DoorDash is the dark horse in the food delivery race
CXLII
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Served.
Postmates submitted confidential draft paperwork with the SEC to go public, the company announced Feb. 7. Postmates joins a throng of Silicon Valley startups expected to pursue initial public offerings this year. They include Uber, Lyft, and Slack—all of which have also submitted confidential draft paperwork with the SEC—as well as Airbnb, Palantir, Pinterest, Instacart, Peloton, Robinhood, and Cloudflare, which haven’t yet announced filings.
Postmates was founded in 2011 as a number of on-demand delivery companies were getting started. The company’s bread and butter, pun intended, is delivering takeout orders from restaurants, but it also fulfills orders from pharmacies and grocery stores. Customers place orders though an app that are carried out by a small army of couriers that Postmates hires as independent contractors.
The company generates revenue by padding orders with extra fees, such as a delivery fee and a separate service fee (tips are also separate). Such fees can easily add up, making the final price of a Postmates order much more than the cost of its items—let us not forget the cautionary tale of Shawn Cook. Postmates also offers a subscription product, Postmates Unlimited, that costs $9.99 a month or $96 a year for free delivery on orders of $15 or more from a network of over 350,000 restaurants.
I like to joke that Postmates is being single-handedly kept afloat by Kylie Jenner, who spent more than $10,000 on the platform in 2018. That is not quite fair though. Postmates has been boosted by a host of celebrities, including John Legend and Chrissy Teigen (657 Postmates orders over three years), Post Malone ($40,000 spent over 400 days, including $8,000 worth of Popeyes biscuits ordered to Coachella), and Rob Kardashian ($13,000 in a month “to Satisfy Blac Chyna's Pregnancy Cravings!”). One of Postmates’ investors is NBA superstar Kevin Durant.
If not celebrities, then who? It is unclear how much of the US online food delivery market Postmates can claim. According to anonymized purchases analyzed by Second Measure, Postmates’ US market share hovered around 10% in 2018, though Second Measure notes that it can’t track purchases made through Postmates’ subscription service, meaning the company’s market share is likely higher. Even so, Postmates appears to be dwarfed by market leader Grubhub, Uber Eats, and DoorDash, which recently surpassed Uber Eats in market share, according to Second Measure. It’s hard to imagine Postmates’ subscription service closing that gap.
DoorDash, not Postmates, has emerged as the dark horse in the food delivery race. As Postmates and Uber prepare to go public, DoorDash is raising another $500 million at a valuation of between $6 billion and $7 billion, the Wall Street Journal reported. DoorDash was founded in 2013 with roughly the same model as Postmates—contractors delivering stuff to customers for steep fees. Its backers include powerful Japanese investor Softbank. The company’s US market share relative to major competitors was estimated at around 25% as of December by Second Measure, a few percentage points better than Uber Eats. That was up significantly from the first half of the year, when Second Measure pegged DoorDash’s market share at around 15%.
Supervoting.
Lyft co-founders John Zimmer and Logan Green are preparing to seize “near-majority voting control” once the company goes public, despite owning a stake of less than 10%, the Wall Street Journal reported this morning:
The founders, John Zimmer and Logan Green, who serve as president and chief executive, respectively, are working with underwriters and lawyers on a plan to create a class of shares with extra votes that they will hold, people familiar with the matter said.
Exact details are unclear, but the men would have significant influence over major decisions at the company, ranging from the election of directors to whether to sell one day.
Shares that confer outsized voting rights are typically known as “supervoting shares.” Should Lyft go through with the plan, it would join an illustrious club of companies with supervoting shares that includes Facebook, Google, LinkedIn, Zynga, and Snap, the last of which sold only nonvoting shares in its public offering. Supervoting shares aren’t friendly to investors because they concentrate power in the hands of a few, usually the company founders. Yet for a long time investors have given companies with this structure a pass. If a bet on a company is really a bet on its founder(s), as the saying goes, then supervoting shares take that to its logical extreme—a bet on the founders carried into the company’s life as a public entity.
The trouble is that the people who succeed at founding startups aren’t always or even often the ones who should be running a large public company. The most obvious comparison in this case is Uber, whose founder and former CEO Travis Kalanick made Uber great, but wasn’t the leader it needed to mature or go public. Kalanick used to wield outsized control through supervoting shares and augmented his power by having employees who sold any portion of their stock back through a company repurchase program cede their voting rights to him. But in October 2017 Uber’s board agreed to strip supervoting rights from shareholders and institute a new “one share, one vote” policy as part of a number of governance reforms.
Lyft is doing the inverse of Uber. Zimmer and Green didn’t have supervoting shares while Lyft was private, holding “voting power in proportion to their economic stake,” according to the Journal. But now as Lyft prepares for an IPO that could happen as soon as March, the company is moving from this democratic structure toward an oligarchic one. The question is whether investors value Zimmer and Green enough to play along.
Neighborhood spoils.
