DoorDash is now valued at nearly $16 billion

(CNN Business) DoorDash is getting a big boost in funding as demand for delivery services surges during the coronavirus pandemic.

DoorDash said Thursday that it has raised $400 million in new financing led by Durable Capital Partners and Fidelity, valuing the company at nearly $16 billion. The company was valued at $12.6 billion when it raised $600 million in May 2019.

The financing comes as the platform "has become ingrained in the lives of local communities as an essential service," said Henry Ellenbogen of Durable Capital Partners in a statement.

The food delivery market is fiercely competitive and may only continue to heat up as the pandemic continues. Just last week, grocery delivery startup Instacart said it raised $225 million, bringing its valuation to nearly $14 billion, after an "unprecedented surge" in demand and a Netherlands-based company, Just Eat Takeaway.com, beat out Uber in a bid to merge with Grubhub. The merger, which is anticipated to close in early 2021, will mark Just Eat Takeaway's entrance into the US.

DoorDash, which acquired premium restaurant delivery service Caviar last August, is the US leader in terms of sales. In May, the company earned 44% of meal delivery sales in the US, according to analytics firm Second Measure.

It is unclear what the new financing might mean for DoorDash's plans to go public. The company announced in February that it had submitted confidential paperwork with the US Securities and Exchange Commission to go public.

DoorDash's business is not without its fair share of question marks, though.

Along with other food and gig economy startups, it is facing a major regulatory battle in the state of California. The company has put $30 million into a joint-ballot initiative that, if passed in November, would exempt them from the new AB-5 law, which makes it more difficult for businesses to continue classifying workers as independent contractors rather than employees.

DoorDash has also been criticized for a controversial tipping policy for delivery workers, where some tips contributed to their base pay. The policy, which has since been changed, is the subject of a lawsuit brought by DC Attorney General Karl Racine in November that seeks to recover the "millions of dollars in tips that were used to subsidize DoorDash's payments to Dashers," and impose civil penalties.

At the time, a DoorDash spokesperson called the complaint "without merit."