DoorDash adds $500M to food delivery duel with Postmates

DoorDash adds $500M to food delivery duel with Postmates

by Marcelle Djaha

Lately, food delivery startup DoorDash has had a voracious appetite for capital.

Six months after closing a $250 million Series E, the Bay Area company is in talks to raise around $500 million from Temasek Holdings at a valuation of more than $6 billion, per The Wall Street Journal, roughly 10 times what DoorDash was worth four years ago.

Backed by investors including CRVSequoia, Coatue Management and DST Global, DoorDash had a strong 2018 when it came to VC funding, pulling in more than $780 million and achieving unicorn status in March, following a $535 million round led by SoftBank‘s Vision Fund. Its valuation rose to $4 billion last August, following another $250 million fundraise.

DoorDash was founded in 2013 by a group of Stanford University students, including current CEO Tony Xu. The company has quickly grabbed a sizable market share and delivers food from restaurants to customers in more than 1,000 cities across the US and Canada. In January, it became the first food delivery startup to operate in all 50 states, per TechCrunch.

By now, it’s well-established that the growing trend of pondering a visually attractive menu online and ordering restaurant food from the comfort of your home is not going to fizzle out anytime soon. The global market for online food delivery is expected to reach $112 billion by 2023, according to Research and Markets, and competition in the space can be fierce.

One of DoorDash’s key competitors, food delivery unicorn Postmates, has also been grabbing headlines in the past week. Founded in 2011, the San Francisco-based company has hauled in plenty of capital as well, raising more than $670 million in VC funding overall, including a $100 million round in January from new investor BlackRock and a group of existing backers that includes Tiger Global. That latest round valued Postmates at $1.85 billion.

For Postmates and DoorDash, the deals are representative of growing VC interest in food delivery businesses.

But while the two companies have followed similar paths thus far, they’re now taking different routes in their quest for the top. DoorDash has opted for more private capital and watched its valuation skyrocket, while Postmates announced last week that it had confidentially filed for an IPO. Per Bloomberg, the company has reportedly hired JPMorgan and Bank of America as lead underwriters for the offering, which could occur during 1H.

However, despite their rising valuations, both DoorDash and Postmates have a long way to go to before either one could challenge the dominant players in the online food delivery business in the US. Grubhub remains the leader with about 34% of total revenue in the online food delivery market in the US, according to The Wall Street Journal, followed by Uber Eats, the online delivery unit of the most valuable VC-backed company in the US, and which is said to outpace its ride-hailing services in cities including Tokyo and Seoul.

 

 

 

 

 

 

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