Startup Watch: Car-Sharing Service Lyft Looks to Branding to Break Out From the Crowd

Five-Month-Old Ridesharing App Has Alex Bogusky as Adviser

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Cars with hot-pink mustaches on their hoods have become a familiar sight in San Francisco thanks to Lyft, a ride-sharing app that launched in June.

In a city where taxis can be scarce and Uber's black town cars are rampant but expensive, Lyft has quickly gained visibility due to low prices and quirky branding. (Adman Alex Bogusky is an adviser.)

Lyft works by letting users summon drivers -- who ride in their regular cars and don't have taxi permits -- to their location, and notifying them with a suggested donation amount at the end of the ride. Although a free ride is technically possible, the prospect of a bad rating is meant to keep users honest, since it makes getting future rides more difficult.

Matt Earnest
Matt Earnest

While the concept of a ride-sharing marketplace based on voluntary payments isn't unique (one of its more well-known local competitors, SideCar, also launched in June), Lyft is looking to branding as a differentiator. In addition to decking out their cars with mustaches, Lyft drivers (who are vetted through DMV and criminal background checks) are urged to fist-bump their passengers upon picking them up, and passengers are urged upon installing the app to sit in the front seat.

The idea is to "design happiness into the whole experience," according to John Zimmer, co-founder and chief operating officer of Zimride, the company behind Lyft, who said there have been cases of drivers and passengers who met and started dating.

Zimride's first product of the same name focuses on longer-distance carpooling and is geared toward universities and companies. It was founded four years ago and has raised $7.2 million altogether.

"To us, it's all one thing," Mr. Zimmer said of Zimride and Lyft. "The goal is to solve the fact that 80% of seats on the road are empty."

Zimride last officially reported the number of Lyft drivers at 250, but it's looking to grow quickly and is actively recruiting drivers using Facebook ads that mention making "$20+" an hour. It hasn't seen a need to do any consumer marketing, Mr. Zimmer said. He noted that Lyft's adviser, Mr. Bogusky, had warned against pairing the company logo with its pink mustache icon in any overt fashion, since the mystery behind the mustache would prompt those wondering about the cars to talk and ask if anyone knew what they were about.

The proliferation of ride-sharing apps has drawn attention from regulatory agencies, and Lyft (along with SideCar and another ride-sharing app, Tickengo) was served with a cease-and-desist order from the California Public Utilities Commission over the summer on the grounds that it hadn't been granted permission to operate.

But Mr. Zimmer says Zimride is now in "productive dialogue" with the agency and hasn't been fined. (Notably, Uber was served a similar order in 2010 but has continued to operate in San Francisco, where it started, with impunity.)

Once the business matures, Zimride ultimately intends to make money off Lyft by taking a 20% cut of fares (technically donations). Overhead includes its current 30 employees and the $1 million excess liability insurance policy it's taken out to head off critics who suggest the service isn't safe.

Asked whether Lyft competes with Uber, a smartphone-based car-hailing service that operates with professional drivers, Mr. Zimmer said that the intimacy of the Lyft experience is different. But he added: "All of us who are creating these alternatives are making it easier not to own a car in the city."

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