DoorDash, one of the largest food delivery apps in the United States, is planning to IPO before the end of 2020. The company is seeking up to a $32 billion valuation from its public debut. It plans to sell 33 million shares. The shares will be listed on the New York Stock Exchange (NYSE) under the ticker symbol “DASH”.

DoorDash has seen demand surge for food delivery since the beginning of the pandemic. The company currently has a private valuation of around $16 billion. The company has soared past its $1.4 billion valuation in 2018.

DoorDash planned to IPO earlier this year, filing its S-1 registration statement with the Securities and Exchange Commission in February. It decided to delay those plans once the coronavirus lockdowns started to roll into effect in North America. The economic outlook became more uncertain.

Food Delivery Worker Status Unclear Until Proposition 22

The motivation to temporarily halt IPO preparations back in February may also have been prompted by uncertainty over the regulation of gig economy workers in California. These workers include those in the food delivery sector. But voters passed Proposition 22 in California. This ballot measure classifies many gig workers as independent contractors rather than employees. DoorDash may now feel more comfortable proceeding with its IPO plans. DoorDash uses a number of independent contractors to make food deliveries. Uber and Lyft were the most prominent beneficiaries of the passage of Proposition 22. The ballot measure allowed their drivers to remain independent contractors. They are exempt from the more stringent regulations that come with classification as employees.

COVID-19 Increased Food Delivery Demand

With the continuation of social distancing rules, food delivery apps such as DoorDash have grown in demand. Many restaurants shut down their physical locations at least for temporary periods. Some have opted to only offer delivery and takeout. The company currently operates in the United States, Canada, and Australia. It boasts over one million drivers and 18 million customers in its network.

To grow quickly and stay competitive, DoorDash has established partnerships with local restaurants and national restaurant chains for food delivery. It charges restaurants a flat monthly subscription fee to list on the platform. It also charges a commission fee that covers delivery and marketing costs. The company temporarily suspended its commission fees for independent restaurants in April due to the pandemic.

The largest fee for customers using DoorDash is the delivery fee. For frequent users, the company created the DashPass subscription service. For $9.99 per month, DashPass provides unlimited free deliveries. Currently there are approximately 5 million subscribers to DashPass.

DoorDash Founded in 2013, Received Series A Financing in 2014

The company was founded in 2013 by Stanford students Tony Xu, Stanley Tang, Andy Fang, and Evan Moore. Tony Xu, who serves as the company’s CEO, grew up helping out in his mother’s restaurant. This experience inspired him to build a delivery business to help other small restaurant operators like his mother. Xu co-founded the app while still a student at Stanford.

DoorDash received $2.4 million in its Series A financing round in 2014. Since then, the company has rapidly grown in valuation. It has raised a total of $700 million over several financing rounds. The list of investors includes prominent names such as Khosla Ventures, Kleiner Perkins, Sequoia Capital, SoftBank Group, and Y Combinator. As of October, DoorDash had approximately half of the total food delivery market share in the United States.

The many tech unicorns that have gone public in the past couple years have set an example for structuring shares. DoorDash plans to have a dual-class share structure. This dual-class share structure will give three of the founders—Tony Xu, Stanley Tang, and Andy Fang—20 votes per share. Common shareholders will get one vote per share. This will leave Xu, Tang, and Fang with 69% of the company’s voting power after the IPO. The voting agreement gives CEO Tony Xu extensive power over major corporate decisions including the election of directors. It also grants Tony Xu the right to vote on behalf of Tang and Fang.

Legal Challenges to Come

Despite DoorDash’s increasing dominance in the meal delivery space, it faces a number of challenges ahead. The company faces steep losses and has yet to post a full-year profit since its founding in 2013. DoorDash turned a quarterly profit of $23 million in June 2020. But it fell back to a net loss of $43 million in the following quarter ending September 2020. This is similar to other on-demand companies with sizable global footprints like Uber Technologies and Lyft.

Additionally, DoorDash faces ongoing competition from other large food delivery companies. These companies include Postmates, Uber Eats, and Grubhub. There is a lack of customer brand loyalty in this sector. Customers, restaurants, and drivers are not particularly dedicated to sticking with one brand. Instead they are gravitating toward the delivery apps offering the best deals at any given moment. DoorDash and its competitors have tried to win over and retain customers with deep discounts and costly advertising.

The food delivery industry has been marked by consolidation in order to maintain market share. Europe’s Just Eat Takeaway acquired Grubhub for $7.3 billion in June 2020. Grubhub itself was created through a combination with rival platform Seamless. DoorDash acquired upscale competitor Caviar for $410 million in 2019.

The DoorDash IPO will round off a year full of tech-related IPOs. Palantir and Snowflake made splashy public debuts in the late summer. Other major companies plan to go public in December 2020. They include home-rental platform Airbnb, online gaming company Roblox, and fintech company Affirm.