Page’s autonomous ride-sharing vision. When Alphabet’s Sidewalk Labs unit proposed building a new digital district in Toronto, it mentioned Lyft three times and Uber once in the plan it submitted. Alphabet’s Waymo and other autonomous vehicle tech companies will help deploy a fleet of “taxibots” and “vanbots” and “existing ride-sharing providers, such as Lyft, would be welcome,” Sidewalk Labs said.
Masayoshi Son’s switch is arguably even more dramatic. Before wooing Uber in recent months, SoftBank had invested billions of dollars in the following ride-sharing startups: Didi in China, Ola in India and Grab in Southeast Asia.
By 2015, SoftBank had formed an anti-Uber alliance that earned nicknames like DKGLO (which stands for Didi Kuaidi, Grab, Lyft, and Ola). There were partnerships and cross investments. Didi invested $100 million in Lyft that year. Lyft and Didi were going to partner up. It seemed inevitable that SoftBank would join team Lyft, and Son even hinted he was interested earlier this year.
Yet Son’s highest-profile ride-hailing bet, Didi, had already struck a truce with Uber. In August 2016, Uber took a 17.5 percent stake in Didi and walked away from the Chinese market. The enemy of SoftBank’s friend was no longer its enemy. Meanwhile, Uber and SoftBank both made a new rich mutual friend — Saudi Arabia’s sovereign wealth fund. That vehicle is the biggest backer of SoftBank’s $93 billion Vision Fund and wrote the largest check so far to Uber.
Now, SoftBank is set to take two Uber board seats, assuming the deal crosses a few more hurdles. SoftBank’s Ron Fisher and Sprint’s Marcelo Claure have been discussed as two potential board members. CapitalG’s David Lawee joined Lyft’s board. But you can be sure Larry and Masa are pulling the strings.