How Lyft's John Zimmer went from sleeping on a couch and eating frozen Trader Joe's meals to running a $7.5 billion company
- John Zimmer is the cofounder and president of the ride-hailing service Lyft.
- Lyft was founded in 2012 and has faced a fierce competitor in Uber since the beginning.
- In the past year, Uber has come under fire for a series of missteps while Lyft has maintained its "nice guy" image.
- Lyft is valued at $7.5 billion and covers 94% of the US population.
For more than five years, Uber and Lyft have been locked in a battle to become the ultimate ride-hailing service. Uber has been the leader with a war chest of billions of dollars from investors. But it has come under fire for how it treats drivers and its employees.
Then there's Lyft, which is also worth billions. One of its biggest advantages seems to be its "nice guy" reputation. But it can be hard for nice guys not to finish last.
"We had a competitor that was trying to put us out of business with capital," Lyft's cofounder and president, John Zimmer, told Business Insider's podcast, "Success! How I Did It." "There was a point three years ago where they had 30 times the amount of capital as us and were trying to use it to give incentives to passengers and drivers such that people weren't using our service. And so it was hard."
On this episode, Zimmer tells us how he got rich by not caring about money, plus how he survived early startup years by living on a couch in an 'apartfice' and eating microwaveable meals from Trader Joe's.
Listen to the full interview on "Success! How I Did It" here:
- Life coach Tony Robbins
- Hearst Magazines CCO Joanna Coles
- Former CIA Director John Brennan
- And a "Master Class" episode of advice from our guests
The following is a transcript of the podcast, which has been lightly edited for clarity and length.
Alyson Shontell: You've been thinking about ride sharing since you were in college. Back then, you came up with a business that sounds a lot like Lyft, but it had a ridiculous name.
John Zimmer: Yeah, I had started writing a business plan with a horrible name.
Shontell: What was it?
Zimmer: It was called "The Waddle." It's really, really bad.
Shontell: The Waddle? Oh, my God, that's amazing.
Zimmer: It's horrible.
Shontell: I'd love to see you pitch a VC with that name.
Zimmer: Yeah, luckily I never did.
Shontell: So you're from Greenwich, Connecticut, one of the wealthiest ZIP codes in the US. I imagine that shaped your ambition in some way, but what was growing up like?
Zimmer: As a kid I was surrounded by a lot of people who valued material objects, and it wasn't important to my parents, to my family. But there were people who would get excited about the car that they got when they were 16, and it was a ridiculous car, or about a watch. And those things never mattered to me.
But it was really interesting to grow up in that environment and almost fight those feelings that were kind of being impressioned on kids as important. And so I had to figure out for myself how to define success differently than a lot of the other members of the community, who were more in material objects. And that took me on a journey over many years.
As a kid, I got the most joy when I was with other people, part of a strong community, making people happy, and so one of my first jobs was in a hotel as a phone operator. At the Hyatt Regency in town I asked the general manager if I could work there.
Shontell: And you were under age, right?
He said, "No." And I said, "What do you mean?" He said, "Well, you're too young." And I said, "OK, well, can we talk to your lawyers and figure this out?" Because it was like a legal concern. And he was shocked that I was really pushing. We ended up figuring it out and he said, "Fine, kid, you can answer the phone."
He gave me this really baggy suit because I was really small, and you had to wear this Hyatt suit, and so I sat out of sight behind the front desk and answered calls from guests in the hotel and people calling from outside as well. That was another chapter in my love for hospitality and delighting people through great service, and I ended up going to study at Cornell hotel school.
Shontell: But then you took a class that changed what you wanted to do, right?
Zimmer: Yeah, so my senior year, I took a city-planning class in the School of Architecture, Art, and Planning, and the class was called Green Cities, and I had this amazing professor. Some of the themes were geography, resources that existed in that geography, and how they moved over time, and he ended the lecture saying what was a really important turning point in world history:
"Population density is rising rapidly as more and more people move toward cities, resources are becoming limited in those cities, and the infrastructures that we built were built decades before there were so many people living here, and, simply, if we don't fix those infrastructures, we're going to have major economic, environmental, and social problems. And if you don't make this class the most important thing you do this semester, I don't want to teach you."
Zimmer: And then he just bailed.
Shontell: Like, I'm out, mic drop.
Zimmer: Yeah, a mic-drop moment.
And then his eighth lecture was on transportation history, and he talked about the evolution in the United States from canals to railroads to highways. And he had these zoomed-out images of those infrastructures - canal lines, railroad lines, highway lines. And I start thinking, "What would be next?" What would be that next infrastructure that's going to be built? Because when individuals were building the canals, they weren't thinking, "In 100 years no one's going to care about this and we're going to have something totally different."
