DoorDash to Raise $400M Ahead of Possible IPO

The delivery firm reportedly expects to break even by the end of the current quarter.
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Restaurant delivery firm DoorDash is raising a significant new round of funding after confidentially filing for an IPO earlier this year. 

The company confirmed to TechCrunch on Thursday that it is raising "approximately $400 million" in new funding, giving it a valuation of just under $16 billion. Existing DoorDash investors T. Rowe Price Group Inc., Fidelity Investments, and possibly Softbank are expected to participate.

DoorDash, a leading player in restaurant delivery, filed confidentially for an IPO in February. 

Along with a number of other IPO hopefuls, DoorDash presumably delayed plans for a public listing after the coronavirus pandemic threw markets and the overall U.S. economy into disarray starting in late February, though it hasn't commented publicly on its IPO plans. 

The number of new U.S. listings plunged this spring, but the IPO pipeline appears to be stirring back to life. Investors expect a glut of new listings in the third quarter of this year, if market conditions remain relatively stable. 

Apart from DoorDash, other Silicon Valley firms that may seek a public offering this year include Snowflake, Unity Technologies, GitLab and others. Airbnb is also reportedly reviving discussions of its IPO, following a major plunge in demand this year tied to COVID-19. 

"You see an increasing hunger for new properties," Duncan Davidson, managing partner at investment firm Bullpen Capital, recently told TheStreet. 

Along with other services aimed at home delivery, DoorDash saw an initial spike in demand as shelter-in-place orders took effect in the U.S. this year.  

According to analytics firm Edison Trends, DoorDash captured 47% of the U.S. food delivery market in April. The firm isn't profitable, though it's aiming to break even by the end of the current quarter, according to reports. 

DoorDash competes primarily with Uber Eats and Grubhub in the U.S., and investors have shown less eagerness in the past year to subsidize money-losing "sharing economy" firms such as Uber  (UBER) - Get Report and Lyft  (LYFT) - Get Report, both of which have lost value since their IPOs last year. 

"It’s difficult to foresee what the market will look like by the end of the year. DoorDash is an interesting example because they are constantly innovating -- from the introduction of DashPass to ghost kitchens and recent signals of pivoting into grocery delivery amid the pandemic," said Hetal Pandya, co-founder of Edison Trends. "Of course, other players like UberEats offer a challenge to DoorDash with their own innovations and expansions, while also having their rideshare arm of the business to factor into their success."

DoorDash rival Grubhub is said to be negotiating a merger with Netherlands-based Just Eat, dropping its plans to be acquired by Uber because of antitrust concerns.

Restaurant delivery services are also facing scrutiny over fees charged to restaurants. 

A federal lawsuit filed in April contends that GrubHub, Uber Eats, DoorDash and Postmates have abused their monopoly power to charge restaurants high fees that are ultimately passed on to customers.

DoorDash and other firms relying on independent contractors are also facing legal challenges over worker misclassification in California and elsewhere.