DoorDash is close to finalizing a $500 million venture funding round (GRUB)

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Crowdsourced delivery startup DoorDash is reportedly close to finalizing a $500 million venture funding round, according to The Wall Street Journal.

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The round would be a significant boost to its total funding — thus far DoorDash has raised $970 million, per Crunchbase. DoorDash, which has services available in all 50 states, has emerged as one of the leading crowdsourced delivery firms in the US — the startup grew faster than anyone else in the US crowdsourced delivery space, according to Edison Trends.

Despite its growth, DoorDash still trails rivals in market share: Edison Trends estimates that it controls only 18% of the US food delivery space, less than GrubHub and UberEats, which control 34% and 28% of the market, respectively.

Making matters worse, DoorDash’s competitors continue exploring ways to grow market share — particularly around automation — ahead of their planned initial public offerings (IPO).

UberEats. Launched back in 2014, the food delivery arm of ride-hailing behemoth Uber has emerged as a force in the industry. The business unit doubled its sales between August 2017 and February 2018, is profitable in 40 US cities, and was independently valued at $20 billion. The platform’s success is owed in part to its parent company’s prevalence among consumers. That said, UberEats also attracts users in its own right, through promotions like offering discounts to those who order from a restaurant that a nearby customer has also recently ordered from, for instance. It’s also experimenting with drone deliveries to cut costs. All of this momentum comes in advance of Uber’s IPO, which is expected to occur sometime in the next few months.
Postmates. The San Francisco-based Postmates is one of the oldest and most mature on-demand delivery firms in the US, having been founded back in 2011. Since then it has emerged as a powerhouse — on average, it completes 3 million deliveries per month and claims to earn a profit on each order. The firm is looking to drive down delivery costs in innovative ways, like through the delivery robot it built in-house late last year. It’s also exploring delivery through Ford’s autonomous cars. Postmates is expected to IPO sometime this year.

DoorDash must accelerate its automation push to continue competing with rivals. Given its wide geographic footprint, outcompeting rivals will likely have to involve offering a higher quality customer experience, cutting its prices, or both.

While slashing delivery times by building a proprietary routing algorithm could help DoorDash differentiate itself, automation might offer a higher ROI. Automating last mile deliveries through technologies like robotics could provide a savings of up to 40% on traditional last-mile delivery methods, according to McKinsey.

So far, DoorDash has tested delivery robots in San Francisco in partnership with Marble. If DoorDash wants to avoid ceding market share to those trailing close behind or falling further behind market leaders, it should funnel a significant portion of its new funding into the expansion of existing automation efforts and the exploration of new ones.

Source: Business Insider