And so I was trying to figure out, "What are we missing? We have so many roads. We have 250 million cars. How are we going to completely change our infrastructure?" And after thinking about it through the lecture, I couldn't figure out what the next physical infrastructure would be; I couldn't understand how we were going to kind of tear up these roads and change how each of these major US cities would look.
If you think about Manhattan or LA, the majority of those cities are paved over with infrastructure for cars. And then it struck me: As a hospitality student, what if we consider the transportation system like a hotel? So I call this "transportation hotel," and I ask, "What is the occupancy in transportation hotel?" And so I started looking at the car itself, and I found out that the car is utilized 4% of the time, it sits idle 96 percent of the time, and therefore we built a lot of infrastructure like parking for that 96% of the time that we're not using it.
If you do it on a seats basis, it's 1% of the seats are used at any given time. So transportation hotel is horribly run. A hotel with that low occupancy would be done the second it started. I wanted to figure out, "How could you increase occupancy?" Which in turn would reduce costs for people, because owning and operating a car is the second-highest household expense in the United States. It's a symbol of, and a reality of, economic mobility in our country, because public transportation is fantastic, but it's not available for everyone across the country. I wanted to figure out how to bring down the cost by increasing the occupancy and provide better service, because in hospitality, occupancy and service are the two main criteria.
Shontell: So this really gets you thinking, but you don't go and start Lyft right away. You went into Lehman Brothers. What happened there?
Zimmer: I wanted to understand finance; I wanted to understand why people got so excited about finance. It didn't make sense to me, but I also wanted to be an entrepreneur, and I felt that getting some financial background would be valuable.
And then the goal was to take whatever money I was earning for the two-year analyst program and save it and not spend it. And so I went to Manhattan and worked at Lehman Brothers from 2006 to 2008, which was a very interesting time to be there.
In 2007, I was on Facebook one night, and Logan Green, my cofounder, who I didn't know at the time, posted on a mutual friend's Facebook page that he was launching a website called Zimride. And what I came to realize is that he named Zimride after a trip he took to Zimbabwe, where he saw people sharing rides out of necessity, which happens in many developing countries. He'd built it himself and was obsessed with providing an alternative to car ownership. I reached out to our mutual friend and I said, "How well do you know Logan, and why the hell did he call his company Zimride?"
Shontell: It was like it was meant for you.
Zimmer: It was bizarre - and way better than my "Waddle" name for sure.
Shontell: And Waddle was going to be a car service?
Zimmer: It was going to be a carpooling network, a carpooling community, and that's what Logan was building, and he was tying it to Facebook so that people could establish trust online. And so I reached out to the mutual friend, Logan flew to New York, and we met each other. This was 10 years ago, and we started working together.
Finding a cofounder
Shontell: How does that happen? You find someone who eventually becomes your cofounder, who you've never met. You live on opposite coasts. This is like long-distance dating to the extreme. Plus, you've got this other full-time and, I would assume, demanding job at Lehman.
Zimmer: Yeah, I wasn't sleeping much.
I was really excited. I'd always wanted to be an entrepreneur, and I always wanted to solve something that would have a positive impact on people's lives, would bring people together in the real world. I was running on adrenaline, I guess, for my second year at Lehman, and in the first year at Lehman, it was probably their best year ever. And the second year ended with them going bankrupt three months after I left.
But I just was way more passionate about working on Zimride and felt like that was really important to be doing, and so I decided I was going to leave after my two-year analyst program. I was told that I was crazy to leave a sure thing like Lehman Brothers for a silly carpool startup. And again, Lehman wasn't around three months later. And then I used Zimride to carpool across the country to meet Logan, and we both moved to Silicon Valley.
Shontell: Wow. And you guys just hit it off and you're, like, "I could do this with you - this could be great."
Zimmer: Yeah, I mean, at that point it was a side project, and so it felt like a school project where there was a lot of interest, passion, and we had a big vision, but we didn't know what it was going to be, and so we just wanted to see it work. We wanted to see if we could flip a student population at a university. We were mostly focused on college campuses and making the majority carpool to get home for spring break. That was the main challenge, and that's what we were trying to solve. So we moved to Palo Alto and Menlo Park. For the first three years we didn't take a salary.
Shontell: Three years, no salary?
Zimmer: Yeah. I think, at least.
Shontell: Good thing you saved a lot of money.
