Lyft is announcing this morning that it has sold off its legacy ride-matching business Zimride to rental car giant Enterprise Holdings. The sale will allow Lyft to focus on its fast-growing, on-demand ride-sharing business, while also adding to its war chest as the company expands into new markets and competes against the likes of Uber and SideCar.
Terms of the deal were not disclosed — we’ve asked and will update this post if we find out elsewhere — but disruptive car companies exiting to large, hulking incumbents looking to get more innovative can be big business. As a point of comparison, earlier this year Avis bought car-sharing company ZipCar for $500 million.
Founded in 2007, Zimride was all about connecting users for long-haul rides and carpooling for universities and businesses. The service made the vast majority of its money from SaaS-based ride-matching software that was run privately through individual schools and companies. The company had more than 130 university and corporate campuses signed up to offer ride-sharing and carpooling through Zimride.
For Enterprise, the Zimride assets will fit nicely with certain pieces of its business. While it’s best known for owning rental car agencies such as Alamo, Enterprise, and National, it has a couple of products in the car-sharing and carpooling space.
One is called Enterprise CarShare, and is geared toward car-sharing, while another is called Enterprise Rideshare, and provides carpooling and vanpooling for commuters. The acquisition of Zimride will give it the technical infrastructure to complement the physical infrastructure — i.e. cars and vans that it already owns — and grow that part of its business.
For Lyft, the decision to sell its Zimride assets was made after it shifted focus to a faster-growing portion of its business. While Zimride had steady revenues, it didn’t show anywhere near the growth trajectory of Lyft’s on-demand ride-sharing business, which was launched early last year. Built to connect users for short rides around major metropolitan areas, Lyft grew to provide more than 30,000 rides a week after operating for just a year.
With that in mind, the startup began putting all of its efforts into developing the new product and growing that business, to help get people around cities like San Francisco, Los Angeles, Seattle, Chicago, Boston, and San Diego. In May, the company solidified the move by shedding its legacy Zimride name and re-incorporating as Lyft, Inc.
The sale to Enterprise will allow Lyft to focus just on its local on-demand service, especially as it looks to aggressively expand into new markets over the next nine to 12 months. “We’re a startup, and it’s hard for us to be running two businesses,” Lyft president John Zimmer told me by phone this morning.
There’s another side benefit to Lyft selling the Zimride assets: While terms of the deal weren’t disclosed, the sale will no doubt add to Lyft’s large — and growing — war chest as it looks to expand and compete against Uber in the on-demand transportation space.
Since the start of the year, Lyft has raised $75 million through two new rounds of funding. The first was for $15 million and was led by Founders Fund in the early part of the year. Then in May it announced an additional $60 million funding led by Andreessen Horowitz, with general partner Scott Weiss joining the board.
Now live in six cities, Lyft is looking to enter new markets. The company has 80 employees, most of which are operating out of San Francisco, and it plans to rapidly expand into many other cities over the next few months.