DoorDash gets a delivery, buys rival Caviar for $410 million

The market for Bay Area-based online food delivery companies will shrink by just a bit, as DoorDash is buying Caviar in a deal worth $410 million.

The market for Bay Area-based online food delivery companies will shrink a bit: DoorDash is buying Caviar in a deal worth $410 million.

DoorDash Chief Executive Tony Xu announced the acquisition late Thursday in a company blog post. Xu said DoorDash made the deal because of Caviar’s standing in the on-demand food-delivery market and its business philosophy.

“Like DoorDash, Caviar is a merchant-first company,” Xu said. “Adding these merchants to our platform will complement DoorDash’s merchant selection, ensuring we can cater to everyone and every occasion.”

Caviar currently is owned by payment-processing and services company Square. Under terms of the deal, San Francisco-based DoorDash will pay Square $410 million in cash and preferred DoorDash stock for Caviar. The deal is expected to close later this year.

The deal comes as competition in the on-demand food delivery market is getting fiercer, with competitors such as GrubHub, Uber Eats and Postmates among the major companies battling for consumers’ attention and dining-out dollars. Postmates has also filed to go public, which could boost its position in the food-delivery sector.

DoorDash’s acquisition of Caviar comes as it is dealing with the fallout from a New York Times report that took a critical view of DoorDash’s policy of subsidizing the wages of its delivery staff with their tips. DoorDash has said it will soon revamp its tipping policy to ensure that delivery staffers, which the company calls “Dashers,” get the full amount of their tips on top of pre-set wages.

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DoorDash Goes Shopping: Term Sheet

Insight Partners led the round. Investors include Crosslink Capital, Bain Capital Ventures, Mango Capital, Y Combinator and Javelin Venture Partners.

The food delivery wars continue in full force.

Food delivery giant DoorDash bought rival Caviar for $410 million. Square, the mobile payments company, had owned Caviar since 2014, and it was looking to offload the service.

“We have not been shopping around,” DoorDash CEO Tony Xu said. But when Square’s Jack Dorsey reached out about a month ago, Xu said he saw an opportunity that would beef up its business to better take on competitors such as Postmates, Grubhub, and UberEats.

DoorDash already provides delivery services for more than 310,000 restaurants across 4,000 cities in the U.S. and Canada. But it has historically expanded across suburban areas. Meanwhile, Caviar, founded in 2012, has focused on urban cores.

My colleague Danielle Abril reports:

The details of how the two services would be integrated haven’t been determined.

DoorDash, founded in 2013, is still in growth mode, Xu said. The company was most recently valued at $12.6 billion after a $600 million funding round in May, according to PitchBook. The delivery service has been one of the most capitalized player in the industry, raising $1.97 billion since inception, as it competes against the rivals Uber Eats, Grubhub, and Postmates.

In addition to its restaurant delivery, DoorDash also earns money from its DoorDash Drive platform, which allows businesses to integrate DoorDash’s technology and fulfillment services into its own app or website. The platform helped DoorDash land Walmart and become as its largest delivery partner, serving 1,000 stores nationwide. DoorDash also generates revenue from its a service that lets customers order food online for pick it up themselves, and DashPass, its monthly subscription offering.

And there are more services coming, Xu said.

“Restaurant delivery is just the beginning on how we hope to touch and grow every local business,” he said.

Read more at Fortune.

BIG NEW MONEY: Toronto-based startup Clearbanc, which funds companies’ purchases of Facebook and Instagram ads in exchange for a fee, raised $300 million in new funding. Of that capital, $50 million is a Series B equity investment led by Highland Capital, with iNovia and Emergence Capital also participating.

The remaining $250 million will go into Clearbanc’s third fund, which it uses to invest in e-commerce companies under unique terms: Clearbanc fronts the money startups need to purchase digital ads, but instead of taking an ownership stake, Clearbanc charges a 6% flat fee, taking a share of the companies’ revenue until it is paid back. Read more.

LOVES ME, LOVES ME NOT: You know when you think one thing & then it turns out the reality of it is totally different? Well, you’ll enjoy this survey. Private equity firms often tout the value they bring to the management teams of the companies they back. But a new survey reveals something entirely contradictory.

PE-focused consulting and technology firm Accordion surveyed 200 private equity executives and portfolio company chief financial officers about their interactions. Here’s what it found:

Among the 100 private-equity professionals surveyed, 92% said they believe they are living up to the expectations of their portfolio company CFOs. But only 29% of the 100 CFOs in the survey agree.