Zimmer: Yeah, it was helpful that I had saved some money.
And we basically lived in an apartment that was also our office, we called it the "apartfice." We lived off a lot of Trader Joe's microwavable meals. I slept on the couch for at least six months before upgrading to my best friend's parents' house, which was a major upgrade, got a full bed. And then not until my now wife came out and said, "This is ridiculous - we need a little bit of space," and then moved out of that situation.
Turning Zimride into Lyft
Shontell: So talk about what Zimride was and how it started and just what was the concept behind it. Because that eventually became Lyft, right?
Zimride was long-distance carpooling. So you're coming home from - in my case, upstate New York - and you want to go to New York City, so that's about a four-hour drive. You're in your dorm hall. There's one other person, who you don't know, who is also going the same way as you. You guys should be paired up, save the cost of the gas, and split the ride. And some people didn't have access to a car, and so they also wanted a ride. And so we allowed people to basically sell those empty seats in their car. So for $20 or $30, you could sell three seats, let's say, make $60 on your ride home, and you'd actually be making some money rather than losing money on all the costs associated with driving.
We got it to thousands of users and had 150 universities and companies paying us for a closed carpooling network. And then, in 2012, Logan and I looked at ourselves and said, "How are we doing? It's five years in, we had this dream of starting a business, we've done that." We had raised a couple of million dollars, which was fantastic. We had this great team of about 20 people. But the bigger vision, which we've always had, was providing a full alternative to car ownership. Our actual mission is to improve people's lives with the world's best transportation and, in doing so, to change our cities so that they are designed around people instead of cars. And we were just scratching the surface. We really didn't feel like we were doing enough.
And so we said, "What if we were starting Zimride over today? What would it look like?" And when we started Zimride in 2007, smartphones didn't really exist. And one of the biggest problems we had with Zimride was that the frequency of use was a couple of times a year because there were these long-distance trips, and so we said, "Well, what if we could increase the frequency of use? Use a smartphone?" At the time, Uber existed, but they were just doing this for black cars and limos, and to us that was uninteresting.
Shontell: Right, they were kind of for the 1%, that was their thing.
Zimmer: Yeah, they were for that Greenwich population that I was trying to think differently than.
And so I thought, well, getting rides for people who are working at banks - that's definitely not what I want to work on. But providing a full alternative to car ownership and allowing people to use their existing car to make money, that was really exciting. And so within three weeks we launched what we were about to call Zimride Instant, and luckily called Lyft, and that was the beginning of Lyft, in the middle of 2012.
Shontell: So three weeks from concept to a live app. Is that what you guys did?
Zimmer: Yeah - we had two incredible engineers who built the app in three weeks.
Shontell: An intern named it, right?
Zimmer: Yeah, Harrison - he's still here. He's on the design team and he helped come up with the name Lyft as well as the logo.
And so it was a pretty exciting three weeks that we went from start to actually having a ride with drivers that we did background checks for and driving-record checks of, and we'd met in person and kind of talked to them about the culture we wanted to create with Lyft, and then it's been crazy since then.
Shontell: So you launched this and you mentioned you had seen Uber was out there. Do you remember the first time you saw Uber and it resonated?
Zimmer: Not really. Again, the image, the tagline at the time, "Everyone's private driver," that didn't really resonate with me. That's not something we wanted to create. Lyft's tagline was "Your friend with a car" and the goal was to provide an alternative to car ownership. And so we felt like it was very, very different.
Shontell: Eventually, Uber did launch UberX, which is kind of exactly what you guys were doing at Lyft. Was that a hard moment? I'm sure it's frustrating sometimes for you whenever people talk about Lyft; Uber is not far from a next sentence. What is the competition of Uber been like? Do you think that having a worthy opponent has made Lyft even more successful or how have you viewed that from the beginning?
Zimmer: Yeah, absolutely. If we consider ourselves still entrepreneurs who are learning, having a formidable competitor has been great training and has brought Logan, myself, and the team closer together and rallied around our values, and I think what sometimes people miss when they're in an area like Silicon Valley or building a business is like, you can get really caught up in winning.
Winning is awesome. We're incredibly competitive, we expect to win, we like winning. But why is really, really important. We want to win because we believe that the set of values that we hold and the way we envision our cities designed around people is so important to the future of our society, where my kids will live, that that's why we want to win, because we're not certain if someone else helps build cities of the future, that they're going to be built in a way conducive to human interaction.
And so that's what drives us and we've only gotten more and more firm in our set of beliefs and in the necessity in our belief to win to make sure that happens.
