Japanese ecommerce giant Rakuten leads $530M round in Lyft, takes 11% stake

Japanese ecommerce conglomerate Rakuten has led a US$530 million investment round for Lyft, the San Francisco based ridesharing startup. TechCrunch  first broke the news of the round, and Lyft quickly confirmed it on its blog. Rakuten also told Tech in Asia that it is taking an 11 percent stake in the firm for US$300 million, and provided the following canned statement from CEO Hiroshi Mikitani:

Rakuten also states that it is investing for Lyft’s “domestic and overseas expansion.”

This isn’t the first investment Lyft has taken from an East Asian internet giant. Almost a year ago, the company closed a US$250 million round with participation from Alibaba, China’s leading ecommerce firm.

Despite bets from high-profile Asian investors, Lyft is only available in the United States. The company’s business model, in which ordinary people get paid to ferry passengers in their personal vehicles, occupies a legal grey area in almost every city. This arguably makes global expansion difficult. Uber, on the other hand, enters markets with its chauffeur-in-a-town-car tier first, before stealthily opening up registration to average Joes. This helps the firm bide time as it establishes a market presence.

Even as investments for transportation networks continue to surface, the ride-hailing industry is growing saturated in both the East and the West. Startups are bowing out and rivals are consolidating. This could also pose challenges for new entrants who seek to build out a network of passengers from scratch.

But even if Lyft’s chances of moving beyond the US (or even flourishing inside of it) appear slim in the short term, there are other reasons for an Asian internet company to invest. Ridehailing startups collect treasure troves data about maps and traffic patterns. They also might observe how Lyft’s sharing-economy model can be imported and tweaked for Asia, when the timing is right. China’s leading transportation network is the newly-merged Kuaidi Dache and Didi Dache, both of which center on taxis, not ordinary people. India’s Ola and Southeast Asia’s GrabTaxi also primarily offer taxi-hails, and Japan looks set to see a boom in on-demand cabs thanks to LineTaxi. Peer-to-peer ridesharing, meanwhile, hasn’t yet achieved market dominance (though UberX is available in many Asian cities).

Over the past two years, Rakuten has made a string of global acquisitions that include chat app Viber, video streamer Viki, ecommerce app Slice, coupon service Ebates, and ereader Kobo. The company also owns several ecommerce properties in Europe, and invests in early-stage companies through Rakuten Ventures.

Editing by Terence Lee, top image by janitors