Postmates Races Toward IPO With Fresh Funding From BlackRock and Others
The $100 million funding round included investors such as BlackRock, the world’s largest investment management firm; and Tiger Management, which is slated to complete 40 years in the industry in 2020.
With this funding round, Postmates’ valuation currently stands at a whopping $1.85 billion. This marks a growth of over 50 percent from the company’s valuation in September 2018, which was pegged at around $1.2 billion.
The news comes in the wake of another major development at the company.
Postmates is Gearing Up for an IPO
The logistics service is expected to come forward with its initial public offering by mid-2019. Plans were set in motion last year when after interviewing a series of banks in October 2018, Postmates finally selected JPMorgan to fulfill the task of underwriting its IPO.
Given these developments, the latest funding round is being seen as more of a way for existing shareholders to sell their stock than as a way to seek funds. In addition to this, it also serves as a marketing move in both the financial and larger public center for hyping up the upcoming IPO.
By the looks of things, Postmates’ IPO does need all the traction that it can get. Its fastest growing competitor, DoorDash, is reportedly already considering an IPO even though it has not set out a date for the event.
On the other hand, public logistics giant Uber which has a direct Postmates’ rival service in the form of Uber Eats, has already filed for its IPO (it has since gotten held back by the government shutdown in terms of timely proceedings).
Apart from these offerings in the same sector, other high profile IPOs in 2019 are to come from immensely popular companies such as Lyft, Pinterest and Slack — all of which hold great marketability and the highly coveted “Unicorn” status which comes with a billion dollar valuation.
Postmates is currently being helmed by its co-founder and CEO Bastian Lehmann. While the company has traveled league years in terms of progress, reaching the current status where it could now consider an IPO hasn’t been a walk in the park.
A Little About the Background of Postmates
Launched in 2011, the San Francisco based delivery firm had made its presence known in surrounding areas during an era where smartphones were on the rise.
Along with Lehmann, the company has two other co-founders. Sean Plaice also serves as the company’s CTO; whereas, Sam Street has a series of past projects on his name with one of them, curated.by, having been co-founded with Lehmann as well.
With web-based services such as Grubhub focused exclusively on food delivery, Postmates expanded on those offerings by allowing people to order and deliver anything that they wanted. The firm started with the aim to improve delivery services across a variety of segments, and it did so through location-based mobile apps. This model allowed people to have any items delivered from businesses that didn’t cater to delivery otherwise.
With nominal pricing, it also eradicated the requirement to call expensive concierge services to have these services delivered in a timely manner.
In other words, Postmates was launched as a GPS delivery service where orders for delivery included ready to eat dishes delivered fresh from restaurants, but were not limited to them. Instead, people could order groceries or any other items that they wanted. As long as the request fell under the umbrella of services rendered by Postmates, the request was met within a justifiable timeframe and with aptly priced service fees.
Postmates Finds Competition in DoorDash
The business model proposed and demonstrated by Postmates was received positively by users. However, it didn’t stay at top of the delivery food chain for long.
Postmates received rave reviews in terms of offering deliveries from restaurants that weren’t even signed up with services such as Grubhub. But DoorDash, which launched in 2013, was able to upstage it in terms of popularity, outreach and venture funding not long after while only offering restaurant delivery services based on the same logistics system as Postmates.
By 2015, it was clear to many that the GPS based delivery system was the future of restaurant delivery services. That realization led to these companies securing investments from major players in the financial industry, which quickly added to their Unicorn status.
However, DoorDash rose to prominence due to its initial investments by financing giants such as Y-Combinator and Sequoia Capital. That made its future venture rounds to be far more successful than Postmates as well. And that winning formula in funding also translated into the company serving more locations than Postmates.
This meant that even though DoorDash was focusing on a sub-segment of the overall delivery sector, it had its services available to more users than Postmates and many other food delivery services that were considered a direct threat to its business model.
This observation currently remains true.
While competitors such as Spoonrocket perished with the onslaught of competition, Postmates was not only able to take up the gauntlet but make through it as well.
