While the average person can easily switch between the Uber and Lyft car service apps, investors aren’t so lucky.
Both Uber Technologies and Lyft Inc have created some pretty stiff rules for potential investors. As the companies head into another series of fundraising efforts, they are requiring investors to sign paperwork that confirms that they won’t invest in the competing company for a period of anywhere from six months to one year.
First, we need your signature. According to people familiar with the matter, both car services require a sign off on the agreement before investors can see internal company data that could help them make a decision whether or not to invest further. Typically, investors avoid making commitments to rival companies in order to avoid conflicts of interest. But it is almost unheard of for companies to be making these types of requests.
These terms are aggressive and very rare in the world of venture-capital investing – and they underscore the bitter rivalry between the two similar services. In addition, they show how much leverage the companies have developed in the market overall.
Uber aiming to raise more. Uber is the larger of the two companies and was valued at $41 billion in a funding round announced last December. Uber is aiming to raise an additional $1 billion in the next round of investing, which would bring them to $5.6 billion in equity funding total. According to the Dow Jones Venture-Source, this is the most on record for any private company backed by venture capital.
Lyft had been valued at more than $700 million last April after it initially raised $250 million from investors like venture firms Mayfield Fund, Andreessen Horowitz and Coatue Management LLC, among others. It aims to raise an additional $250 million, which may bring the valuation up to around $3 billion.
Both companies are getting closer to selling shares to the public, and may require investment banks to make the same sort of loyalty promise that they are requiring from investors.