Does Lyft have the IP to Win Big in Public Markets?
After months of speculation, Lyft filed for its IPO.
The long awaited filing sheds light on Lyft's financials, but also raises questions about the ride-sharing giant's long-term viability.
Lyft’s disclosure that it will lose money for the foreseeable future highlights the intense competition for market share in the ride sharing market. Currently, Lyft subsidizes ridership through steep discounts for riders, putting unsustainable pressure on their bottom line.
In light of this, Lyft has emphasized its narrow focus as a long-term differentiator. That focus, they argue, will help them outperform competitors like Uber that are chasing multiple verticals (e.g., autonomy, E-commerce)
However, Lyft’s IP portfolio tells a different story:
Lyft has developed and acquired IP across a broad set of technologies. And while a large, diversified IP portfolio can be an asset for large companies, Uber has ten times more IP than Lyft.
In a sign that they recognized the shortcommings of its portfolio, Lyft acquired nearly 70 patents in the months leading up to filing its S-1 IPO documents.
Their shopping spree highlights the importance of IP to mitigate legal risk and create barriers to entry - particularly for public companies.
The acquisitions, primarily from AT&T's IP portfolio, focused on key elements of rider experience where other competitors had limited positions:
Telecommunications: Automated telephone response for riders calling their drivers or customer service
Video Content Distribution: Streaming media for passengers
These acquisitions nearly doubled the size of Lyft's portfolio and show that Lyft has recognized the value of an activity Uber has been prioritizing for years.
The timing shows that IP is a critical metric investors look at in highly competitive markets with limited comparable IPOs.
On this note, we looked at premiums investors have paid for other technology companies based on the strength of their IP portfolios.
While patent count alone doesn't tell the full story, it can be a helpful indicator of company IRAD and differentiation.
Lyft is fairly well-positioned compared to other recent Unicorn IPOs. However, Uber will likely command a similar revenue multiple with a substantially larger IP portfolio.
The Big Picture:
Lyft has built an IP portfolio that compares favorably with other Unicorn IPOs that commanded similar premiums. However, serious questions remain about Lyft’s ability to compete profitably.