DoorDash Inc.’s aggressive expansion drive has helped to nearly triple its valuation in less than six months.
The food delivery startup revealed in a press release that it raised $250 million in venture capital funding at a $4 billion valuation. This latest cash injection came just five months after DoorDash tapped the likes of SoftBank Group Corp., Sequoia Capital and Singapore’s GIC Pte Ltd. sovereign-wealth fund for $535 million in a Series D financing round that valued it at $1.4 billion. (See also: The Risk and Rewards of Investing in Startups)
The company's co-founder and CEO Tony Xu told the media that DoorDash decided to embark on additional funding after receiving multiple inquiries from interested parties. He claimed that the delivery startup was not actively seeking new investment, but figured it could use the extra capital on offer to help accelerate its expansion.
“We do have the majority of our Series D money in the bank,” Xu told Fortune. “This was an opportunistic financing. We’ve had multiple inbound [inquiries]. We were not looking.”
Investments Paying off
Xu also used the opportunity to tell investors how well DoorDash is doing, adding that the company’s $4 billion valuation is justified as it is "gaining market share faster than anyone in the space,” has already met or exceeded most of the metrics set during the Series D round in March and delivered 250% year-over-year growth in delivery volume.
This near tripling of delivery volumes comes as the company nearly doubled its geographic footprint to more than 1,000 cities across the U.S. and Canada. DoorDash, which hopes to expand to more than 2,000 cities by the end of the year, has also benefited from partnerships with the likes of Chipotle Mexican Grill Inc. (CMG), Dine Brands Global Inc.'s (DIN) IHOP, Golden Gate Capital's Red Lobster, White Castle and The Cheesecake Factory Inc. (CAKE).
In order to keep growing, DoorDash must tackle competition from the likes of Amazon.com Inc. (AMZN), GrubHub Inc. (GRUB), Square Inc.’s (SQ) Caviar, Postmates and Uber Technologies Inc. Bloomberg highlighted that Uber could pose the biggest threat as it is currently pouring significant capital into its Uber Eats business. (See also: GrubHub Stock Breaks Out From Symmetrical Triangle.)
On Wednesday, Uber revealed that its aggressive investment in food delivery led to losses of $891 million in three months. With $7.3 billion in cash on hand, the San Francisco, California-based company has more than enough money behind it to derail DoorDash's growth prospects. (See also: Uber Jumps to $62 Billion Valuation.)