¯_(ツ)_/¯

Have a great weekend!

VENTURE DEALS

Babylon Health, a London-based startup that has developed a number of AI-based health services, raised $550 million in funding at a valuation of more than $2 billion. Investors include Saudi Arabia’s Public Investment Fund, Munich Re’s ERGO Fund, Kinnevik and Vostok New Ventures.

UrbanClap, an India-based marketplace for freelance labor, raised $75 million in Series E funding. Tiger Global led the round, and was joined by investors including Steadview Capital and Vy Capital.

Armory, a San Francisco-based developer of an open source platform for delivering software, raised $28 million in Series B funding. Insight Partners led the round. Investors include Crosslink Capital, Bain Capital Ventures, Mango Capital, Y Combinator and Javelin Venture Partners.

FNA, a London-based deep technology analytics company, raised $5.5 million in Series A funding. IQ Capital led the round, and was joined by investors including GETTYLAB.

Holloway, a San Francisco-based online publishing company producing comprehensive professional guides on various topics, raised $4.6 million in seed funding. Investors include NEA, The New York Times Co., and South Park Commons.

Biome Makers, a San Francisco-based technology company that uses data analytics and artificial intelligence to analyse the soil’s ecosystem and provide data-driven insights to farmers, raised $4 million in funding. Seaya Ventures and JME Ventures co-led the round, and was joined by investors including LocalGlobe.

HEALTH AND LIFE SCIENCES DEALS

Prellis Biologics, a San Francisco-based human tissue engineering company, raised $8.7 million in Series A funding. Khosla Ventures led the round.

PRIVATE EQUITY DEALS

KKR will acquire certain international operations, including Australian snacks unit Arnott’s, from Campbell Soup Company for approximately $2.2 billion. Read more.

Progressio acquired a minority stake in Polenghi Food S.p.A, an Italy-based distributor of lemon and lime juice products for the condiments industry, from the Polenghi family. Financial terms weren’t disclosed.

Fenix Parts, which is backed by Stellex Capital, acquired the assets of Cox Truck and Van Inc, a Gainesville, Ga.-based operator of a full-service auto recycling facility. No financial terms were disclosed.

CoolSys, which is backed by Ares Management, acquired Agape Mechanical, a Lakeville, Minn.-based specializes in HVAC, refrigeration, electrical and plumbing services, as well as hot water hydro-scrubbing. Financial terms weren’t disclosed.

Level Equity made an investment in Planet DDS, a Costa Mesa, Calif.-based company behind a dental practice management software solution provider. Financial terms weren’t disclosed.

Congruex, which is backed by Crestview Partners, acquired HHS Construction, an Ontario, Calif.-based provider of infrastructure services to major telecommunications and cable providers. Financial terms weren’t disclosed.

Audax Private Equity invested inStonewall Kitchen, a York, Maine-based specialty food producer. Financial terms weren’t disclosed.

Steele Compliance Solutions Inc, a Bregal Sagemount portfolio company, acquired Osprey Compliance Software, a Waltham, Maine-based provider of corporate compliance and oversight software. Financial terms weren’t disclosed.

Ambiente Wine, a portfolio company of Fountain Square Industries, acquired Hops & Vines Distributing, a San Antonio, Texas-based craft beer distributor based in San Antonio, Texas. Financial terms weren’t disclosed.

IPOs

I-Mab, a Chinese drug developer, is filing for an IPO in the U.S. that could raise up to $200 million, Bloomberg reports citing sources. Read more.

RAPT Therapeutics, a South San Francisco-based biotech firm creating therapies for cancer and inflammatory diseases, postponed plans to raise $75 million in an IPO of 5 million shares priced between $14 to $16. The Column Group (34.7% pre-offering), KPCB Holdings (20%), and Topspin Fund (12.2%) back the firm. It planned to list on the Nasdaq as “RAPT.” Read more.

EXITS

Kellermeyer Bergensons Services LLC, a portfolio company of GI Partners, acquired Pristine, an Austin, Texas-based provider of facility management, contract cleaning and related services. Financial terms weren’t disclosed. The seller was Great Elm Capital Corp.

FIRMS + FUNDS

Gron Ventures, a Newport Beach, Calif.-based venture capital firm, raised more than $117 million for its debut fund, according to an SEC filing. The target is $150 million.

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DoorDash to buy Caviar food delivery platform from Square for $410mn

Last mile logistics platform DoorDash announced this week plans to acquire Caviar, the all-in-one food delivery platform from fintech company Square.

