Postmates Seeks Up to $150 Million as Food Delivery Competition Heats Upby
Food delivery startup aims to avoid overpromising on valuation
Financial docs show revenue forecast of $225 million for '16
Postmates Inc., a San Francisco food delivery startup, is in talks with investors to raise $100 million to $150 million in funding, said people familiar with the matter.
The flow of venture capital has been slowing since last year, and money-losing delivery businesses have faced especially heightened scrutiny from investors. Postmates wants to avoid setting too high of a valuation target in its fundraising round, said the people, who asked not to be identified because the negotiations are private.
DoorDash Inc., another San Francisco food delivery company, recently sold shares at a lower price than its prior funding round after seeking a valuation of at least $1 billion. The most recent round valued the company at about $600 million. SpoonRocket, a Berkeley, California, delivery startup that prepared food in company-operated kitchens, closed up shop last month, citing competition and the inability to raise more funding.
Bastian Lehmann, the co-founder and chief executive officer of Postmates, said the company expects to be profitable by the fourth quarter of 2017. He declined to comment on the fundraising discussions. “We focus on bringing value to our customers, not setting an unrealistic valuation for our investors,” he said.
Competition in food delivery continues to ramp up. Uber Technologies Inc. now offers a standalone food-delivery app called UberEats and has been rolling out the service in more cities. Amazon.com Inc. expanded its Prime Now restaurant delivery option to Postmates’s hometown of San Francisco on Tuesday. To undercut rivals, Amazon said it won’t mark up menu items or charge delivery fees to Prime members for now.
Postmates has added 23 cities in the past twelve months and began offering a Prime-like subscription feature in March. The company expects to generate $225 million in revenue on $740 million in gross sales this year, according to financial documents from April reviewed by Bloomberg.
Jeff Clavier, whose firm SoftTech VC is a Postmates backer, said couriers will be useful for transporting more than burritos and pizza, though he declined to discuss the fundraising plans.
“What people don’t understand about Postmates is it’s not just a food delivery company,” Clavier said. “It’s a logistics company that built its success on food delivery.”