Postmates, the on-demand delivery service that operates in nearly 60 markets, has raised $35 million in Series C exclusively from existing investor Spark Capital, according to our sources.
Postmates is a service that lets users order anything from local stores and have it delivered directly to their home for a small delivery fee.
The company launched back in 2011 and has raised a total of $58 million, including a $16 million Series B which was also led by Spark Capital with investments from Matrix Partners, SoftTech VC, Crosslink Capital, Scott Banister, Naval Ravikant, Russell Simmons, Thomas Korte, Shervin Pishevar, Dave Morin and David Sacks.
Sources tell TechCrunch that the latest deal, which valued the company between $150 million and $200 million, closed within the last month.
Postmates has made more than 1 million deliveries in nearly 60 markets across the United States, and has recently launched an API. Using the Postmates API, third-party sellers and app developers can offer same-day delivery powered by Postmates.
Scale is the most important factor in a business like Postmates, which generates a small amount of revenue per transaction, which is why it has been expanding so rapidly. This time last year, the company was only operating in four different markets.
There’s no doubt about the on-demand economy as a whole, with everyone from Amazon to Square to Uber to WunWun looking for a piece of the (on-demand) pie. But ultimately, the winner will be determined by who has the most surface area and the lowest prices.
Amazon recently turned on Prime Now, its one-hour delivery service, in New York, which may be one of the more valuable on-demand delivery markets in the country. Meanwhile, newer startups like WunWun (What U Want, When U Want) are operating under the same model, but undercutting Postmates’ pricing.
Postmates makes money by charging a delivery fee, which starts at $5 and escalates based on distance and “the capacity of the platform,” alongside a 9 percent service fee that is applied to the purchase price.
On one hand, Amazon is asking for an extra $7 for one-hour delivery, but offering two-hour delivery for free. On the other, you’ve got WunWun slightly undercutting Postmates pricing in New York, the Hamptons and San Francisco with a $4 flat delivery fee on orders greater than $20, and then shifting to an automatic gratuity charge that starts at 20 percent and goes down incrementally as the price of the order increases.
Plus, Square has shown interest in on-demand delivery with the acquisition of Caviar last year.
It’s a growing, yet crowded space. But existing investor Spark is clearly ready to bet on Postmates as a front-runner. Literally.