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Alphabet is leading a $1 billion round in Lyft — despite being an investor in Uber

  • CapitalG, an investment arm within Google-parent Alphabet, will lead a $1 billion funding round for Lyft.
  • CapitalG Partner David Lawee will join Lyft's board.

There's yet another complication in Alphabet's relationship with start-up giant Uber.

CapitalG, an investment arm within Google-parent Alphabet, will lead a $1 billion funding round for Lyft, the companies said on Thursday. CapitalG Partner David Lawee will join Lyft's board. The round is not closed yet.

Alphabet's self-driving car unit, Waymo, confirmed earlier this year it would partner with Lyft on a self-driving car project. Lyft noted in a statement that its service is now available to 95 percent of the U.S. population — up from 54 percent at the beginning of the year.

The funding round comes as a chummy relationship between Uber and Google has soured, in part due to a lawsuit between Waymo and Uber. Waymo alleges that Uber is using one of Waymo's trade secrets for its autonomous vehicle sensors.

Lyft, now worth $11 billion, is still much smaller than the nearly $70 billion market leader Uber.

Uber also got an infusion of about $250 million from Google in 2013, earning Google's David Drummond a seat on Uber's board. Google and Uber mulled teaming up on self-driving car technology at that time.

But around October 2014, Drummond recused himself from Uber's board. According to Uber co-founder Travis Kalanick, Drummond said, "Google is intending to compete with Uber in the ridesharing space." Drummond is now chairman of Google's investment arms, Google Ventures and CapitalG — the same unit that is investing in Lyft.

Kalanick said in legal filings that he became paranoid that Alphabet CEO Larry Page was gathering intel on Uber as their relationship frayed.

"I don't remember my exact words, but I remember feeling disappointed a little bit, a little burned by the relationship," Kalanick said in a deposition this year.

Kalanick has since left his operational role at Uber, as the company reels from a workplace culture investigation that flushed out many key employees. New CEO Dara Khosrowshahi has said he's preparing Uber financially for an IPO.

Correction: Alphabet is leading a $1 billion round in Lyft, but is not the sole investor.