|
|
|
PitchBook
|
|
|
|
|
|
|
|
Social distancing presents a unique opportunity for meal-delivery companies. It also highlights the precarious tightrope these businesses are attempting to walk. Shutting in the public has led to higher revenues for delivery companies like DoorDash and Uber Eats. But high marketing costs and razor-thin margins make it as difficult as ever to turn a profit.
Many have long believed that consolidation was the ultimate end game for meal delivery, with the power of scale perhaps the only force strong enough to overcome the industry's many headwinds. Others have argued that such consolidation could be a worrisome development for restaurants and consumers.
For better or worse, Uber might be ready to get the merger party started.
Welcome to The Weekend Pitch. I'm Kevin Dowd, and you can reach me at weekend@pitchbook.com. Dealmaking talk is heating up in the meal-delivery space, and that's one of 10 things you need to know from the past week: |
|
|
|
|
|
 |
The takeout game has changed amid a pandemic.
(Serhii Sobolevskyi/Getty Images Plus) |
|
|
1. Delivery deals
Reports emerged on Tuesday that Uber is in talks to acquire Grubhub, news that sent Grubhub's share price soaring nearly 30%. A combination of the two would transform the sector by reducing the number of companies fighting for true meal-delivery supremacy in the US from four to two.
During March, DoorDash accounted for 42% of all meal-delivery spending, according to consumer analytics specialist Second Measure. Grubhub checked in with 28% market share, while Uber's Uber Eats arm was at 20% and Postmates at 9%. A combination of Uber Eats and Grubhub, then, would essentially create a duopoly, placing some 90% of the market in the hands of two companies. It could also spur DoorDash and Postmates to join forces in a bid to keep up with the Joneses (or the Khosrowshahis, if you will).
If those two startups do have deal talks, it wouldn't be the first time. The Wall Street Journal reported earlier this year that DoorDash, Postmates and Uber Eats had all discussed merger combinations at various times in 2019.
The four industry powers have traveled different paths over the past several years. Grubhub has been publicly traded since 2014. Uber just went public last year, and both DoorDash and Postmates remain VC-backed. Uber Eats, of course, is also just one part of a much larger corporation. That means the companies have had different degrees of resources, and different motives. Grubhub's responsibility to public shareholders made it difficult to spend at the same level as its younger rivals.
But so far none of those models have resulted in any sort of sustained profitability. Grubhub posted a net loss of $33.4 million in Q1, and Uber Eats lost $313 million in the quarter in terms of adjusted EBITDA.
And business isn't getting any easier. Meal-delivery providers have always spent heavily on marketing, and that has continued during the pandemic. They also now face higher costs in part because of new safety measures for their workers. And these companies still have plenty of critics who complain about the power they wield over labor and restaurants.
Other food delivery companies were also in the news this week. The Information reported that Instacart is raising new funding at a pre-money valuation of between $12 billion and $14 billion. Louis Borders—the founder of both the Borders bookstore chain and Webvan, the legendary grocery delivery flameout of a prior age—is back with a new delivery startup called, appropriately enough, Home Delivery Service. China's Dingdong Maicai secured $300 million in funding this week for its grocery delivery services, according to Reuters.
But it's in the meal-delivery sector where the most notable drama is unfolding. If Uber and Grubhub go ahead with a deal, it could mark the beginning of a new era in the industry—assuming a combination is allowed by antitrust regulators.
2. Self-driving seesaw
In a bit of positive news from the autonomous driving sector, Waymo raised $750 million in an extension of the Alphabet subsidiary's latest funding, taking the round's total to $3 billion. On the other side of the coin, there was Cruise, the self-driving unit of General Motors, which this week laid off around 160 workers, according to Bloomberg.
3. Big tech goes shopping
On Friday, Facebook announced its acquisition of Giphy from the GIF specialist's VC backers, with reports placing the valuation between $300 million and $400 million. A day earlier, Apple reportedly confirmed its acquisition of NextVR, a virtual reality company specializing in live events that was previously backed by SoftBank, among others. And Microsoft agreed this week to buy Metaswitch Networks, a cloud-based communications company.
4. Buyout optimism
So far, at least, early predictions are holding up that the biggest PE firms would still be able to raise massive funds in the face of a pandemic. BDT Capital Partners, a merchant banking firm led by former Goldman Sachs star Byron Trott, has raised nearly $9.1 billion for a new fund, according to a regulatory filing. Bain Capital, meanwhile, is targeting $9 billion for its next buyout fund, and the UK's Hg has raised some $11 billion for a new trio of funds, Bloomberg reported.
5. EDM to ROI
Alex Pall and Drew Taggart are best known for crafting electronic-influenced earworms as the Chainsmokers, becoming the highest-paid DJs in the world in 2019, according to Forbes. Now, the musical duo is putting some of that cash to work in VC: The Grammy Award winners have launched a new venture firm called Mantis, with reported plans to invest an initial $50 million. |
|
 |
| Alex Pall (left) and Drew Taggart, aka the Chainsmokers, are ready to take the VC stage. (Bryan Bedder/Getty Images) |
|
|
6. Andreessen activity
Andreessen Horowitz led an investment this week in Clubhouse, valuing the buzzy voice-chat startup at a reported $100 million. The Sand Hill Road stalwart also took part in two other headline-grabbing deals, joining a $50 million investment in DigitalOcean that valued the creator of a cloud-based platform for developers at $1.15 billion and backing fantasy sports startup Sleeper alongside several notable angels, including frequent a16z collaborator Kevin Durant.
