The biggest headlines last week in the food delivery space was Postmates closing a $141 million dollars fundraising round. This fundraising effort was very difficult for Postmates.
All around the world, food delivery startups are struggling to raise money. With the historic ascent of Uber, food delivery startups were once the hottest trend in tech as venture capitalists were eager to pump money into the “Uber of X” concept. At one point, there were 242 food delivery apps available for download. But food delivery, it turns out, is a cash-burning venture. Venture capitalists have since clamped down on pouring money into such ventures.
In many cases, food delivery startups have failed to raise enough money to continue operations. These companies have either sold to another company, merged with a competitor, or shut down completely. For example, in March, meal delivery company SpoonRocket closed down after failing to raise enough money to continue operations. Around this time, DoorDash, one of the more prominent on-demand food delivery company in the U.S. raised $127 million in what many called a “down” round.
In short, Postmates secured finance during a time when food delivery startups are struggling to raise money from investors. They need to scrutinize how capital is spent and reach profitability. Postmates appears to be on track to do this. Back in April, leaked documents suggest that Postmates is on track to be profitability in 2017. In the spring, Postmates revealed that it had reached 1 million deliveries per month. The company also rolled out a
The company also rolled out a subscription service. To my knowledge, none of the other U.S. on-demand food delivery company has done this. This suggest to me that Postmats has somewhat figured out the economics of food delivery and have explored other offerings with their app.
So what does this mean for couriers? I think it’s good news (for now). In this latest fundraising found, Founders Fund, which has already invested in Postmates, stepped up their support of the company. This suggests that Postmates is on track to hit milestones necessary to continue toward profitability. Additionally, Postmates is in more markets than most on-demand startups and isn’t withdrawing from markets. In contrast, last winter I saw on DoorDash’s career page that the company was looking to hire operations people in Portland. As of today, DoorDash hasn’t launched in Portland, a city somewhat known for its food scene.
And rumor has it Square, Inc. recently tried to sell Caviar, their on-demand food delivery business. Caviar is losing money and recently withdrew from three markets in the U.S.
If you drive for Postmates, I have reasons to believe your gig isn’t going to disappear anytime soon. But given the funding market for food delivery companies right now, it may not be safe to drive for just one platform. Bigger names like Amazon, Uber, and Google are rolling out delivery services to compete in this space. This will make the future of food delivery companies with evaluations under $1 billion very uncertain. So I recommend driving for multiple platforms. Personally, I drive for Uber, Lyft, Caviar, and Postmates. I am an active Dasher for DoorDash, but they have not launched in Portland. And Amazon Flex isn’t available for people with iPhones.
Venture capitalists diversifies their portfolio, likewise drivers of the gig economy should diversify their income stream by driving for multiple platforms.