Two of the largest restaurant delivery startups in the U.S. are considering a merger in an attempt to take on their biggest rivals.
Multiple sources have told Recode that the CEOs of both DoorDash and Postmates have discussed a potential deal at least once in person in the last year. The discussions have been on-again off-again, and there is currently no deal in place. One of the issues at play is who would run a joint company, since neither CEO — DoorDash’s Tony Xu nor Postmates’ Bastian Lehmann — wants to report to the other.
In addition, neither company is convinced that the risk and difficultly of a merger would result in financial benefits.
Last month, DoorDash raised $535 million in a Series D round, which could bring its value to $1.4 billion in a post-money valuation. SoftBank Group led the round, along with participation from GIC, Wellcome Trust and Sequoia Capital.
“It doesn’t really change anything for us,” said Xu at the time. “Instead, we’re saying it adds more flexibility, giving us the optionality in terms of where we want to invest and how we want to think about financing for the company.”
But a merger between DoorDash and Postmates could enable the companies to take on their better-funded competition. Currently, GrubHub, which also owns Seamless and Eat24, is the biggest company in the United States dedicated to restaurant delivery, with a public market value of $8.5 billion.
And Uber operates its UberEats delivery service in more than 140 North American cities, while Amazon and Square-owned Caviar are also in the market.
By 2022, 11 percent of U.S. restaurant sales are expected to come from delivery orders — an increase from an estimated 6 percent in 2017, according to Morgan Stanley Research. That is a $32 billion market opportunity within four years.
If they were to merge, DoorDash and Postmates would have about 23 percent market share. UberEats has around 20 percent of the market, while GrubHub — counting Seamless and Eat24 — has 52 percent.
Postmates and DoorDash spokespeople declined to comment on the talks.