Andreessen Horowitz Sells Some Lyft Shares to Prince Al-Waleed

Two of the most prominent investors in ride-hailing service Lyft Inc. quietly sold $148 million in shares of the company in recent weeks, according to people familiar with the matter.

Andreessen Horowitz and Founders Fund, a venture firm founded by Peter Thiel, each sold a portion of their stakes in Lyft to Saudi Arabia's Prince al-Waleed bin Talal and his Kingdom Holding Co. in a December deal authorized by the company, the people said. The secondary transaction coincided with Lyft's larger series F round of funding, in which the company raised $1 billion directly from investors including General Motors Co. and Mr. al-Waleed.

The share sales may reflect a desire by the venture funds to return cash to their own investors, called limited partners, which in recent years have waited longer to realize gains from highflying startups that have delayed plans to go public.

But they may also be a sign Andreessen Horowitz and Founders Fund want to take money off the table at a time when Lyft's future is far from certain. The ride-hailing service is locked in brutal competition with Uber Technologies Inc. in markets across the U.S., where both companies are burning through cash to expand into new markets and subsidize the cost of low-price rides.

Lyft's valuation soared to $5.5 billion in the funding round it closed last month, up from just $275 million when Andreessen Horowitz invested in May 2013 and around $90 million when Founders Fund invested in January of the same year.

Andreessen Horowitz's sale is especially notable given the firm's co-founder, Marc Andreessen, has been a particularly vocal evangelist of the latest tech boom. On Twitter, where he sends dozens of tweets a day, he often defends the lofty valuations of startups. Mr. Andreessen has also been a champion of Lyft in his musings on Twitter, writing in November that the company has an opportunity because "there are a lot more people who want rides than own cars."

The Lyft transaction marks the first time Andreessen Horowitz has sold shares of a closely held company on the secondary market, said one of the people. Mr. Andreessen also sits on the board of Facebook Inc., a company whose shares were widely traded on the secondary market in the run up to its 2012 public offering.

Scott Weiss, the Andreessen Horowitz partner who led the firm's investment in Lyft, said in a blog post last week he would step back from investments to spend more time with his family.

In August, the sentiment for highly valued startups began to shift after the stock market sank over surprisingly slow growth in China. Talk of a possible world-wide recession has further spooked the markets, and last week Silicon Valley was rattled last week by a selloff in public tech stocks, including a 50% collapse of LinkedIn Inc.

Amit Karp, vice president of venture firm Bessemer Venture Partners, wrote in a blog that recent equity funding rounds had routinely valued privately held software startups at four times the valuation multiple where LinkedIn now trades.

"Unless the public market quickly corrects back up, private investors will need to correct down to eliminate the wide valuation gap between the private and the public market," he wrote.

Investment firms launched by Mr. Thiel, the billionaire co-founder of PayPal, have already sold shares of streaming music service Spotify AB and are seeking to sell over $100 million worth of shares in data-flying firm Palantir Technologies Inc.

Uber has largely restricted employees and early investors from selling its shares, but growing Interest in the ride-hailing leader has spawned a shadowy market of financial middlemen, who outmaneuver those restrictions by offering derivatives that deliver payments to employees based on a stock's perceived value.

Write to Douglas MacMillan at [e-mail] and Rolfe Winkler at [e-mail]

(END) Dow Jones Newswires

February 10, 2016 18:25 ET (23:25 GMT)

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