Who’s feeding startups across the United States?
Every day, as the sun peaks in the sky, one of life’s greatest existential questions hits everyone across the country: “What’s for lunch?”
It’s such a problematic, philosophical conundrum nearly a dozen startups are trying to solve it. Since the turn of the decade, several companies have come into existence to broaden the menu for startups across Silicon Valley and beyond. The goal of each is to help supply — the restaurants and chefs — meet the demand for a near infinite menu of options.
The herculean task of creating that unbounded menu to sate every appetite imaginable right at their doorstep has indeed created tens of billions of dollars in value. DoorDash alone is reported to be raising a new financing round that would put its valuation near $13 billion. We asked ourselves: who else are startups paying for their meals?
So we did what we always do: dig into Brex data to find out. Brex examined startup spend across the fourth quarter of 2018, the first quarter of 2019, and May 2019 to see where Brex customers are deploying their capital when it comes to food delivery. Brex customers consist primarily of startups across the country, though we have an increasingly broad base of ecommerce customers after the launch of ecommerce product in February this year.
And, as you’d expect, there’s a good reason DoorDash is suddenly worth as much as it is.
The rise of DoorDash
There are a lot of different ways to think about getting food to startups around the country. Some companies like EZ Cater, Chewse, and Zerocater are what they sound like: catering services. There are also long-standing brands like Seamless (probably known best for that sweet $5 udon in New York City) and GrubHub.
Beyond that, there are the newer platforms that create a delivery network between drivers, restaurants, and customers. That’s where DoorDash, Caviar, and Postmates sit. And that’s where startups are deploying the majority of their capital. Indeed, while recent entrant Chewse has gained substantial market share, DoorDash and Caviar continue to control vast shares of food delivery spending.
Here’s what the spend distribution looks like:
While Postmates was one of the earliest entrants and continues to gain market share, DoorDash has become the clear winner over the past three quarters. In the fourth quarter, DoorDash picked up 16% of all startup spend on food delivery. By May, it was up to a whopping 26% of total Brex customer spend, while Caviar mostly stayed steady and Postmates grew incrementally. Chewse grew the fastest of the catering startups.
Meanwhile, UberEats has one of the largest customer bases of the services above among Brex customers. But even then, its share has continued to dwindle. It’s not entirely clear what the dynamic is here. While our research has shown it’s a definite favorite when it comes to ridesharing among startups, there still appears to be considerable room to grow when it comes to food delivery.
The future of food delivery
While there’s room for both models, each company may eventually face the same question Uber faced when it went public: what kind of company, really, is it?
You could consider Uber a transportation company replacing taxis. Or you could consider it a technology company, creating a powerful new tool for users. Or you could consider it a platform, akin to being the pipes of a new kind of internet.
The catering services and the delivery services like DoorDash have different approaches. DoorDash, Postmates, and Caviar can serve as the connective tissue to satisfy demand across multiple parties, acting as a marketplace between their restaurant customers and the end consumers ordering food. Meanwhile, catering services may have a new opportunity to understand what startups want at scale and fine tune a business model augmented by technological prowess.
Or maybe there’s a third outcome: they one day find themselves in more real competition. There are reports of both Uber and former Uber CEO Travis Kalanick exploring renting out commercial kitchen space on demand. What, then, happens if platforms find themselves running kitchens, or kitchens opening themselves up to a platform?
Either way, the future of food delivery is going to be weird, impressive, and filled with the endless paradox of choice for consumers. Sorry, but we still don’t have a good recommendation for lunch today.
Brex is transforming B2B payments by creating financial products that are tailored to specific industries, like startups or ecommerce. In 2018 Brex launched the first corporate card and rewards program specifically designed for startups. By rebuilding the credit card tech stack from the ground up, Brex is able to reimagine every aspect of corporate cards, including underwriting, transparency and approvals, to create a radically better experience for customers. Brex has raised $215M in funding and is backed by Y Combinator Continuity, Peter Thiel, Max Levchin and more. The company’s headquarters are in San Francisco.
We’re still early, and we welcome as much feedback as we can get. Also, we are hiring like crazy. Check out any openings we have!
Brex examined customer spend data on food delivery services for the fourth quarter of 2018, the first quarter of 2019, and May 2019 to get a snapshot of the ecosystem. Share of spend is defined as the amount of money Brex customers spent on a specific service over the total spend by Brex customers on all products.
As part of its underwriting process, Brex maintains visibility into the spending of companies that use its products. Companies who asked that their data not to be shared were not used, and any company that does not wish to share its data for future aggregated analysis may request to exclude it from being shared in the aggregate.