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Postmates and DoorDash have discussed a merger that would unite two of the largest restaurant-delivery startups in the U.S. in a bid to take on better-funded competitors like GrubHub, Uber and Amazon, multiple sources have told Recode.

The CEOs of both companies — DoorDash’s Tony Xu and Postmates’ Bastian Lehmann — have discussed a potential deal at least once in person in the last year, these people said. Lehmann was optimistic enough at some point in the last year that he expressed confidence in a private conversation that a merger would happen, according to one source.

The discussions have been on-again off-again over this timeframe, but there is currently no concrete deal on the table and there are several roadblocks to getting one done. One of the biggest obstacles is the decision of who would run a joint company — neither CEO is crazy about the idea of reporting to the other. It’s also not clear if both sides are convinced they’d gain enough benefits from a merger to justify the risk and difficultly of combining two large private companies.

Still, Postmates and its investors could face increased pressure to cut a deal in the wake of DoorDash’s recent, giant cash infusion of $535 million from SoftBank. Postmates was slightly better funded than DoorDash prior to that. Now — like all rivals to SoftBank-backed companies — Postmates suddenly has to reckon with how to compete against a startup with a huge capital advantage, potentially making a merger or sale more attractive.

Postmates and DoorDash spokespeople declined to comment on the talks.

News of the discussions comes only a month after DoorDash announced it had bulked up its balance sheet with a $535 million investment led by SoftBank’s Vision Fund. That cash infusion has left Postmates, which last raised $140 million in 2016, in the daunting position of being one of the least-capitalized major players in the industry.

In the U.S., GrubHub, which also owns Seamless and Eat24, is the biggest company dedicated solely to restaurant delivery, with a public market value of $8.5 billion.

But Uber operates its UberEats delivery service in more than 140 North American cities, and Amazon and Square-owned Caviar also compete. All of these companies are also vying for the large chunk of food delivery that thousands of restaurants today simply handle directly themselves.

What’s at stake for DoorDash and Postmates

The stakes are high. By 2022, 11 percent of U.S. restaurant sales are expected to come from delivery orders, up from an estimated 6 percent last year, according to Morgan Stanley Research. That would equate to a $32 billion market opportunity within four years.

DoorDash, which was founded in 2013, has created some differentiation from competitors by striking delivery deals with more than 50 of the top 100 restaurant chains, including Wendy’s and the Cheesecake Factory. Those deals account for 25 percent of its sales, Xu said in an appearance at Recode’s recent Code Commerce event.

The startup also white-labels its service in order to handle some orders that customers place directly with its restaurant partners.

Postmates, which launched two years earlier than DoorDash, has become a hit in Los Angeles and Hollywood, which has helped it get written into scripts of popular shows like HBO’s “Insecure.” It has also recently started offering grocery delivery.

Combined, DoorDash and Postmates would have about 23 percent market share, according to data from Second Measure, a startup that analyzes debit and credit card transactions. UberEats has about 20 percent of the market, while GrubHub — counting its Seamless and Eat24 businesses — has 52 percent.

Both DoorDash and Postmates hire their own networks of contracted delivery people and supplement their business from partner restaurants with deliveries from establishments with which they do not have formal relationships. They make money from delivery and service fees, in addition to commissions from partners. Postmates also sells subscriptions that offer unlimited deliveries for a flat monthly or annual fee.

Postmates’ revenue grew more than 85 percent to around $250 million in 2017 on nearly $900 million in total gross sales, according to a document viewed by Recode. But the startup is still losing a lot of money, posting an operating loss of $75 million for the year. The company previously told some news outlets it would be profitable by the end of 2017.

For comparison’s sake, revenue at GrubHub, the only public restaurant-delivery company in the U.S., grew 39 percent to $683 million in 2017 on $3.8 billion in gross sales, according to public filings. The company recorded operating income of nearly $90 million; unlike Postmates and DoorDash, GrubHub doesn’t handle delivery itself on the majority of its sales, reducing its costs. It is, however, investing heavily in its own delivery network.

Postmates has also discussed a sale with GrubHub, according to a person with knowledge of the conversations. GrubHub declined to comment.

Postmates had at one point reportedly projected between $200 million and $250 million in revenue for the prior year — 2016 — but only ended up hitting $135 million that year, according to the document.

A Postmates spokesperson declined to comment on these historical numbers, but told Recode that the company is projecting 2018 revenue of “approximately $400 million” on total food sales of more than $1.2 billion.

DoorDash declined to offer similar financials when asked by Recode for theirs as well.

It is not clear whether either side is completely convinced that a merger makes sense, but geographic strengths could play a part.

As of last August, DoorDash was the leading restaurant delivery service in cities including San Jose, Indianapolis and San Antonio, according to data from Second Measure. In addition to Los Angeles, Postmates also has strongholds in large metro areas like Phoenix and Charlotte.

When GrubHub and Seamless agreed to merge in 2014, Seamless essentially owned the New York City delivery market while GrubHub was much stronger in Chicago.

When asked earlier this year about acquiring Postmates or a similar company, Xu told Recode that an acquisition was not a priority for DoorDash, but acknowledged that he was more likely to look at potential M&A opportunities now that he was flush with cash.

Xu has also said that the funds will help the company more than triple its staff size and expand its availability from about 600 North American cities to 1,600.

On the Postmates side, CEO Lehmann has been privately playing up the possibility of an IPO in recent months, but it’s unclear how realistic that option is, people familiar with the matter told Recode. Postmates is also considering raising another private round of financing, one person said.

As for a potential deal with DoorDash, there is also some apprehension on the Postmates side about getting in bed with SoftBank, which now owns large stakes in both Uber — and therefore UberEats — as well as DoorDash.

This is not the first time Postmates has entertained a merger or sale. In early 2016, Postmates hired Qatalyst Partners, the boutique investment bank that specializes in selling tech companies. But the startup ended up securing a new investment of $140 million from a group of its existing investors instead, raising the question of why it needed to hire Qatalyst to make that happen.

Recode previously reported that Postmates investors agreed to convert some of their preferred shares to common shares as part of that last funding round, at least in part to keep employees from fleeing.

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