the investment in DoorDash
I was browsing Bloomberg recently for the latest in markets news and I came across an interview that was quite interesting. The subject of this interview was DoorDash, a San Francisco based startup company.
What left me in a state of bewilderment is that this company received $535M in investment. This was quite alot of money for a startup company, so I wanted to find out more about what it does and what justified this investment. It is not unusual for startup companies to receive large sums of money in investment. What does DoorDash do? While researching DoorDash the first thing that popped in my mind was the UK’s HungryHouse & JustEat. (Interesting fact: Just-Eat is HungryHouse’s parent company that acquired it in 2017 for £200M from Berlin based company Delivery Hero.) HungryHouse and JustEat are online platforms that connect local take-out restaurants to consumers. Customers simply log onto the platform, browse for local take-outs and choose to have their food delivered or collected. Payments can be made via cash on delivery or online. It’s quite a convenient service. Being a recent grad, I can clearly recall the number of times I’ve used this platform to get food... *memories* . DoorDash essentially provides the same service: connecting consumers to food outlets. DoorDash not only connects consumers to restaurants but also offers employment for individuals with flexible time. DoorDash even connects grocery stores to consumers so that customers could get their purchases delivered to their doorstep. DoorDash therefore, effectively functions as a third party logistics platform for the food delivery space. This opens up a large pasture of market for DoorDash to venture into and market expansion beyond food markets. DoorDash identifies itself as a logistics company and not a mere food-delivery service. This potentially hints at Door-Dash providing on-demand logistics services in markets alternative to food, perhaps in textile retail. Later on down the line, DoorDash could potentially establish an infrastructure that would allow it provide low cost services for export and import agents to have their goods delivered to warehouses and provide services for these goods to be delivered from warehouses to the store where the company will operate with a direct store delivery business model. Large sums of investment in startups by VC firms is warranted largely by faith in the potential for startups to exponentially increase its interaction with its user base, thereby incurring higher earnings. In 2016, DoorDash revealed its focus on growth, raising $127M in investment and currently has plans to increase its market reach to 1600 cities in North America from 600 by the end of 2018. DoorDash also maintains an in house sales team focused on the maintenance of client relationship as well as securing deals with new merchants to expand DoorDash’s expanding clientele The half a billion dollar funding is lead by SoftBank which also owns a sizable chunk of Uber who has its own food delivery service Uber Eats which is reported to have generated $3B in gross sales last year. Investors will bet on competitors to hedge themselves from startup failure. The food delivery market space is becoming increasingly overcrowded with the likes of popular platforms like GrubHub and Seamless which DoorDash must compete against. It is important for DoorDash to differentiate itself from the rest of the competition to prevent itself from becoming another failed startup statistic.