At the time of writing, Postmates operates in more than 550 cities. On the other hand, DoorDash has 6 times more cities on its portfolio with over 3,000 locations under its belt.
But the slight difference in services and the ability to serve more locations is not the only thing that set Postmates and DoorDash apart. The fact that DoorDash has a valuation of $4 billion as opposed to Postmates’ $1.85 billion (as mentioned earlier) also set both companies apart quite distinctively.
That would explain why it’s essential for Postmates to actually go ahead in the IPO race before DoorDash decides to throw its hat in the ring.
With Uber’s IPO filings already made by none other than DoorDash’s current CFO, Prabir Adarkar, Postmates only has more weight added to its competition. This means that the same resources which completed Uber’s immensely difficult valuation would be at work and in play when DoorDash decides to go ahead with its own IPO.
Uber’s IPO Would Soften the Impact that Postmates Could Have for its Investors
Postmates may have gone ahead in beating DoorDash to the IPO race for now, but it faces immense competition from Uber, a brand which in the words of its own CEO “suffers from having too much opportunity as a company.”
But that humblebrag doesn’t come without sufficient evidence. When Uber filed for its IPO in December 2018, it chose to do so in a confidential manner. This means that the company’s final valuation at the time of filing was never announced to the public.
However, as it may have been surmised, that would not have been sufficient to keep financial experts, investment enthusiasts or news outlets away from sleuthing towards the valuation amount.
Originally reported by the Wall Street Journal and as featured in Reuters, Uber’s valuation was proposed at $120 billion in their IPO proposals. Much of it came from the plethora of services that it operates under the Uber brand and the many subsidiaries that it has otherwise, with UberEats being a major one of them.
With plans to increase its operations to over 70 percent of the U.S., UberEats is considered as the fastest growing food delivery service in the country. That goal to reach 70 percent of the U.S. may also sound unattainable at first, but it wouldn’t seem that way if one were to realize that the service already covers 50 percent of the U.S. population.
When one adds the statistic that 40 percent of new UberEats users had never used Uber in the first place, the significance of the service to the Uber brand only becomes more profound. UberEats operates in locations where even Uber as a ridesharing service currently doesn’t. That makes UberEats’ expansion all the more important to the logistics giant.
That also pegs UberEats as an even bigger competition than DoorDash for Postmates, mostly because Uber also has a network of logistics at hand that could delve into the many other sectors that Postmates operates in (such as grocery delivery or small parcel transfer).
However, what could work in Postmates favor here is that while Uber may be a recognizable brand, its UberEats division is still considered a startup by many.
The same holds true for many of its other divisions. This means that investors who want to invest in a business that is focused on its core competencies may actually wait for Lyft’s upcoming IPO, and that might dilute the investments that are to reportedly to be made in Uber.
With that being said, it doesn’t mean that those investors would be shifting towards Postmates. The same mindset could very well apply to waiting out for DoorDash’s reported IPO while Postmates waits to garner investors on its own.
It was recently reported by CNBC that Uber may have to make its way through another complicating factor with investor Softbank before it could debut its IPO, which buys Postmates some more time.
Postmates is Already Considered as One of the Most High Profile IPOs of 2019
Whichever way the larger picture turns out to be for Postmates, one thing is certain: it has already carved out a distinction as one of the most sought after IPOs of 2019.
That perspective doesn’t come lightly, given that 2019 has a slew of other high profile IPOs slated for its run. In addition to Uber; Lyft, Pinterest and Slack are considered as surefire bets for successful tech IPOs. Whereas, other major players especially in terms of valuation include Palantir and Airbnb. Reuters had also reported in October 2018 that Cloudflare, one of the world’s largest content delivery network (CDN), is also considering its own IPO in 2019.
All of this points to a major competitive shift for Postmates. But at the same time, it also alludes to the possibility that if it is one of the first tech companies to come out with an IPO on its own before the market gets concentrated with other offerings, then there might be better opportunities ahead for it.