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Ready for IPO, Postmates needs to win big in LA — or else

Sam Dean, Los Angeles Times on

Published in Science & Technology News

LOS ANGELES -- Bastian Lehmann, the German-born chief executive of delivery app maker Postmates Inc., has taken to wearing a Dodgers cap and a crisp white tee, at least whenever cameras are around.

Lehmann has never lived in Los Angeles. (Postmates is based in San Francisco.) He has been to only a handful of Dodger games.

But his company, which is poised to go public in the coming weeks and is currently valued at $2.4 billion, needs Los Angeles. So Dodgers cap it is.

IPOs are meant to be victory laps for investors and early employees, but at first glance, Postmates heads into this one in a less than ideal position. Among the major services providing on-demand restaurant delivery via smartphone app, it ranks fourth for national market share, and its competitors have significantly more cash to burn. DoorDash, the national leader and owner of Seamless and Caviar, has raised $1 billion in 2019 alone. Grubhub, the No. 2, dominates the lucrative New York City market. Uber Eats, which comes in third across the country, has the $55-billion market cap of Uber behind it.

And this year has not been kind to money-losing consumer tech companies making their public market debuts.

First Lyft, then Uber went public in the spring, only to see their stock prices crater once their financials were exposed, showing massive losses and no clear path to black ink. WeWork seemed to disintegrate as soon as its balance sheet -- and the self-dealing and self-aggrandizement of its now-ousted founder-CEO, Adam Neumann -- saw daylight.

 

Postmates first filed confidential paperwork with the SEC back in February, but reports that it has entertained buyout offers from DoorDash and Uber this year suggest that the company is aware of the difficulties it faces.

In mid-September, Postmates raised a final round of $225 million from a private equity firm, a move that could indicate a desire to pump up its valuation before going public, or a sign it was running out of cash. In 2018, according to Forbes, the company failed to break a profit on $400 million in revenue. At the same time, new California regulations that threaten to upend the company's entire business model were signed into law.

But throughout it all, the company has held on to Greater Los Angeles, a crown jewel market of 10 million consumers, many of them flush with disposable income and reluctant to leave their homes in search of food, despite the nice weather. According to data from credit card spending analysis firm Second Measure, Postmates currently commands 40% of the L.A. market, after years of fending off attacks on its customer base and driver corps from DoorDash and Uber Eats.

L.A. is the proving ground for Postmates' pitch to investors that it's not just another money-burning machine. But it landed in the city only after trying five others first: San Francisco, Seattle, New York, Washington and Chicago.

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