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Future Startup Dossier: DoorDash

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Jun 10, 2021

DoorDash is a San Francisco-based food delivery company that was founded in January 2013 by four Stanford Graduate School of Business alumni: Tony Xu (CEO), Stanley Tang, Andy Fang, and Evan Moore. The four co-founders of DoorDash met in the second year of their university and decided to build something meaningful. 

To understand the market need, they started to go from door to door asking small business owners their needs. Eventually, they came up with the idea of building a delivery platform after overhearing a macaroon shop owner turning down a delivery order. They saw that restaurants were losing orders due to not having a delivery solution. To solve the problem, in January 2013, they launched an on-demand food delivery platform named PaloAltoDelivery.com in Palo Alto, California. In the same year, the startup entered Y Combinator and received $120k in seed funding and eventually was renamed to DoorDash.

During their first year, DoorDash expanded its operation in 70 restaurants of the Bay area of California and raised $2.4 million in funding. As per the Y Combinator, the company grew at a 20% rate each week during their first year.

In December 2018, DoorDash became the second-largest food delivery company after GrubHub, in the US. By March of the following year, it took over Grubhub with a market share of 27.6%, becoming the largest food delivery company in the US. At present, the current market share of DoorDash is 45%. It also has 60% of the total market share regarding convenience delivery.

In October 2019 DoorDash opened its first delivery-only kitchen, DoorDash Kitchen, in the Redwood City of California collaborating with four restaurants of that location. 

After the COVID-19 pandemic started, DoorDash distributed hand sanitizers and gloves among its drivers for free and included the drop-off feature to ensure contactless delivery. In April 2020 the company became the fastest growing delivery company in the US.

In October 2020 DoorDash introduced its project, ‘Reopen for delivery’ aiming to partner up their delivery-only kitchens with the local restaurants that went out of business due to the pandemic, helping them to deliver food through DoorDash.

In November 2020 the company opened its first physical restaurant partnering up with Burma Bites.

So far DoorDash has raised $2.5B in 11 funding rounds. The last funding round (Series H) was in June 2020, where DoorDash raised a total of $400M, and the funding round was led by Durable Capital Partners, Fidelity, and return backer T. Rowe Price. After series H the total value of DoorDash reached $16 billion.

On December 9, 2020, DoorDash went public raising $3.37 billion. At present, the company’s value is $72 billion.

At the beginning of 2021, DoorDash acquired Chowbotics, a salad robotics startup.

The Growth of DoorDash. In 2013, when DoorDash was launched many investors did not see anything remarkable in a third-party food delivery company like this, as there were already other companies with similar concepts such as Postmates, Grubhub, etc. DoorDash even had to do a down round to raise funds. 

According to a report, In 2020 DoorDash increased its revenue from $850 million to $2.9 billion which is a 241% increase. As per Edison Trends, DoorDash controls 45 percent of the US food delivery market. At present, DoorDash has over a million riders who are called Dashers, to deliver foods and the company has completed over 900M orders since its inception and is available in over 4000 cities of North America.

Several initiatives have helped DoorDash to acquire their growth. From the beginning, DoorDash tried to ‘Keep It Simple. Instead of constantly adding new features and making the app more complicated for the users to use, DoorDash has kept its app quite simple on the consumers’ side. Simple features like the ranking of the restaurants help the users to choose a restaurant based on their service and customer feedback.

Moreover, DoorDash provides restaurants with insights about their customers such as information regarding the peak hours, the most ordered items, etc, helping them to understand their customers, which also helps DoorDash to build partnerships with restaurants based on credibility.

Read:

The Story of a Cap Table: DoorDashSequoia Capital’s Alfred Lin, the former chief operating officer at pioneer e-commerce company Zappos, passed on the seed round after meeting with the team. Lin worried that the DoorDash model seemed to be predicated on college kids spending their parents’ money. (All four founders met at Stanford where the business started.) The next year, Lin led the $17.3 million Series A round and took a board seat. The round gave Sequoia about one-fifth of DoorDash’s shares.

DoorDash Has All The Makings Of The “Next Amazon”: In 2000, top business school analysts thought Amazon was just an online bookstore. They didn’t see the big picture. Once Amazon could ship books across America, it could deliver almost anything. Today, most analysts see DoorDash as just another food delivery app. But pizzas and burgers are only the beginning.

Interview with Tony Xu. Chief Executive Officer at DoorDash | by Helena Seo“In marketplace businesses like ours, it’s also critical to think about the interplaying effects. Every single decision on one audience impacts other audiences and that becomes increasingly important as the marketplace grows larger. I’m always thinking about how to increase the healthiness of the liquidity in the marketplace,” says Tony Xu.

Watch

DoorDash: from origins to IPOAccusations of monopolistic behavior and stingy earnings for contractors have surfaced lately. Plus, there's always the question: will we have to stay indoors for much longer? 

So, when delivery giant DoorDash quietly announced its IPO in late 2020, some were excited, but others were cautious. But, how did DoorDash get to this point? 

DoorDash: How a $50 billion Company Got Started: This video takes a look at their history and how they got to where they are today.

What Else Can DoorDash Deliver?: Ingrid Lunden talks with DoorDash CEO and Founder Tony Xu and DoorDash investor Alfred Lin of Sequoia Capital about customer experience, surfacing new data, expansion, profitability, and potential acquisition.

Lessons We Learn From DoorDash:

  1. Being Flexible

From the beginning, DoorDash had a flexible approach. According to Tony Xu, the CEO of DoorDash, DoorDash started with on-demand food delivery back in 2013, 85% of the restaurants in the US did not deliver and they took the bet. Which worked out. The company has plans to shift its operation in the future and expand its service. According to the CEO of the company, instead of operating only in the food delivery niche, after four to five years, DoorDash will most likely turn into a logistics platform.

  1. Find the gaps and resolve them

While people living in metropolitan areas have a wide range of options when it comes to food delivery services, people outside the metropolitan areas are provided with a limited number of options. DoorDash pointed out this gap and unlike its competitors, it not only focused on the metropolitan areas but also areas outside inner cities. Rather than going head to head with their competitors in the metropolitan areas, they focused on underserved markets and this simple step helped them to achieve significant traction.

  1. A clear strategy

DoorDash has always had a clear strategy. Its business model ‘Flywheel’ enables the growth of not only DoorDash but other stakeholders including the restaurants and dashers as well. Incorporating the flywheel model has helped DoorDash to acquire not only more restaurants as their partners but also more customers and dashers.

Here is the ‘FlyWheel’ model of DoorDash.

Future Startup Dossier: DoorDash

Source: Lars Kamp

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Tithi Chowdhury is an undergraduate student majoring in Botany at the University of Dhaka. She is a Trainee Analyst at Future Startup and looks after our Collective Knowledge initiative where she prepares interviews and writes articles on interesting topics. She is a voracious reader and loves listening to podcasts in her spare time.

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