DoorDash is becoming valuable

Due to COVID-19, most of us have reduced our frequency of going out. We are workin from home, buying grocery online and not eating at restaurant. This pandemic created great opportunities for some companies. Today let's talk about DoorDash.

Photo by Griffin Wooldridge / Unsplash

For readers who don’t know, DoorDash is simply a market maker between restaurants and people who want meals delivered to their door.

Consumers order from their favorite restaurants through DoorDash’s app or website, and then DoorDash will have a delivery person pick up the food from the restaurant and deliver it to them. In return, DoorDash gets a commission on the sale.

Doordash is in business that caters to restaurants which already is a thin margin business. It was known that Doordash would struggle for business amid competitors like UberEats, Postmates, GrubHub. But Doordash took very aggressive approach on growing and scaling at any cost. Doordash was bleeding cash and consistently unprofitable. It wanted to go public last December but then had to delay its plans because there just wasn’t that much interest at a reasonable valuation. As a result, DoorDash took on about $500 million in debt in February and March of this year. It looked like the company was trying to buy some time. But then COVID-19 happened. Ironically, COVID-19 was the best thing that could have happened to DoorDash.

Demand for meal deliveries hit the record levels. In a matter of months, DoorDash transformed from a struggling company into one scrambling to hire more delivery drivers because business was booming. Recently DoorDash raised $400 million in a Series H venture capital (VC) round last week. The company is now valued at an impressive $16 billion.

Meal delivery business seems to start consolidating, Uber tried to acquire GrubHub but deals couldn't got a nod from executives. But Uber didn't pause there and continued on their plan to grow meal delivery business by acquiring Postmates in $2.6B deal.

But the DoorDash with it's $16B valuation is more valuable than companies like Domino’s Pizza. Yet they don't own a single restaurant.

There will clearly be lasting impacts on society from this experience with COVID-19. The world’s reaction to the virus was a catalyst accelerating trends that were already in place.

And that has created the perfect window for DoorDash to test the waters with an IPO once again. And we can expect DoorDash IPO either by end of the year or next

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