DoorDash’s Recent Acquisitions, Small Robots, And Burn

Morning Markets: What’s up with food delivery these days?

We’ve covered the dizzying rise of DoorDash from food delivery unicorn to Vision Fund-backed, niche-defining decacorn.

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All it took was a bathtub of capital. The company’s market share has risen among key groups thanks to its epic fundraising activity. Its consumer market share in the United States has risen to a leading position, according to certain reports. And its recent acquisition of Caviar from Square will boost its corporate delivery share as well.

But it seems that even the company’s sights are a bit higher than merely using humans to deliver an ever-larger amount of food. Instead, DoorDash is snapping up self-driving talent. To what end, and at what cost, is a good question.

Robots, Not Cars

It doesn’t seem that DoorDash is in any danger of building self-driving car tech. What the firm is working on are self-driving robots that can scoot about cities, delivering food at a far lower cost (in theory) than what it costs to pay humans to do the same.

It’s not new work at DoorDash. You can find company notes like this August 2017 entry, extolling a new robot delivery vehicle that it was excited to announce. The post also noted that the firm had already started “testing robot deliveries on the DoorDash platform.”

Fast forward to this week, and the company appears to be very much still at it. Here’s TechCrunch from yesterday:

DoorDash has been on an acquisition tear of late, with Scotty Labs as its latest target. […] [The company] is working on technology to enable people to remotely control self-driving cars, raised a $6 million seed round.”

TechCrunch also notes that DoorDash scooped up “the two co-founders from Lvl5,” a firm that works in mapping for self-driving tech. (Data on Scotty Labs here, and Lvl5 here.)

Add the two deals to DoorDash’s history of work in robotics and it’s pretty simple to see that the company is still investing in building delivery robots. Of course, competitors like Postmates are working on the same thing.

Indeed, there appears to be a sort of two-prong battle in the world of autonomous wheels. The first deals with self-driving vehicles that can carry several things; cars, trucks, and other wheeled machines that can bring multiple people, or multiple tons of product to where they need to go. And the smaller end of the race, where box-sized robots want to bring small amounts of product to consumers’ places of work and rest.

It’s hard to fault delivery companies for working on their own tech. My read is that every single on-demand company wants to get rid of paying delivery humans as quickly, and completely as possible. This was evident even back when ride-hailing companies first decided to not pay their driving staff like staff. Since then, self-driving machines have been worked on by nearly everyone you can name in the ride-hailing market. Postmates and DoorDash, in the on-demand niche, are similar.

Postmates has filed privately to go public and could reveal a public S-1 this year. If it does, we’ll be curious to see what sort of impact its robot delivery machines make on its R&D spend. Because we know that self-driving tech is expensive.

Ride-Hailing, Self-Driving

Ride-hailing generates no cash, let alone net income. I cannot name a single ride-hailing company of scale that makes money anywhere in the world. The model requires lots of capital until a later date when prices can rise to help companies cover costs. Or until self-driving tech can reduce costs in other ways, allowing delivery platforms to collect more money per delivery for themselves.

Now, read that paragraph again but swap in on-demand deliveries for ride-hailing, and you get a nearly-true set of statements. GrubHub makes money, so the edits don’t hold up, but you can see the point.

On-demand companies feel like they are suffering from a similar problem as ride-hailing companies. To generate lots of demand (revenue, and revenue growth), they need to charge a price point that doesn’t allow them to fully cover their costs. Self-driving tech could help either category, so everyone is investing in the stuff. (More on the issue here.)

But at what cost? We’ve noted that ride-hailing is a bit like fracking in the past, with lots of capital going in but very little coming out in the way of cash or profit. Autonomous work is similar. Indeed, the cost of self-driving tech is staggering. Billions and billions of dollars are being poured into the space, with little so far to show for it in the way of commercial performance.

So can DoorDash get robot deliveries right before Postmates does, or someone else? Or can it get the work done and scaled before its model runs out of fresh cash? We’ll see, but the company certainly is still hard at it.

Illustration: Dom Guzman