Last mile logistics platform DoorDash announced this week plans to acquire Caviar, the all-in-one food delivery platform from fintech company Square. The deal will see DoorDash pay a $410mn cash and stock consideration to Square for the platform.

The acquisition creates a highly diversified logistics company, and highlights both DoorDash and Caviar’s strategic commitment to merchant selection – the process by which consumers establish loyalty to brands and services.

The addition of Caviar’s premium restaurants, with whom DoorDash will work closely to drive their growth, will enable the combined organization to cater to every food preference and occasion. Caviar’s complementary geographic footprint provides DoorDash with a significant number of new and unique customers, who will benefit from an even broader set of merchants.

SEE ALSO:

“Today’s announcement is another important step forward on our mission to empower local economies. We have long-admired Caviar, which has a coveted brand, an exceptional portfolio of premium restaurants and leading technology,” said Tony Xu, CEO of DoorDash in a statement. The acquisition further enhances the breadth of our merchant selection, enabling us to offer customers even more choice when they order through DoorDash. We look forward to welcoming the Caviar team to DoorDash and expanding our partnership with Square in the future.”

Jack Dorsey, CEO of Square, said: “We are increasing our focus on and investment in our two large, growing ecosystems—one for businesses and one for individuals. This transaction furthers that effort, and we believe partnering with DoorDash provides valuable and strategic opportunities for Square.”

DoorDash reached a $7.1bn valuation as a result of a $400mn funding round earlier in the year.

The acquisition is expected to close before the end of 2019, pending regulatory approval.

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With $410M Acquisition, DoorDash Will Serve Caviar’s Customers

DoorDash is acquiring Caviar — the food ordering and delivery service for “premium” restaurants launched in 2012 and acquired by Square in 2014 for …

DoorDash is acquiring Caviar — the foodordering and delivery service for “premium” restaurants launched in 2012 and acquired by Square in 2014 for $90 million — for $410 million, excluding any gratuity.

“According to Square’s release, the cash-and-stock deal — which is expected to close later this year — builds on the existing partnership between DoorDash and Square forRestaurants. Square for Restaurants is a software platform designed to help small businesses integrate online delivery orders with in-restaurant operations. The product was introduced lastyear,” writes Sara Ashley O’Brien for CNN Business.

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“To many observers, the launch of Square for Restaurants helped justify Square’s acquisition of Caviar, which perplexed some when it was announced,” O’Briencontinues.

“Tony Xu, chief executive of DoorDash, said Caviar’s selection of higher-end restaurants in cities complemented DoorDash’s offerings, which skewmore heavily toward chain restaurants in the suburbs. When Jack Dorsey, chief executive of Square, called him about a potential deal, he said, it was a ‘short conversation,’” ErinGriffith writes for The New York Times.

“Xusaid he did not see competition as a hindrance in food delivery because only 7% of ‘non-pizza’ food sold in the United States was delivered. ‘It’s early days in a market that’shighly dynamic,’ he said,” Griffith adds.

“The Caviar deal is a boost for DoorDash, already the most popular food delivery app in the U.S. The privately heldcompany, which counts SoftBank Group Corp. as a major backer, is valued at more than $12 billion. DoorDash recently faced an outcry over its handling of customers’ tips and said it would change the policy, which counts gratuity toward adriver’s base pay. A challenge it has yet to solve — and one that eluded Square — is finding a way to reliably turn a profit from food delivery,” writes Julie Verhage for Bloomberg.

“The big players in the on-demand food delivery space are now DoorDash/Caviar, Postmates, UberEats andGrubhub/Seamless. In May, DoorDash raised a $400 million round valuing it at $12.6 billion. Postmates, easily now one of DoorDash’s prime competitors, is currently worth about$1.85 billion and confidentially filed to go public earlier this year. Though that IPO has yet to happen,” writes Megan Rose Dickey for TechCrunch.

Both Square and DoorDash are based in San Francisco. Caviar currently provides service in Brooklyn, Boston,Chicago, Dallas, Fort Worth, Manhattan, Los Angeles, Orange County, San Diego, Philadelphia, Queens, Sacramento, the San Francisco Bay Area, Seattle, Portland and Washington D.C.

“In his announcement about the Caviar acquisition, Xu wrote that Caviar, like DoorDash, ‘(works) hard to help local restaurants attract more customers, grow their sales and expandtheir reach,’” Tara Duggan reports for the San Francisco Chronicle.

