DoorDash, the US food delivery app that has seen business almost quadruple during the coronavirus pandemic, filed its intention to go public on Friday, bringing closer one of the most hotly anticipated share sales of the year.
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Founded by four Stanford university students in 2013, DoorDash is one of several tech companies to apply “gig economy” logistics to offer restaurant deliveries. It has about 1 million “Dashers” (delivery workers) and more than 18 million customers.
The company, with 49% of meal delivery sales in September, will join rivals Grubhub and Uber in the public markets. But compared with Uber’s 22% and GrubHub’s 20% market share, DoorDash is the dominant player.
Business has boomed during the pandemic, with revenues growing 226% in 2020. That comes after growing revenues from $291m in 2018, to $885m in 2019 and $1.92bn in the year to September. At its most recent round of funding, in June, the company was valued at $16bn, according to Crunchbase, and had blown through $2.5bn in capital.
DoorDash’s initial public offering (IPO), which is expected before the end of the year, comes in what may prove to be a record year for public offerings, among them Palantir, Robinhood, Snowflake, Asana and Unity Software. Between now and the end of the year, Airbnb, the gaming company Roblox and e-retailer Wish are also expected to launch share sales on New York exchanges.
DoorDash’s IPO comes as gig economy companies are under scrutiny for offering employment without taking on the responsibilities of full-employment benefits.
On 3 November, California voter rejected provisions in a new labor law which would have forced companies to classify workers – including delivery drivers – as employees instead of contractors. Under Proposition 22, which was heavily backed by tech money, employees of DoorDash and Instacart, along with Uber and Lyft, will be largely exempt from new protections.
In its public prospectus, DoorDash explicitly warned that “if Dashers are reclassified as employees under federal or state law, our business, financial condition, and results of operations would be adversely affected.”
The company has also faced challenges over its tipping system which instead of going directly to workers is used to support guaranteed minimum pay. Last year, the Washington DC attorney general, Karl Racine, filed charges against DoorDash over the practice, describing it as “deceptive”.
In a statement, a DoorDash spokesperson said: “We believe the assertions made in the complaint are without merit.”
But investors, who have seen GrubHub’s stock rise 49% this year, will have to judge whether delivery services like DoorDash will continue to grow strongly if and when the pandemic is contained.
“The circumstances that have accelerated the growth of our business stemming from the effects of the Covid-19 pandemic may not continue in the future, and we expect the growth rates in revenue, Total Orders, and Marketplace GOV to decline in future periods,” the company said in its filing.
DoorDash also said it recognized that the ease with which customers can switch between delivery services could also affect its future. Its CEO, Tony Xu, said the company hoped to move beyond food delivery and toward creating an “on-demand logistics platform” that would “transform the way local merchants do business and enrich the communities in which they operate”.
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