John Sciulli/Getty Images for Lyft
Shontell: There are a lot of things that I'm sure were extremely hard in getting Lyft off the ground. First off, the business model itself. You have multiple customers. You've got the drivers you have to keep happy and you have the customers you need to keep happy. So that's one challenge. How did you learn to balance that and figure that out?
Zimmer: Yeah, well, it's very related.
In hospitality, if you use the Lyft example, drivers are critical to everything. If we don't take care of drivers, then passengers don't get taken care of. And so by treating drivers better than any other company, we're going to create the best experience for our passenger. So in that case it's connected, and we always thought of it as really simple. We should be nice to drivers. We should do our best to take care of drivers because that's also going to be great for passengers. So for us, that was always straightforward.
Shontell: But it's easier said than done, because customers want cheaper prices and drivers obviously want to make more money. So how did you figure out the pricing structure that would work? As you're putting this together, how has it changed and evolved, and what have you learned? Because it is very hard to keep two separate entities happy.
Zimmer: Yeah, that's right. That's definitely fair.
It's a balancing act, so this is a marketplace with two sides. We had to kind of try our way into it. In the early days, a product like this didn't exist, so we had to look at alternatives. From the passenger perspective, they're thinking about, "Well, what is my other alternative?" Often at the time, it was a taxi or a cab alternative because the first use case people were using Lyft for was a night out or "I'm going to have a drink - I don't want to drive"-type situation.
Longer term, with things like Lyft Line and where prices are now, I think it can take over more use cases than just that first one, but it's really just through trial and understanding what passengers are willing to pay and how we can get drivers as much of that as possible while moving the business toward profitability.
Shontell: Another challenge has been regulators. It's a very messy business.
It sounds like a great idea in theory, like, "I'm going to just fill cars that aren't being used with people who want to use them at any given moment." It's obviously why consumers would want it. But regulators were resistant for a while and at times sent you cease-and-desists. And it's been extremely challenging in every city you've launched in; it's different. A lot of people who would just be, like, "Well, it's not possible, it's not doable, there are too many things in the way."
Why did you keep going anyways, and how did you get it done?
Zimmer: We kept going because we really believed in our mission, and, when I think about all the moments that were the hardest, like how close we were to failure along the way, it was really this, like, we really believe in the need for making our cities better and designed around people.
We received cease-and-desists within, I think, two months of launching, and our first thought was, "Oh, let's go talk to them and let's explain what we're doing." We'd already done the legal analysis, which made us believe that we were in the clear because this was different than anything that had been done before, but we weren't unaware of the fact that this was very new, culturally, to be riding in other people's cars.
And so we sat down with the regulators, in this case the California Public Utilities Commission, and said, "What are you most concerned about? Why did you send us a cease-and-desist? Is it public safety or is it to protect against existing industries?" And they said, "It's safety, of course." And we said, "Great," and we had this document prepared that walked through all of the safety things that we did, including a criminal-background check, a driving-record check, a million-dollar insurance liability policy to cover each driver. And then we said, "And here's what you require of the entities you regulate." They regulate the black cars and limos in California.
And almost everything was more significant than what they were requiring. For example, they require $750,000, I think to this day, instead of a million dollars for black cars and limos. They do not require a criminal-background check for black cars and limos, which is shocking. And so that led to about a year of back-and-forth to the point where they did create the new category and regulated using that kind of model for safety.
Shontell: And was that one of those near-death moments? Did you guys ever think, like, "Wow, he told us to still stop"? Like, "There's just no way forward." How close were you to throwing in the towel?
Zimmer: There were moments where we were close, and that would have really, I think, prevented the whole industry from growing in the United States.
But again, we felt like we were on the right side of history here, we felt like safety was the most important thing, and that we were being responsible around that. And so we fought through it. But sure, we doubted ourselves throughout. I don't know that we would have thrown in the towel unless they were to lock us up or something, or if there was a moment where there was, like, a decision point. And it was a vote at the CPUC, the public utilities commission.
I remember we went to the commission meeting where they voted on whether or not to pass these positive regulations for this new industry. And we had invited the driver community and passenger community and the room was filled. And I believe it was a unanimous decision. I'm not 100% sure, but after the vote, a lot of people stood up and cheered, and the commissioner said that has never happened before and it was a really exciting moment because we weren't certain of that outcome.
Kelly Sullivan/Getty Images
Shontell: That's a huge win. And now you all are in how many cities?
Zimmer: We cover 94% of the US population - meaning 94% of the US population can get a ride. Well over 300 cities.