“However, some Bay Area restaurateurs havecomplained about what they see is the steep price for the service,” she continues.

“For example, Karen Heisler, co-owner of San Francisco’s Mission Pie,recently toldMission Local that she was unwilling to paya 25% to 30% service charge she said such services demand to get her pies delivered because it was much more than her profit margin. Not much later, Heisler announced that the cafe would closepermanently.”

Xu sees it differently, of course.

“Today’s announcement is another important step forward on our mission to empowerlocal economies,” he says in the release announcing the deal. “We have long admired Caviar, which has a coveted brand, anexceptional portfolio of premium restaurants and leading technology. The acquisition further enhances the breadth of our merchant selection, enabling us to offer customers even more choice when theyorder through DoorDash.”

Meanwhile, the New York Daily News has the story of 38-year-old Manhattan restaurant manager and Queens resident MichaelGarcia, who “ended up in the hospital after a DoorDash driver delivered a beating to his head, face and leg following a dispute over bringing his food order all the way to his door, according toa recent lawsuit filed in Manhattan Supreme Court.”

All he wanted as he settled in to watch “Game of Thrones” at 1 a.m., Trevor Boyer and JanonFisher write, “was a couple of cheeseburgers, but what he got was a knuckle sandwich.”

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All of the Food Will Be Delivered

In the past few years, venture capitalists have spent billions of dollars subsidizing meal-delivery services such as DoorDash, Uber Eats, and …

But another turn is coming: In 2020, more than half of restaurant spending is projected to be “off premise”—not inside a restaurant. In other words, spending on deliveries, drive-throughs, and takeaway meals will soon overtake dining inside restaurants, for the first time on record. According to the investment group Cowen and Company, off-premise spending will account for as much as 80 percent of the industry’s growth in the next five years.

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The fastest-growing restaurants are quick-service chains (such as McDonald’s and Starbucks) and fast-casual locations (such as Chipotle and Sweetgreen), where diners can walk in, walk out, and never touch a chair or table. But no segment of the industry is growing faster than online delivery, which now accounts for 5 to 10 percent of total restaurant business, according to industry reports.

So restaurants surpassed grocery stores only to become something quite like grocery stores: food-service establishments that sell grub for people to chew somewhere else.


Both of the above trends—the triumph of restaurants and the surge of delivery— are powered, in different ways, by the internet. Online commerce reduced traffic in brick-and-mortar stores, which this year are closing at a record-setting pace. Into those vacancies has flowed the “munch-and-crunch economy”: a fleet of gyms and cafés and fast-casual chains.

The web not only cleared space for new dining spots, but also made possible apps that allow consumers to order prepared food on their phone. For decades, the delivery business was dominated by pizza and Chinese food. More than 60 percent of all deliveries are still pizza, but that number is falling quickly. In the past few years, venture capitalists have spent billions of dollars subsidizing meal-delivery services such as DoorDash, Uber Eats, and Postmates, which create partnerships with restaurants of every type and cuisine.

With this injection of venture-capital funds, online delivery has gone mainstream. The share of Americans who have ordered food over the internet grew from 17 to 24 percent in the past year. According to the analytics company Second Measure, meal-delivery sales to the four largest apps—DoorDash, Grubhub (which owns Seamless), Uber Eats, and Postmates—have tripled since 2016. If you’ve never heard of some of these companies, it’s probably because they’ve split their dominance regionally, like cable companies. Grubhub rules in New York City; DoorDash has more than half of sales in Houston and Dallas; Uber Eats is strong in Miami and Atlanta. (The term online food delivery might bring to mind “meal kit” companies, such as Blue Apron, but those services lose about half of their subscribers after one month.)

Source: “Which Company Is Winning the Food Delivery War?,” by the retail-analytics company Second Measure.

Meal-delivery companies have several things in common with other digital platforms—for better and for worse. Like ride-hailing companies, they provide a revolution in convenience, which is undercut by shoddy labor practices. Last week, a New York Times investigation reminded users that tips to DoorDash delivery people actually go straight to the company, rather than to the worker. (DoorDash has since changed its policy, but delivery workers are still paid poorly.) Like Amazon, these companies supply instant gratification and leave behind a mountain of garbage. Like most fledging internet-based businesses, they’re cash-flow giants that are miles from profitability. DoorDash, the largest delivery start-up, raised $600 million in funding this year despite negative earnings. Uber Eats probably isn’t gushing profits either; its parent company loses approximately $1 billion a quarter.

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