On-Demand Delivery Startup Postmates Raises $16 Million From Spark Capital

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On-demand delivery startup Postmates has brought on a new round of funding to help roll out service in new markets. The Series B funding round totals $16 million and was led by Spark Capital, with Spark venture partner Nabeel Hyatt joining the board.

Other investors in Postmates include SoftTechVC, Matrix Partners, Crosslink Capital, Scott Banister, Naval Ravikant, Russel Simmons, Thomas Korte, Shervin Pishevar, Dave Morin, and David Sacks. Altogether, the company has raised a little more than $22 million.

Postmates has built a mobile app and logistical network of couriers, enabling customers to place orders from local merchants and have goods delivered generally within an hour. Its revenue model is pretty simple, as it makes money through a delivery small fee paid on top of orders.

That value proposition — getting lunch or groceries delivered in a short period of time for a fixed fee — has proven to be really sticky with customers. Co-founder Bastian Lehmann told me that the company is averaging thousands of deliveries per week, but the more important metric is how often customers are placing orders.

About 28 percent of its total order volume comes from “whales” who use the service 10 times or more each month. And about half of that volume comes from users who order at least five times a month.

The service is now available in four different markets throughout the U.S., but is looking to continue expanding in a city-by-city fashion. The company launched in San Francisco and later added service in Seattle, New York City, and Washington, D.C. Not surprisingly, each new market has grown more quickly than the previous one, with D.C. order volume at 2.5 times the size of New York City’s after 60 days.

With the new funding, Postmates is looking to expand its operations team and launch in even more cities soon. In particular, Lehmann said the company is in the market for a senior exec to take over management of its on-the-ground operations. The startup has more than 2,000 couriers in its multiple markets, and is onboarding about 200 new couriers each week.