Postmates CEO Bastian Lehmann is one of my favorite founders. But despite knowing him for years, last week was the first opportunity I’ve had to interview him in front of an audience.
Over the course of an hour-long conversation, we talked about how Postmates has grown to be available in 40 metropolitan markets throughout the U.S., how the demand for on-demand services has changed over the past four years, and how Lehmann sees the competitive landscape shaping up. These are just a few of the key highlights from that discussion.
Listen To Your Customers
The idea behind Postmates was always to enable consumers to connect with local businesses and have goods delivered to them, but it took some time for the company to catch on to the types of good customers wanted delivered.
Prior to launch, the company had signed up a number of local furniture shops to act as delivery partners for their goods. The result was underwhelming, with Postmates only making a delivery or two a day.
It wasn’t until the company launched its ‘Get It Now’ app, which essentially let customers request deliveries of practically anything nearby, that it began to understand customer usage patterns and build around what they were asking to have delivered.
The result was a focus on streamlining the app for requesting deliveries from restaurants and certain nearby retailers. That included creating detailed menus and store inventory listings to make frequently requested goods easier to find and order. Once that happened, the company was on its way to pretty remarkable growth.
Would On-Demand Delivery Work Anywhere?
So far, Postmates has grown to serve 40 different metropolitan markets in the U.S. But how many more markets could it serve? I asked Lehmann that question, mainly wondering how big or geographically dense a market has to be for it to make sense for Postmates to launch there.
As a data point, Lehmann noted that there Domino’s Pizza serves 240 markets throughout the U.S., suggesting that local delivery services could thrive even in many smaller suburban or even some more rural markets.
Even if it didn’t serve those markets directly, Lehmann suggested the company could experiment with making its technology available to third parties who could introduce their own local delivery services based on Postmates’ logistics and routing tech.
Fundraising Isn’t Easy, Even For Fast-Growing Startups
Basti gave a little bit of background into Postmates’ fundraising process over the course of its four-year history. The first investment in the company came from angel investor and AngelList founder Naval Ravikant, who had known the Postmates founders (and had actually tried to recruit them prior to investing).
While the seed funding got the company to launch, it found raising a Series A somewhat challenging. Keep in mind, this was before the huge proliferation of on-demand delivery services from the likes of Instacart, DoorDash, Sprig, and others.
As he told me, it’s easier to raise money as a late mover in an established and pretty well understood market than it is to find investors willing to take a bet on an idea — even one with traction — in a nascent market. Nevertheless, Founders Fund came on board and led its Series A round.
When it came time for a Series B, things were easier, with Spark taking the lead on a $15 million round. But raising the next round of funding wasn’t so smooth. That fundraise came at a time when Postmates was investing in a couple of deals — with Starbucks and Apple — that in the short term put pressure on its margins and made investors skittish.
Six months later, those deals paid off and Postmates was able to raise an additional $80 million led by Tiger Global. The best way to get investors on your side, Lehman said, is to tell them what your financial targets are and then actually hit them.
Why Postmates Delivers Starbucks, Apple, And Everlane
While many on-demand companies are springing up to offer vertical markets of goods or services — think Instacart for groceries, Sprig for lunch, Saucey for booze, and Washio for dry cleaning — Postmates has maintained its blended model of offering goods from a variety of shops, restaurants, and cafes.
The reason for that? According to Lehmann, Postmates offers different categories of products in part as a way to flatten out its demand curve over the course of the day.
Lehmann drew an illustration showing how if Postmates only offered prepared food deliveries, the company would see high utilization for a few hours around lunchtime and then again in the evening around dinner.
But guess what? Customers drink coffee mostly in the morning and early afternoon. As a result, Postmates won’t see quite as dramatic of a dropoff in usage in the hours between those meals, thanks to its deal with Starbucks.
And thanks to retail partnerships like the ones it has with Apple and Everlane, the demand curve flattens out even more. That’s because most customers shop for retail goods in the late afternoon during work, which means the quiet pre-dinner hours for food delivery aren’t quite as quiet for Postmates as for some of their competitors.
Postmates Sees Amazon, Not Uber, As Its Biggest Treat
Over the last five years, Uber has been very aggressive in its expansion into new geographies and vertical markets. While it started out as an app for hailing a black car on demand, it’s now experimenting with food delivery, courier services, and is even investing heavily in self-driving cars.
But when asked about the competitive threat Uber poses, Lehmann said he’s actually more worried about Amazon. While Uber knows logistics at the local level, Amazon has been making working to move closer and closer to its customers through the launch of offerings like Amazon Fresh and Amazon Prime Now.
With more customer data around the types of goods customers want than anyone else, and the ability to streamline distribution of those goods, Amazon could take aim not just at Postmates, but at the ecosystem of local retailers that the company partners with.