The BBC has a good roundup of restrictions on Airbnb and other short-term home rental sites around the world:
Amsterdam: Entire home rentals limited to 60 days a year, set to be halved
Barcelona: Short-term rentals must be licensed but no new licences are being issued
Berlin: Landlords need a permit to rent 50% or more of their main residence for a short period
London: Short-term rentals for whole homes limited to 90 days a year
Palma: Mayor has announced a ban on short-term flat rentals
New York City: Usually illegal for flats to be rented for 30 consecutive days or fewer, unless the host is present
Paris: Short-term rentals limited to 120 days a year
San Francisco: Hosts must obtain business registration and short-term rental certificates. Entire property rentals limited to 90 days a year
Singapore: Minimum rental period of six consecutive months for public housing
Tokyo: Home sharing legalised in only 2017. Capped at 180 days per year
These rules are significant as Airbnb contemplates an initial public offering in 2019 built on the strength of home rentals. Cities like Paris, New York, and London are core to Airbnb’s business—ever popular tourist destinations where travelers love to stay like locals. Such cities have grown wary of Airbnb and its peers, which they fear are depleting housing for residents as landlords and entrepreneurial types buy up properties and turn them into full-time rentals. Most of the restrictions are designed to weed out these commercial operators and make sure the people renting their homes are actually doing that: renting a home in which they reside, rather than a second or third or fourth property that could be part of the local housing supply.
Airbnb has less to fear from the letter of the law than from cities figuring out to enforce it. Enforcement has bedeviled local governments that want to crack down on Airbnb and its so-called illegal hotels but have lacked the funding, manpower, and data they need to do it. New York in October 2016 made it illegal to advertise a home rental on a site like Airbnb for less than 30 days largely because officials had struggled to enforce a longstanding ban on rentals of less than 30 days. Regulators didn’t know who was renting what, and Airbnb refused to provide the data. Listings, on the other hand, are much easier to track, making a ban on short-term rental ads easier to enforce.
Cities are now figuring this out. They’ve cracked down in Europe, the US, and Canada. Paris recently sued Airbnb for €12.5 million ($14.1 million) over an alleged 1,000 advertisements for illegal rentals, Reuters reported. Under a French law passed in 2018, home owners in Paris can rent their properties on platforms like Airbnb for up to 120 days per year. Listings must include a registration number to check that properties aren’t being rented out for longer. Companies can be fined up to €12,500 for each illegal ad, hence Paris’s €12.5 million charge.
Paris mayor Anne Hidalgo, an outspoken critic of Airbnb, told a local paper that illegal rentals “spoil some Parisian neighbourhoods.” Airbnb for its part called the rules “inefficient, disproportionate and in contravention of European rules,” which makes perfect sense. The last thing Airbnb needs is for Paris’s regulatory model and strict enforcement to become the standard in the European cities on which its business depends, especially ahead of an IPO.
Speed bump.
Well this is not great:
An electric scooter popular with dockless, ride-sharing services can be made to suddenly accelerate or brake mid-ride thanks to a flaw in the device’s Bluetooth module, security research firm Zimperium reported Tuesday.
In a video published today, Zimperium researchers were able to demonstrate their “proof of concept” involving Xiaomi’s popular M365 scooter. The scooter was designed to allow users to remotely lock it using a Bluetooth-enabled app, preventing someone from riding it.
Through the hack, Zimperium was able to target any passerby riding any Xiaomi M365 —locking the device, as well as forcing it to accelerate and brake, without physically accessing the scooter. The researchers could issue commands to manipulate any scooter up to 100 meters (328 feet) away.
Bird and Lime both said their scooters are unaffected by the bug. Elsewhere in scooters, here is a horrifying story in the Washington Post about a woman suing Lime after a scooter accident in December left her daughter in a vegetative state:
On Monday, Tracy Jordan announced plans to sue Lime — one of the world’s largest electric-scooter companies — on her daughter’s behalf for negligence, according to Todd R. Falzone, a Fort Lauderdale personal injury lawyer representing Tracy Jordan as the guardian of her daughter. Falzone said Lime’s app includes language that specifically instructs people not to operate scooters on local sidewalks, pushing them onto city streets instead.
Many experts consider motorized scooters dangerous, and operating them on the street is against the law in Florida, although Fort Lauderdale does permit e-scooters to be ridden on sidewalks. Because Jordan followed Lime’s instructions, Falzone said, she avoided the sidewalk and was catastrophically injured.
A recent study found that electric scooters are sending more people to the hospital than bikes, with 249 patients treated for scooter-related injuries at two emergency departments in Los Angeles from September 2017 to August 2018, compared to 195 for bicycle-related injuries over the same period.
This time last year.
There were two! First, a special bonus edition of Oversharing, filed from San Francisco: What Travis Kalanick said at the Uber-Waymo trial
And then, the regular issue: The Uber-Waymo case is ancient history, Instacart raises $200 million, Airbnb touts Experiences
Other stuff.
Daimler-backed car-booking startup to take on Uber in France. Walmart and Deliv end online grocery partnership. Airbnb hires Delta vet to lead transportation team. Uber’s Jump scooters could get a shot in San Francisco. Jump bikes report seven rides per day. Uber Freight co-founders join logistics startup Turvo full time. Prominent lawyer pushes for Uber to pay value added tax in UK. Uber intensifies push for Middle East. Softbank bets $940 million on driverless delivery startup Nuro. Driverless technologies startup Aurora raises $530 million. Kroger expanding Home Chef meal kits to 500 new stores. Hong Kong lawmaker calls for crack down on illegal ride-hails. Activist investor calls for Just Eat to seek a merger. Amazon sometimes pays Flex delivery drivers using tips. How Uber and Airbnb employees try to dodge California taxes. The Resurrection of American Labor. New unicorns. Power clash at Softbank.
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