Dive Brief:

• Postmates confidentially filed for an initial public offering on Thursday with an estimated valuation of more than $1.85 million, according to Bloomberg. 
• The company said it completes 5 million deliveries per month, including grocery delivery, and is expected to record $400 million in revenue in 2018 on food sales of $1.2 billion.
• It would become the third third-party delivery provider after Grubhub and Waitr to become public. 

Dive Insight:

Although specific terms weren't released, Bloomberg's $1.85 billion estimation is surely good news for Postmates, which partners with the likes of Walmart and Chipotle. As recently as October, Postmates was valued around $1.2 billion, but additional rounds of funding have brought that valuation up ahead of the IPO filing. 

With the added investments from an IPO, Postmates — which now covers more than 550 U.S. cities — should be able to expedite its expansion to even more markets. The company also should enable Postmates to quickly evolve its technologies and kick in some funds for marketing — strategies its closest competitors are focusing on. Grubhub, for example, acquired payments and loyalty company LevelUp last year, Uber Eats has launched a new self-sign-up process for restaurants, and DoorDash launched its first national ad campaign in January. On the technology side, Postmates could more quickly rollout its autonomous delivery rover, Serve, which is aimed at delivering food more efficiently through cities. 

The aggregate space is certainly crowded and these types of differentiators are important. Postmates could use the boost. New research from Zion & Zion shows that Grubhub is the most popular multi-restaurant delivery service with 37.8% of respondents using the app, followed by Uber Eats at 36% and DoorDash at 19.9%. Postmates was fourth, with 9.8% usage. 

Investors’ optimism isn't surprising when considering the growth trajectory of delivery demand. McKinsey & Company estimates that the global online food delivery market will grow by about 15% annually each year until 2020. But going public doesn't mean an automatic win for Postmates.

Grubhub, which is already public, has the ability to leverage its partnership with Yum Brands and its extensive domestic footprint, while Starbucks and McDonald's both collaborate with Uber Eats. Also, Uber and DoorDash are both rumored to be following Postmates onto the stock market, so the competition should intensify even more this year. Investor appetite could be mixed, however. Grubhub's recent fourth quarter earnings disappointed investors after it reported lower-than-expected EBITDA, resulting in a 21% slide in stock prices on Thursday.

Perhaps the bigger question is how much investors will be willing to spend — and how long they'll be willing to exert patience — on fledgling service models that struggle to turn a profit, as delivery companies have. There also seems to be added tumult in the delivery space as some restaurant companies — like Jimmy John's and Bareburger  — actively revolt against third-party companies in favor of their own fleets.