If business partnerships are a high-stakes form of matchmaking, then the strategic partnership between Lyft and the automotive services giant Holman was something of an odd-couple proposition at the start. When first broached five years ago, the companies’ working styles and cultures—a fast-growing Bay Area startup and a nearly 100-year-old East Coast retail bastion—were almost diametrically opposed. But though the history of attempted tech partnerships is littered with mismatches and false starts, this pairing provides a case study of a dynamic, mutually beneficial relationship that has withstood the test of time.
We asked two key players in the Lyft-Holman partnership to share the missteps and most useful learnings behind their eventual success. From how to build a custom playbook to how to effectively communicate through crises, here’s how they navigated obstacles to reach a win-win outcome.
Bill Doman, Director of Market Development at Holman
Stephen Hayes, former Strategy Manager at Lyft, now CEO at Flexdrive (a Lyft subsidiary)
Bill Doman, Holman: About six years ago, our strategic ventures group was looking at different investments in “new mobility.” It was really important to us to get into this new mobility space, and we were looking at a few different companies in the ride handling, ride-share, and car-share space. Holman had originally planned to go pretty hard with car subscription into dealers and retail, but we were a little too early to the game.
Stephen Hayes, (formerly) Lyft: Driver supply is really the heart of the Lyft business. If a rider opens the Lyft app and sees a three to five minute ETA, that’s a sweet spot for conversion. In order to be able to provide that, we needed to have a broad base of driver supply, and those drivers needed high-quality vehicles. For us, it was about being able to create more opportunity for drivers and offer a more consistent brand experience.
With that in mind, we needed someone to help us quickly launch and scale an asset-intensive rentals business. At the time, we offered vehicle rentals through third-party partners, but we wanted to be able to roll up our sleeves and understand how to effectively manage a large fleet of vehicles ourselves.
Around that same time, Uber was dealing with the fallout from a similar strategy: they had set up a subsidiary that they were using to rent vehicles to drivers. That very publicly shut down at the end of 2017 after losing $9,000 per vehicle that they had purchased. It amounted to hundreds of millions of dollars of losses. So this felt very much like a “can’t fail” moment for Lyft.
Bill: Our typical customers are companies like FedEx, Exxon, and Comcast. Those are usually fleets where the company’s employees drive the vehicles and we support the customer in managing that. Lyft’s proposed use case was unique for us: at that point, they weren’t far into the concept of procuring and selling vehicles and managing everything in between themselves.
And at that time, Lyft was renting vehicles to drivers via third-party partnerships (e.g. Hertz), so the cars were someone else’s assets. This was their first foray into actually managing vehicles on their own balance sheet. So the tax treatment of it, the rental contracts, the balance sheet, all of these things were brand new for them.
Stephen: We knew that we had a lot to learn. We came in and said: “We want to do impossible things in very short amounts of time.” And Holman was in the position to enable it.
Bill: Our early agreement with Holman’s president was: “Don’t let [this partnership] interfere with the rest of the business as you’re building it, but let’s come out with some strong learnings at the end so we can adapt our processes.” It was a good way for us to quickly “learn by doing” in this new mobility space.
Stephen: At the very beginning, my role was basically getting the rental business off the ground. I helped drive the negotiations, and then set up the partnership once we placed the initial vehicle orders. It took nearly a year of negotiation and solutions architecture to figure out the mechanics of: How are we going to operationalize this very complex idea?
Bill: I was the lead from a business development and operations standpoint, and Stephen was my guy on the other side.
Stephen: Talking to Holman in the early days was like a warm blanket—every question that we had, they either knew the answer or knew who to talk to get that answer. We very quickly realized that this company knew every single aspect of the automotive industry inside and out and could serve our needs, from vehicle financing to acquisition to ongoing fleet services.
Bill: We spent a two-day workshop peeling apart every single process that we currently do. We went through all our standard operating procedures: where we order a vehicle, how we source it to the customer, how it goes into service, how the lease activates…
Stephen: That was a really important moment in the early days of the partnership. The various teams came together and we talked through every aspect of what it was going to take to run this business, step by step. Everything you can imagine that can happen to a vehicle will happen. And so we needed an answer to every scenario: How do we ensure that the vehicles get to the right place at the right time? And then how do we get them on the road? How do we manage the facilities? How do we manage vehicle service and maintenance and collisions?
