Delivery Startups “Are Guys Playing Chicken With a Bulldozer on a Bicycle”

Postmates

Postmates recently raised $141 million in a new financing round, valuing the startup at around $600 million. The delivery startup is operating in 44 markets in the U.S. now and is planing to go international.

Bloomberg spoke with Postmates CEO and co-founder Bastian Lehmann. Most interesting is maybe that Lehmann is publicly mulling over merging with other companies; or, realistically, getting acquired. Other the last months rumors of failed talks with Amazon and Uber made the round. The hard market conditions (and the problems rising money) certainly account for some of that thinking:

Few entrepreneurs like to entertain the idea publicly, but Lehmann said Postmates would consider a merger: “We have a desire to build a large, big, successful company that does a lot of good for local economies. There are many ways to get there. If you draw the odds on how to get there the fastest, you have to entertain the thought that multiple companies or a few companies in this space could join forces,” Lehmann said. “I believe that something like this will happen.”

Not only does its app compete with decades-old courier services and the restaurants themselves, it faces a bevy of other companies that have piled into the on-demand food delivery industry in recent years. Amazon.com Inc. and Uber Technologies Inc., each with deep pockets, have been diving head first into the food business this year with global ambitions.

“Uber’s main mode is this Death Star thing,” Lehmann said. “They’re using their balance sheet as a weapon very well, and I think it’s actually unprecedented.”

In April, documents from Postmates leaked, showing gross margins above 20% and a doubling of revenues in the six months ending Q1 2016.

The market is certainly not an easy one for stand-alone startups. Bloomberg:

“What you have here is a lot of super over-funded competition for a fundamentally big market that’s a lot smaller than people think,” said Max Wolff, chief economist at Manhattan Venture Partners, which specializes in private stock transactions. “Lots of people have decided that, through some pure ego, they can compete with entrenched players with logistical chops. These are guys playing chicken with a bulldozer on a bicycle.”

That is why I, generally, agree with Lehmann. Merging with a bigger player makes sense for Postmates. Those logistics guys can be shaken up, but only by someone who is big elsewhere already and who can leverage that; someone like, say, Amazon or Uber. (Talking about this option publicly, right after a successful financing round, plus all those ‘leaks’ over the year, implies heavily that Postmates’ investors are thinking very much the same.)

Postmates is now completing more than 1.5 million deliveries a month, according to what the company told Bloomberg. In April, six months ago, Postmates hit one million monthly deliveries.

Gross merchandise value run rate, according to Postmates, will be at least $1 billion annually by December of this year.

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  1. […] Delivery Startups “Are Guys Playing Chicken With a Bulldozer on a Bicycle” […]

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