7. Hoop dreams
Durant's deal with Sleeper wasn't the only instance this week of the NBA crossing over into finance. Bloomberg reported Thursday that the league is in talks with Dyal Capital Partners about launching a new fund that would buy minority stakes in multiple NBA teams, essentially offering an avenue to liquidity to existing owners who might otherwise struggle to find deep-pocketed buyers. I wrote earlier this month about the deepening ties between pro sports and Wall Street.
8. Carlyle in court
Does the coronavirus pandemic qualify as legal grounds to walk away from a deal? That's the question at the heart of an ongoing legal dispute between The Carlyle Group and American Express Global Business Travel, a corporate travel specialist in which Carlyle had planned to acquire a 20% stake before calling off the deal this month. A Delaware court's decision on whether Carlyle is allowed to back out could have major implications across the dealmaking landscape.
9. Saving face
A group of Chinese state-owned investors invested a reported 1.8 billion yuan (about $253 million) this week in CloudWalk Technology, an AI giant focusing on facial recognition. The deal comes about nine months after Megvii, another Chinese facial recognition company, filed for an IPO in Hong Kong, a listing that's yet to occur. Two months after that filing, the US government placed Megvii on a blacklist due in part to concerns that its technology may have been deployed to surveil the Uighur population in northwest China.
10. Quiz whiz
Schools might not get back to normal anytime soon, but that doesn't mean an edtech startup can't turn into a unicorn. Quizlet, which specializes in flashcards and other study tools, raised a $30 million Series C round this week led by General Atlantic, reportedly resulting in an even $1 billion valuation.
View the full list online |
|
|
|
|
|
|
|
|
|
A message from Sentient Jet
|
|
|
|
Air travel for the coronavirus era
|
|
Getting where you need to go safely, securely and quickly has always been a luxury, but in today's world, it's a necessity. Whether you're looking to get back to business, rediscover the world, or reunite with family, Sentient Jet can get you there.
No matter which Sentient Jet Card you choose, you'll gain access to all-inclusive fixed rates, guaranteed availability starting at 10 hours' notice, seamless booking, jet card hours that never expire, pristinely sanitized aircraft, and more.
Get the card |
|
|
|
|
|
|
|
|
 |
| (nadia_bormotova/Getty Images Plus) |
|
|
|
The five biggest publicly traded private equity firms in the US reported huge losses and major markdowns in their PE portfolios for the first quarter of 2020. But those headline numbers belie a deeper story of the firms' financial state in the midst of a globe-spanning crisis.
PitchBook analyst Wylie Fernyhough burrowed into the data in a new note this week, examining the most telling numbers from Q1 and forecasting what could be ahead for Blackstone, KKR and the rest of the group in the uncertain months to come. |
|
|
|
|
|
 |
| (Chan2545/Getty Images Plus) |
|
|
|
The world of fintech is a wide one, encompassing everything from health insurance to digital wallets, online stock brokerages to digital banks. The current global upheaval will surely affect different slices of the financial world in different ways.
But on the whole, fintech appears well positioned to navigate any stormy weather ahead, according to a new piece of Emerging Tech Research from PitchBook's Robert Le. The full 108-page note is available to PitchBook subscribers, and anyone can explore a preview version that includes an executive summary and closer looks at capital markets and financial services IT. |
|
|
|
|
|
 |
| (t_kimura/Getty Images) |
|
|
|
Our ostensible honoree this week is ANNA, a British startup that raised a reported $21 million in recent days to fund its financial software for small businesses. But really, we're here to acknowledge a whole crop of startups that have raised VC in the past two-plus months and might sound more like human beings than companies.
ANNA is the latest example, but Olive, Paige, Pepper, Nate, Clyde, Josh and Fritz have also raised capital since March 1, according to the PitchBook Platform, operating in sectors ranging from ecommerce to AI to oncology. But they all still have a way to go to catch the company that is currently, as far as I can tell, the most valuable VC-backed startup with a human's name: Oscar, the healthcare specialist that reportedly climbed to a $3.2 billion valuation in 2018. |
|
|
|
|
|
Recommended reads
The confessions of Marcus Hutchins, the man who saved the internet. [Wired]
For some, unexpected company of a supernatural sort seems to have arrived during home isolation. [The New York Times]
How is a Hollywood leading man who is preparing to play Batman spending his time in isolation? With a whole lot of poorly microwaved pasta. [GQ]
The indescribable appetites of Jerry Saltz, a Pulitzer Prize-winning art critic who, in his seven decades of life, has also been so much more. [Vulture]
For millions of Americans already living paycheck to paycheck, the coronavirus is presenting unforeseen and previously unfathomable challenges. [The New Yorker]
An increasing friendliness toward remote work among startups could already be creating an exodus of tech employees from San Francisco. [Bloomberg]
Making the case that the "financialization" of the US economy is only accelerating during the coronavirus crisis—to the benefit of Wall Street, and to the detriment of those hit hardest by the pandemic. [Rolling Stone]
For the trivia pros at Sporcle, the move from bars to webcams has been surprisingly smooth. For other companies, it shows the potential of Zoom as a platform for third-party developers. [Protocol]
Startups are sprinting to build apps to aid in contact tracing. Whether it will prove an effective business model is still anybody's guess. [The Wall Street Journal] |
|
|
|
|
|
Quote of the week
"Nobody knows how to value a business right now. There is no precedent for valuations really in this market, but, at some point, someone will figure out a reasonable way and that will become some sort of industry standard."
—Paul Aversano, a managing director at consulting firm Alvarez and Marsal, speaking to The Wall Street Journal about the volatile state of private equity valuations |
|
|
|
|
|
The Weekend Pitch is produced by editor Kevin Dowd.
Were you forwarded this newsletter? Sign up at pitchbook.com/subscribe. |
|
|
|
|
|
|
|
|
Since yesterday, the PitchBook Platform added:
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
