IPO profile: DoorDash part of the ‘accelerated future’
- DoorDash is a food delivery company that is set to become public before 2021.
- According to regulatory documents, total revenue for the first nine months of 2020 was $1.9 billion.
- By contrast, total revenue in 2019 was $885 million.
Invezz and other media outlets reported that DoorDash is planning to list its shares on the public market. But what exactly does the company do and is it properly valued at a reported $25 billion?
All companies looking to become public must release to the public a regulatory S-1 filing. The document gives potential investors an inside look at the company’s operations.
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The concept of DoorDash was born in early January 2013 when its first customer ordered prawn pad thai and spring rolls for delivery to his home. Since then, the company has grown to connect 390,000 merchants, more than 18 million consumers, and more than 1 million delivery personnel in the U.S., Canada, and Australia.
DoorDash’s business model solves a prior problem of consumers wanting to order food to their homes or business but was limited to traditional delivery food items like pizza.
“We enable local brick-and-mortar businesses to thrive in an increasingly convenience-driven economy with rapidly evolving consumer expectations,” the company said in its S-1.
The company believes it holds a 50% market share in the U.S. local food delivery logistics category and a 58% market share within suburban markets.
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DoorDash generated revenue of $885 million in 2019 and $1.9 billion in the first nine months of 2020. But the company is not profitable as it heavily investments in sales and marketing and promotions to attract and retain customers. But as DoorDash gains a new customer that is happy with the platform, incremental marketing spend per customer mostly normalizes by the second year.
DoorDash’s investments are part of the company’s goal to dominate the food delivery market. Throughout 2019, Americans spent $1.5 trillion on food and beverages, of which $600.5 billion was spent at restaurants and other consumer food services.
To better capture market share, DoorDash’s investments have three main objectives: 1) help merchants grow their business, 2) increase consumer adoption so DoorDash is viewed as a daily activity, and 3) build a reliable, high quality, and operationally efficient logistics network.
Pro: DoorDash part of the ‘accelerated future’
DoorDash’s $1.9 billion of revenue in the first nine months of 2020 is particularly small given expectations for the company to fetch a valuation of around $25 billion, Recode Executive Editor Kara Swisher said on CNBC’s “Squawk Alley.” But investors are left with limited other compelling options to buy a company that is part of the “accelerated future.”