Shontell: And how did you devise a playbook for launching in each city? When Lyft is going to go into a new market, what do you do?
Zimmer: Yeah, so, it's changed over the years.
In the early days, we had a launch team that would drop down and recruit driver mentors, which were drivers who had the highest ratings, and then the mentors would train the next set of drivers, and it was a way for us to pass on those set of cultural values we had and the hospitality from driver to driver. And it's evolved such that we can now have 94% coverage and in our top 20 markets, we have local teams, general managers, and they manage an expanding region.
Shontell: You've scaled tremendously. If you had to give a couple of tips for how you scale and how you create mass consumer interest, what do you think were the biggest things?
Zimmer: It's been really helpful to be close to our product, so one, Logan and I drive. That's really important.
Shontell: You actually do Lyft driving? You pick people up?
Zimmer: Every New Year's I drive. It's one of the times where drivers are making a sacrifice from being with their family and helping people who have had a lot to drink get safe rides, and so it's been important to me that I do that every year, and also more recently have committed to driving every month. That's really, really important.
So be close to the experience, and to the people who are driving your business. And, then, obviously, using it daily on the passenger side has been really helpful. Those are some of the main things.
It's a tough balance between "expand quickly" and "don't expand too quickly." And so sometimes some of the best decisions we made were to say no. So whether that was international expansion or we learned sometimes we expanded too quickly in the US and sometimes we had to redo it in a better way. But it's finding that right balance of speed.
Shontell: You've raised a lot of money for Lyft. Definitely over $2 billion - valuation of $7.5 billion since last I checked. So as someone who's raised a billion-dollar round, what are your tips for fundraising and navigating VCs. Was it ever hard to do in the fundraising process of Lyft?
Zimmer: It was absolutely hard to do. We had a competitor that was trying to put us out of business with capital, and that was larger than us and a lot of investors were asking.
Shontell: And how were they doing that?
Zimmer: There was a point three years ago where they had 30 times the amount of capital as us.
Shontell: That's insane.
Zimmer: And we're trying to use it to give incentives to passengers and drivers such that people weren't using our service. And so it was hard.
But honestly, the best advice I can give to other entrepreneurs is to work on what you're passionate about. If you're working on something just to win or working on something just to make money, in all those tough moments, like raising a round when your competitor is trying to put you out of business with 30 times the amount of capital, it's not going to be a genuine pitch. It's going to be hard to overcome those moments.
But when you care about the work so much, investors can see that. And we had to articulate how we were going to get to where we are today and we found enough people that believed us.
How to win in business as a nice guy
Shontell: You guys have grown the company tremendously. It's been not that long, 2012 to now - five years you guys have been in business. But everybody says Lyft and Uber in not-too-distant sentences. You've always had a competitive environment. I know you and Travis have had your moments as well. And the personalities of the brands are just completely different, it seems. You walk into your office and it's a very happy, pleasant place, and everyone seems nice and genuine. How can you win in business and be nice? Do you think that that hurt you ever?
Zimmer: It's strange that it's become a thing, because treating people well is great for business.
It is complementary to doing well in business. But there's been this story told of founders who are just not nice to people and that's what it takes to get ahead. And that's just not true.
Shontell: I mean all the way back to Steve Jobs: He's a good example of someone who was cursing out people in some rooms and then also changing the world.
Zimmer: Yeah. I never met Steve Jobs, and I've heard both sides of that story.
What I do know is that most businesses require other people to help you get where you need to go. Whether that's our employees - we call them team members - whether that's in our case the drivers or customers, passengers using the service, great service, great hospitality, treating people well, having a good set of values. That is great for business, and we are out to prove that, along with the mission we have to make our cities better.
Shontell: And if someone is just graduating from Cornell now and wants to create the next billion-dollar, multi-unicorn company, what's your advice to them?
Zimmer: I wouldn't focus on the billion dollars or the term "unicorn." I would focus on why.
Why do you want to do this? What do you actually want to do? What are you passionate about? What do you think needs to be better in the world?
There are a lot of things that need improvement and that can be in the business arena, that can be in other arenas, but certainly in the business arena; there are big opportunities and we've got to focus our business success and metrics around the impact they're having in the real world. And so I would push the next set of entrepreneurs to do that.
Shontell: Isn't it a little bit ironic that you started out by saying what you didn't like about Greenwich was the materialism and now you could probably go buy the biggest house in Greenwich if you wanted to?
Zimmer: But I don't want to.
Shontell: Well, there you go.
Thanks. Congrats on all of your success with Lyft. And hopefully this inspires other people to create the next big thing.
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