Lyft looking to raise $500M in new funding at valuation of about $4B

> is raising at 25x revenue or so.

valuation is not equal to annual revenue..its more like the value over the lifetime.

Under generally accepted accounting principles (GAAP), and their European equivalent, IFRS, a company generally cannot include in income payments it receives on behalf of others.

Lyft, and Uber, rely on the fiction that they are merely booking apps for drivers, so the fares belong to the driver, and Lyft and Uber are merely entitled to a portion of the fare for providing the booking service. At no time are they/were they entitled to the entire fare, so booking the entire fare as income flies in the face of good accounting--and, for publicly traded companies, the law.

The only reason startups do this is to artificially inflate their valuations. It's really not much different from cooking the books.

That's not quite true. You normally wouldn't refer to Lyft's total proceeds as "revenue", gross or otherwise. Retail stores hold inventory which runs the risk of going unsold. Not true of Lyft. Ebay calls it "gross merchandise sales". PayPal calls it "total payment volume". Google subtracts "TAC" out of its network revenue. Etc. I've seen Uber refer to it as "gross bookings".

Sure, but I'd argue even using gross in a situation where you aren't the primary provider is misleading. Financial processors such as Visa (or Square for that matter), pretty much only talk about net revenue (Square's S-1 uses "Gross Payment Volume" to talk about gross, and never uses the phrase "gross revenue" once). We are certainly in the weeds of semantics, but I do find the phrasing of that misleading.

We can argue this one all day :).

I would argue Lyft is merely providing the service of matching me with the driver (who is a 3rd party, specifically not an employee), for which it takes a fixed cut. The driver is the primary provider of the service, and as such Lyft is merely an agent, and should follow net revenue reporting.

Really Lyft (and Uber) fall on both sides of EITF 99-19, but I suspect when Uber IPOs you wont find "gross revenue" anywhere in their S-1

It's incorrect to do that, and no leading accounting firm would sign-off those statements. The service provided by Lyft is not the taxi ride, but the arrangement of the taxi ride. Lyft is acting as an agent, not the principle, and consequently they can only recognise the booking fee, not the entire service.

Gross revenue = income to which the company is entitled for the sale of goods or services.

Gross profit = gross revenue less expenses (salaries, etc.)

Lyft and Uber are not being paid by the passenger; they are being paid by the driver out of the fare paid to the driver for the service of booking the fare for the driver. Consequently, their gross revenue should only include their % of the fare, not the entire fare.

Importantly, this is one of the reasons that both companies are having trouble with the classification of their drivers. Booking the entire fare as gross income strongly refutes their claims that drivers are independent contractors and not employees.

Some would argue that "gross revenue" should only include the amount that Lyft gets paid, not the amount that they hold in escrow for their drivers.

This is more a question of semantics than anything else.

Indeed, but when the net is 20% of that it feels pretty misleading (at least to me). "Cut of money the drivers take" being 80%? The wording feels very off

I don't have any ride-sharing apps installed. Uber just showed up as an option in the directions section below car, walking and public transport, along with an estimated fare cost and 'first ride is free' offer.

Including those that are not installed on the device?