Tony Xu, co-founder and CEO of DoorDash Inc., smiles through the Wall Avenue Journal Tech Dwell convention in Laguna Seaside, California, on Oct. 22, 2019.
Martina Albertazzi | Bloomberg | Getty Pictures
In the course of the depths of the Covid pandemic, with eating places across the nation going through an existential disaster, DoorDash CEO Tony Xu had an unconventional proposal. He wished to chop commissions.
Chief Enterprise Officer Keith Yandell frightened that such a transfer would end in an enormous hit to income forward of the corporate’s deliberate IPO. However Xu made a persuasive case.
“If eating places do not thrive, we can not,” Yandell instructed CNBC in a current interview, recalling Xu’s perspective on the time. “We have to take a management place.”
The corporate ended up sacrificing over $100 million in charges, Xu later mentioned.
Since beginning DoorDash on the campus of Stanford College in 2013, the now 40-year-old CEO has navigated the notoriously cutthroat and low-margin enterprise of meals supply, constructing an organization that Wall Avenue as we speak values at near $90 billion. The inventory has emerged as a tech darling this yr, leaping 23%, whereas the Nasdaq continues to be down for the yr largely on tariff issues.
Greater than 4 years after its IPO, internet income stay slim. However that is not getting in the best way of Xu’s mission to change into an trade consolidator, utilizing a mixture of money and new debt to gasoline an acquisition spree at a time when massive tech offers stay scarce. Earlier this month, DoorDash scooped up British meals supply startup Deliveroo for about $3.9 billion and restaurant know-how firm SevenRooms for $1.2 billion.
“What we have delivered for a buyer yesterday in all probability is not adequate for what we’ll ship for them as we speak,” Xu instructed CNBC’s “Squawk Field” after the offers have been introduced.
This week DoorDash introduced the pricing of $2.5 billion in convertible debt, and mentioned the proceeds may very well be utilized in half for acquisitions.
Doordash meals supply service in New York Metropolis on Feb. 13, 2025.
Danielle DeVries | CNBC
The San Francisco-based firm has a historical past with scooping up opponents to develop market share. In 2019, it purchased meals supply competitor Caviar for $410 million from Sq., now often called Block. About two years later, DoorDash mentioned it was paying $8.1 billion for worldwide supply platform Wolt. The deal was its final massive transaction till this month.
When DoorDash entered the meals supply market, it needed to face off towards the likes of GrubHub and Seamless, which later joined forces. That mixed entity was purchased late final yr by restaurant proprietor Marvel Group. In 2014, Uber launched Uber Eats, which is now DoorDash’s largest competitor within the U.S.
“It is a very aggressive market, and I feel retailers do have alternative,” Xu mentioned within the CNBC interview. “What we’re targeted on is at all times attempting to innovate and convey new merchandise to match growing requirements and expectations from prospects.”
DoorDash did not make Xu obtainable for an interview for this story, however offered an announcement concerning the firm’s acquisition technique.
“We’re very choosy, very affected person, and aware that, for many corporations, offers do not work out in hindsight,” the corporate mentioned. “After we see a chance that brings worth to prospects, expands our potential to empower native economies all over the world, and has a path to robust long-term returns on capital, we are likely to push our chips in.”
Taking up the suburbs
DoorDash differentiated itself early on by cornering suburban markets that had fewer supply choices, whereas different gamers attacked metropolis facilities. When Covid shut down restaurant eating in early 2020, DoorDash capitalized on the booming demand for deliveries. Income greater than tripled that yr, and grew 69% in 2021.
Colleagues and early traders credit score a customer-first focus for a lot of Xu’s success. Gokul Rajaram, who joined DoorDash by means of its Caviar acquisition, described Xu as “the very best operational chief within the U.S.” after Amazon founder Jeff Bezos.
Eating places have not universally considered DoorDash as an ally. Commissions can attain as excessive as 30%, which is a hefty reduce to fork over. Many eating places have reluctantly paid the excessive charges due to DoorDash’s dominant market share, which reached an estimated 67%. In 2021, the corporate launched three tiers of pricing, with a fundamental choice at 15% for extra price-sensitive companies.
DoorDash wants the excessive charges with the intention to keep within the black. The corporate’s contribution revenue as a share of complete market quantity hovers beneath 5%.
Colleagues who’ve recognized Xu for many years say the meals supply entrepreneur hasn’t modified a lot because the early days of the corporate.
Yandell mentioned Xu as soon as took recommendation from his younger daughter, who complained a couple of routing situation whereas accompanying him on meals supply orders. All workers, together with Xu, are required to finish orders and deal with help calls yearly as a part of the corporate’s WeDash program.
In part of the nation recognized for the pomp of its rich founders, Xu has a really totally different fame.
Early employees recall reminiscences of Xu pulling up in a dilapidated inexperienced 2001 Honda Accord to crew occasions, or collaborating in firm knockout basketball video games known as “knockys,” subsequent to the animal hospital in Palo Alto, which DoorDash briefly referred to as its headquarters. Xu additionally personally permitted each supply for the corporate’s first 4,000 workers.
Xu spends many mornings answering customer support complaints. He usually drops his children off at college and, after tucking them in at night time, hops on calls with worldwide areas, colleagues say. Xu is an avid Gold State Warriors basketball fan however has a tender spot for the Chicago Bulls, having spent a few years in Illinois. A couple of times every week, Xu squeezes in a morning run, and can usually achieve this whereas touring to discover totally different neighborhoods and shops.
