Venture Capital News: Postmates Receives $140M
SAN FRANCISCO, CA, Postmates said it raised $140 million in a new funding round.
According to the Wall Street Journal, Postmates, known for delivering prepared food, on Monday said it raised the money from new and existing investors including Founders Fund. The venture-capital firm led the funding round and is adding Brian Singerman, a partner, to the Postmates board of directors. Among the new investors is Fontinalis Partners.
The new investment was at the same valuation -- around $600 million -- as Postmates' previous round. Such flat rounds generally are seen as a sign of investor caution.
Postmates Chief Executive Bastian Lehmann said that the latest valuation was 'lower than we had hoped,' without offering specifics. 'The valuation kind of reflects the markets,' he said in an interview. 'The markets are bearish on the on-demand space in general.'
Postmates, which has delivery partnerships with chains including Chipotle Mexican Grill Inc. and Walgreens Boots Alliance Inc., is one of a host of firms trying to speedily and inexpensively deliver hot food, cleaning products or other goods to customers, typically for a fee of $3 or more. Such companies, including DoorDash Inc., Square Inc.'s Caviar and Instacart Inc., dispatch contract employees to existing stores to fetch merchandise and bring it to customers, who typically place their orders through a smartphone app.
Investors have been cautious in approaching on-demand delivery companies because their logistics operations can been challenging and cut into already razor-thin margins in food sales. Mr. Lehmann conceded Postmates isn't yet profitable but is on a pace to be so by the end of next year.
Postmates currently operates in 44 metropolitan areas. Mr. Lehmann said the new funds would help Postmates expand to new markets and potentially beyond the borders of the U.S. He said an initial public offering is part of Postmates' plan, but likely wouldn't occur before 2018.
In the coming months, Postmates also will add more options for alcohol delivery. It handles 1.5 million deliveries a month using around 40,000 couriers and has been pushing its $9.99-a-month subscription service, which allows for unlimited orders over $25 with no additional charge.
Mr. Lehmann said Postmates still hopes to be able to offer $1 deliveries in under an hour, a goal it set last year, and has been able to lower its own costs by bundling orders through the subscription service.
Like some of its competitors, Postmates is battling lawsuits over its classification of workers as contractors, rather than employees. That enables the companies to keep costs down by passing along expenses such as gas, tolls and insurance.
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