Bill: Keep in mind, these are gig drivers, not employees. They can’t be directed how to do their job: You can give them tools, give them instruction, and incentivize them. But at the end of the day it’s a much different animal [than we were used to]. So it was critical to go in with an open mind. We couldn’t assume that we would just plug-and-play what we had previously done. Going through that exercise of breaking down every single process—and then rebuilding it up so that it was custom—that really was the magic in this.
Stephen: We paired Holman team members with Lyft team members to map out our playbook. I think part of the secret sauce is I’d hope that any member of the Holman team who works on this partnership would feel like they are absolutely trusted peers of their counterparts on the Lyft side.
Bill: The Lyft team came in and really rolled up their sleeves; it was really important that all of us sat at the table and worked through some of these things together. We stood up a team of over a dozen people at Holman to live within Lyft’s operational groups, from the account management side to maintenance management to billing.
Stephen: We completely integrated the Holman team with our team. There was no there was no information that we didn’t share with each other. That was critical—we needed both sides of the equation to quickly solve some of the issues that came up.
Culture and Speed
Bill: It took some time for us to get on the same page around culture and speed, in particular. We’re very proud of our culture—it’s more on the traditional side. Our first meeting with Lyft, most of us were probably buttoned up with suits, and I don’t think any of them had on anything more than a t-shirt. So on one hand, you’ve got this nearly 100-year-old, family-owned, privately held company on the East Coast, and on the other you’ve got this startup on the West Coast.
Stephen: The cultures of Lyft and Holman were incredibly different at the time. Lyft was not afraid to set incredibly audacious growth targets and Holman was like, How exactly do we deliver on that? Lyft tends to be more: “move fast and break things” and Holman is more: “this pace has worked very well for us for the past hundred years.”
Bill: When we reviewed their initial ramp-up plan, our jaws dropped. They wanted to go from zero to 10,000 cars really quickly. We don’t shy away from customization, but the velocity they expected was a lot.
Stephen: Within a couple-month period, we were going to go from not being in this space at all to being one of the 10 largest commercial fleets in North America.
Bill: We’re typically taking on a company that has a set number of assets already operating. Starting at zero was very aggressive, to say the least. But it served as a great challenge for us: launching new markets, learning that together.
Stephen: There were all sorts of growing pains in the beginning as we grew really rapidly while not having a strong handle on things. But I think we approached these issues with Holman collaboratively and in a solution-oriented way. There were the times that we stubbed our toes, and then there were more substantive initial misalignments with Holman.
Bill: Don’t make assumptions that the other company knows your business as well as you do. When you live and work in an industry day-to-day, you take for granted that everyone thinks like you do. That was typically where we got into trouble, on both sides. They made some assumptions on how the operations would unfold and where the boots on the ground would be for the folks actively running the fleet.
Stephen: One of the initial incorrect assumptions that I had was that Holman would single-handedly do all of the work related to the vehicles. And they do have incredibly wide-ranging and vast domain expertise in the automotive space. But, like everyone, they also have partners and various contractors that they work with for different things. That was probably something that we could have just been more clear about upfront or we could have asked better questions to get at early.
Bill: When you’re talking about physical assets on the road—yes, there’s a lot of data exchanged—but this is not a virtual world for us. You’re still talking about physical assets that have to move from point A to point B and get into maintenance shops. They have accidents. They have to be repaired. There are a lot of touchpoints on the vehicles.
Stephen: There is so much unsexy, but mission critical stuff that you have to get right every time when you’re talking about managing a fleet of vehicles. Everything from vehicle registration to renewals to going to the DMV at the right time.
Bill: That’s a great example of a disconnect: When it comes to maintaining a car, for example, most people know you have to get oil changes at a certain interval. That was the kind of thing we might take for granted. But most of the Lyft guys didn’t even own cars.