Xu was born in China and moved together with his household to Champaign, Illinois, in 1989. Rising up, he performed basketball and mowed lawns to avoid wasting up for a Nintendo. He instructed Stanford’s View From the High podcast in 2021 that the expertise, and watching his dad and mom hustle, taught him “earn your manner into higher issues.”
His “traits grew to become the corporate’s values,” mentioned Alfred Lin, an early DoorDash investor and accomplice at enterprise agency Sequoia.
Xu usually attributes his entrepreneurial spirit to his dad and mom. His mom labored as a health care provider in China, and juggled three jobs within the U.S. for over a decade, saving up sufficient to finally open a medical clinic. His father labored as a waiter whereas pursuing a Ph.D. Xu mentioned on the podcast that watching his mother gave him a deep understanding of what it takes to run a small enterprise, which got here in helpful in DoorDash’s early years as he was attempting to transform eating places into prospects.
‘Ten instances tougher’
Workers say Xu has a fame for detecting hidden abilities amongst his colleagues. Jessica Lachs, the corporate’s chief analytics officer, was working as a normal supervisor helping with DoorDash’s Los Angeles launch when Xu guided her towards her ardour for information.
“He believes in leaning into the belongings you’re actually good at, reasonably than attempting to be mediocre at numerous issues,” she mentioned.
After Toby Espinosa, DoorDash’s advertisements vp, misplaced a cope with a significant quick meals firm throughout his early years on the startup, Xu instructed him to work “10 instances tougher” and change into an knowledgeable in his area. A number of years later, the corporate secured the partnership, Espinosa mentioned.
Grit and wrestle outlined the early years of DoorDash. The founding crew of 4 managed deliveries round Stanford and Palo Alto although a Google Voice quantity directed to their cellphones.
DoorDash emerged out of a Stanford enterprise college course often called Startup Storage, taught by Professor Stefanos Zenios. The category requires college students to current a enterprise thought, check it, after which pitch it to traders.
Zenios mentioned Xu stood out together with his data-driven strategy and pure management qualities. The crew examined two totally different concepts, together with a platform that helped small companies higher observe the effectiveness of their advertising and marketing, he remembers. Zenios referred to as the thought to focus on suburban areas a “sensible perception.”
Xu and his crew entered Y Combinator in the summertime of 2013. The three-month startup accelerator program is thought for spawning corporations like Airbnb, Stripe and Reddit. Each session culminates with a demo day in entrance of a few of Silicon Valley’s largest traders.
The DoorDash thought excited Paul Buchheit, creator of Gmail and a accomplice at Y Combinator. However like many different potential traders, Buchheit was skeptical concerning the financial mannequin.
“You had a gifted crew of founders engaged on what I believed was an concept that had potential,” he mentioned. “That is principally the system for a superb startup.”
On pitch day, the corporate did not lure any enterprise companies, however Buchheit later participated as a seed investor.
Shortly after demo day, DoorDash encountered Saar Gur of Charles River Ventures. Gur had been searching for a meals supply platform to again and was conducting due diligence on one other firm when a buddy led him to DoorDash.
By the tip of their first assembly, they have been “ending one another’s sentences,” Gur mentioned.
Sequoia’s Lin initially handed on DoorDash after the Y Combinator pitch, however saved in contact with the crew. Lin mentioned he wished to see information that confirmed the platform may penetrate past Stanford and Palo Alto, and retain prospects. He ended up main two institutional rounds, attaining a 20% stake for Sequoia on the time of the IPO.
“Tony at all times believed that his firm would succeed, or they’re going to discover a approach to succeed,” Lin mentioned.
A meals supply messenger is seen in Manhattan.
Luiz C. Ribeiro | New York Every day Information | Tribune Information Service | Getty Pictures
Shortly after its Y Combinator stint, DoorDash hit an early roadblock. Following a Stanford soccer sport, a rush of orders bombarded its supply system inflicting large delays, Xu instructed Y Combinator’s CEO Garry Tan in an interview this yr.
The founders refunded the orders and spent the night time baking cookies, then driving them to prospects early the subsequent morning.
Oren’s Hummus co-owner Mistie Boulton mentioned DoorDash nonetheless takes that strategy. The crew comes to satisfy along with her each quarter and she or he serves as a beta tester for brand spanking new merchandise.
The restaurant, which began in Palo Alto and has since expanded to a half-dozen places throughout the Bay Space, was certainly one of DoorDash’s first shoppers, latching onto the chance to succeed in extra prospects past its small institution that often had traces snaking out the door.
“We simply fell in love with the thought,” Boulton mentioned. “The primary factor that inspired and enticed me to need to work with them was Xu’s ardour. He actually is a kind of individuals that you could rely on.”
Wall Avenue is now relying on Xu’s means to execute massive offers, even with the corporate having this month surpassed 10 billion supply orders worldwide.
The acquisition of Deliveroo, based mostly in London, marks a renewed effort by DoorDash to broaden its presence abroad, following the acquisition of Finland’s Wolt three years in the past.
The money deal for SevenRooms, a New York Metropolis-based information platform for eating places and motels to handle reserving info, takes DoorDash into a completely new class. Xu instructed CNBC that DoorDash is a “multi-product firm now that is working on a worldwide scale.”
Following the acquisition bulletins, which coincided with a disappointing earnings report in March, analysts at Piper Sandler reiterated their maintain advice on the inventory.
One purpose for concern, they mentioned, was that “integrating a number of acquisitions directly might create some noise near-term.”
Correction: A previous model of this story had an incorrect determine for complete supply orders.
