There have been a handful of watershed moments in the third-party delivery space these last few years: Grubhub going public in 2014; Target buying Shipt in 2017; and DoorDash raising three-quarters of a billion dollars during 2018. With the latest news that DoorDash raised an additional $400 million, the industry crosses another mega-checkpoint with investors valuing the San Francisco-based delivery service at $7.1 billion dollars.
The two big questions from this investment, which nearly doubled DoorDash’s valuation in just seven months, are whether this eye-watering market value has any connection to reality and, secondly, what impacts this will have on the wider on-demand landscape as Postmates prepares to join Grubhub on the public markets.
In the understatement of the year (thus far), DoorDash put out a release announcing its latest cash infusion, through a Series F round led by Temasek and Dragoneer Investment Group, with additional participation from existing investors SoftBank, DST Global, Coatue Management, GIC, Sequoia Capital and Y Combinator.
Some of those firms may sound like battle robot manufacturers, but their cash is real—and this mega-deal is the latest signal that investors are exceptionally bullish on third-party delivery, even as many restaurant and retail operators struggle to make profits on their side of this convenience-boosting equation.
For a little context, delivery darling Domino’s crossed the $12 billion valuation mark in 2017, according to the Franchise Times Top 200. A $7.1 billion valuation puts DoorDash somewhere between Tim Horton’s, with nearly 4,800 locations, and Hampton Inn by Hilton, with more than 2,300 locations worldwide.
At press time, delivery market share leader Grubhub’s total market value is just north of $7.21 billion. Because DoorDash isn’t a public company comparing apples to apples isn’t always possible, however, Grub recently reported that it processes more than 465,000 orders each day with a total base of 17.7 million active diners.
Included in the celebratory release, DoorDash said its market share grew to 26.5 percent, according to Second Measure, and its geographic footprint grew five-fold during 2018, “reaching 3,300 cities and 80 percent of Americas nationwide while becoming the first on-demand platform available in all 50 states.”
As Grubhub shifts away from new market growth toward driving sales in existing markets, the pressure will increase from investors, industry watchers and DoorDash partners to see if it can cash an awfully large check that’s yet to post to its account.
Your move, Tony Xu.
For some extracurricular reading, this page (http://fundinfo.rbcgam.com/pop-up/funds-series-descriptions.fs) from RBC Wealth Management breaks down the differences between the different fund series descriptions that are becoming increasingly common in the third-party delivery industry.