Stephen: We had a ramp plan for when the vehicles would come online and be available to drivers. Then we found out that there were 250 cars in LA that didn’t have their license plates because we weren’t able to talk to the right person at the DMV. This was expensive; a vehicle is an asset that’s depreciating in value, so you’re incurring costs on vehicles that are sitting unproductive. So there were a lot of early-on conversations around: How do we solve this problem as quickly as possible?
That meant we needed to get aligned at the headquarters level, but also tactical things like: who is going to go to the DMV and knock on the door and wait in the waiting room until we can talk to the right person to get this resolved?
Bill: Delivery was another example: Delivering a thousand vehicles through one single point in one market within two to four weeks…no one was going to be able to handle that. A retail dealer is not set up that way. So we had to create custom staging partnerships, dropping vehicles in to get them customized and ready for the road. We had to get telematics installed, so all the paperwork was in the glove box and the car was turnkey ready. That was a shift from our normal process—this generated a whole new supply chain process for us.
Stephen: Bill and the team’s approach to how we work through those very tactical issues was very confidence-inspiring for us.
Stephen: One of the absolutely critical assumptions that underpinned the entire financial model was: How many miles per year are going to get put on these vehicles? We aligned with Holman on what we thought that number would be and…surprise, the number of miles was much higher than we had projected.
Bill: On this side of the house, while we live in the world of unit economics, the mobility element was new. Fast forward, and we certainly know a lot about managing mobility unit economics now. There was a bit of a learning curve there, and the Lyft team was a great partner.
Stephen: That was one of those early learnings that had a big impact on our projected unit economics. We had to rework the financials and how long we’d keep these vehicles in the fleet based on that. It was one of the first big moments that was like: Okay, the business case was wrong on this. How are we going to solve it together?
Stephen: We’re now in about 30 markets and we have a fleet of over 10,000 vehicles. At the beginning, Holman was really responsible for doing everything vehicle related for us. Over time we started to say, “Hey, I think we’re ready to take this part on ourselves.” Bill and the Holman team’s reaction was always: “Great, how can we help you nail that transition?” That was when I knew that the partnership was really going to work and endure—I saw that we could have very frank conversations. Their willingness to let us take on more and more over the years was instructive, and there was a quiet confidence that underpinned that.
Bill: You need structured, repeatable processes—and there wasn’t much structured or repeatable about this. So as the business started to grow and scale, documentation was key. As new people were brought in, it was important to have that custom playbook that we generated for this particular use, on both sides.
Stephen: Holman’s culture and the way that they operate means people often commit to the company for their entire careers. So we’ve been very fortunate to have a remarkable amount of consistency in the team that we’ve worked with there. Coming from the tech space, Lyft employees tend to have a shorter tenure. So it’s been important to preserve that institutional knowledge over the years.
Stephen: We have good practices around getting together in person on a regular basis and reviewing the state of the business. Frankly, the personal relationship that I’ve built with Bill over the years has been really helpful to cut to the heart of issues really quickly when there are inevitable miscommunications or escalations.
Bill: It’s cliche, but it was the relationships that made this partnership work. When we hit tough times, we had the ability to sit down at the table, work through the issues, and reset.
Stephen: That was a key learning: We pushed them out of their comfort zone and they, in turn, showed us that there are no shortcuts to success in an asset-intensive business. We’ve helped them expand into this new mobility area, and they’ve shown us what it actually looks like to run an enduring business on the fleet side. And that capability—to manage a large fleet at scale—sets us up as we begin deploying electric vehicles at a significant volume on the platform.
Bill: We failed a bit in the beginning, but a lot of those failures turned into learnings—and eventually successes—that shaped the future of our business. We’ve made a lot of great connections and some significant investments as a result of this partnership.
Stephen: I feel proud that five years after jumping into this “can’t fail” situation, with Holman’s help we have been able to build a strong and profitable business.
* * *
The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; a16z has not reviewed such advertisements and does not endorse any advertising content contained therein.
This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments for which the issuer has not provided permission for a16z to disclose publicly as well as unannounced investments in publicly traded digital assets) is available at https://a16z.com/investments/.
Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.