US-based food delivery service DoorDash picked up its first corporate funding last week, closing a $535m series D round led by telecommunications and internet group SoftBank, and its next move could help solidify the links between food delivery and logistics.
The round also featured Singaporean government-owned fund GIC, venture capital firm Sequoia Capital and charitable foundation Wellcome Trust. The company has now raised $722m in total, its past backers including Kleiner Perkins Caufield & Byers, Pear Ventures, Khosla Ventures, SV Angel, CRV and Y Combinator.
Founded in 2013, DoorDash partners restaurants to send food to local customers, adding a service fee to cover the cost of delivery. Its largest markets are California and the cities of Seattle and Minneapolis, but it operates in more than 600 urban areas across North America.
The series D round valued DoorDash at $1.4bn post-money, almost doubling its valuation from its $127m series C round two years ago. The latest funding will help drive an expansion the company hopes will take it to 1,600 areas by the end of 2018.
The company’s business model differs slightly from rivals in that it seeks to proactively form partnerships with restaurants, both local independent operators and national chains such as Wendy’s or PF Chang’s. The key to this is DoorDash Drive, which covers the delivery not only of individual meals but also large food orders to catered events or retailers.
The press release announcing the funding confirmed DoorDash’s long-term plans, which involve establishing a last-mile delivery platform for any consumer-focused business. This would enable it to partner both local shops and online merchants to get products to customers more quickly than conventional mail or logistics services.
DoorDash’s core offering is relatively similar to that of Uber Eats, the food delivery business started by ride hailing service Uber, but moving into a logistics service staffed by ‘independent contractors’ would theoretically put it closer to Southeast Asian operators like Grab or Go-Jek.
The movement is indicative of a startup space where logistics, consumer businesses and transport are increasingly moving closer together, not least due to the influence of corporate investors like SoftBank which can help form links through their positions in portfolio companies.
SoftBank is of course a shareholder of Uber, Didi Chuxing and several other ride hailing companies, but it also has significant stakes in online sports memorabilia seller Fanatics as well as Asian e-commerce giants Alibaba and Coupang.
The latter two have their own large-scale logistics operations but an expansion by DoorDash into more diversified logistics could theoretically precede some substantial investments by SoftBank in more pure-play consumer companies. Access to SoftBank’s artificial intelligence-focused portfolio companies could also give DoorDash an edge on rivals when it comes to delivery strategies and efficiency.
E-commerce and cloud services firm Amazon could be pursing a similar strategy, having acquired grocery chain Whole Foods, itself an investor in grocery delivery chain Instacart. Amazon’s acquisition of smart doorbell maker Ring last week is expected to enhance its Amazon Key service, but Instacart’s contractor-based delivery platform could hypothetically be added to the corporate’s existing logistics network at some point down the line.
Unlike in China, the logistics sector in the US is still dominated by long-established players like UPS, DHL and FedEx, and startups have yet to disrupt the industry to the same extent as some other areas, but the signs indicate such a change could be possible as delivery times continue to be reduced. DoorDash will be hoping to grab itself a slice.