Fireside Chat, Interview, Podcast
DoorDash ft. Tony Xu – The “Wrong” Moves That Built a Giant
- The company aims to evolve from a single-category U.S. restaurant delivery model into a five-business portfolio covering grocery, convenience, alcohol, and retail, with the ultimate vision of becoming the global infrastructure for moving all items within cities.
- Strategic plans include expanding into Europe via a partner to access markets comparable in size to the U.S., acquiring Volt to operate across nearly 30 incremental countries with significant time zone differences, and launching into 3,000 cities within a six-to-nine-month window.
- Financial projections indicate that the Series D capital of $535 million (including a $190 million offer from Sequoia and a pre-money valuation term sheet of approximately $850 million received from SoftBank in mid-2017) is intended to secure the market against competitors like Uber Eats and create a company worth ten times the capital cost.
- Historical fundraising timelines include a Series A led by Sequoia in May 2014, a Series B in 2015 at a $600 million valuation, a Series C closed in March 2016 as a 5% down round, and a Series D fundraising period beginning in Q4 2016 characterized by six to nine months of rejections.
- Operational challenges during the pandemic saw volume crater immediately after shelter-in-place orders in March 2020 before doubling within a week, necessitating an overnight 200 to 300 percent capacity increase while the company faced potential runway of only days to a couple of weeks.
- The company intends to reduce commissions by half, costing over $100 million, to support merchant survival and improve public perception, accepting a potential 2.5 billion dollar market cap reduction at a 25x EBITDA multiple to achieve long-term market leadership.
- Growth strategies focus on acquiring twice as many customers as competitors per dollar spent, leveraging power user retention where subsequent orders are profitable, and targeting suburbs as less competitive markets with higher consumer value than dense city centers.
- Risks include the potential dissolution of the business into a niche model similar to Caviar if the SoftBank deal fails, the loss of 20 to 25% of staff over three years due to eroded confidence, and the possibility that last-mile delivery remains an unprofitable industry.
- Future expectations suggest the company will pursue an IPO to build a standalone entity rather than being acquired, utilizing a large capital reserve to eliminate future fundraising concerns while investing for years until unit economics turn profitable.
- Competitive dynamics are expected to consolidate into one to three remaining players, with the pandemic serving as a crucible that clarifies values and propels the company to global category leadership despite the toxicity of the 2016 market environment.