Can you build a billion-dollar business on the backs of cyclists weaving through traffic with tacos in tow? According to Silicon Valley, absolutely. The rise of a new breed of delivery company, fueled by algorithms and venture capital, is making it easier than ever to get a hot meal (or anything else) brought to your door.
Direct delivery of food could devour 40% of total restaurant sales, or $220 billion, by 2020, according to a 2017 Morgan Stanley estimate. And it’s still early days as far as technology and logistical efficiency are concerned. “There may be room for more innovation than appears at first blush,” says Cowen & Co. analyst Thomas Champion.
The list of delivery contenders is long, and several—like Amazon, GrubHub, and IPO-bound Uber—are large, as measured by both revenue and market share. But two private companies in San Francisco, DoorDash and Postmates, have established a rivalry so intense that it sometimes seems they’re ignoring the rest of the field as they exchange blows.
In March, DoorDash announced a $535 million investment and vowed support for 1,000 new cities by year’s end. In July, Postmates activated service in more than 100 cities; the next week, DoorDash CEO Tony Xu promised hundreds more. In August, DoorDash announced another $250 million fundraising; the following month, Postmates CEO Bastian Lehmann bounced back with $300 million of his own and talk of an IPO.
In April the CEOs were reported to have engaged in merger discussions, but it didn’t come to pass. Today both consider themselves to be market leaders, though they disagree on the definition of the market. DoorDash is focused on food but mulling more options; Postmates will deliver anything but emphasizes food. Neither is keen on comparisons to the other.
Who will win the next round of this bout? The answer in part depends on securing lucrative exclusive partnerships with national chains. With Wendy’s and the Cheesecake Factory in its corner, DoorDash appears to have the upper hand. “DoorDash is now the fastest-growing company in this space,” Xu tells Fortune, pointing to its payments volume.
Still, “the fastest car at any moment in time may not win the race,” Lehmann, ever the pugilist, said on CNBC in September.
Get ready to rumble.
A version of this article appears in the December 1, 2018 issue of Fortune with the headline “Punches, Delivered.”