Tony Xu, co-founder and CEO of DoorDash Inc., smiles through the Wall Road Journal Tech Dwell convention in Laguna Seaside, California, on Oct. 22, 2019.
Martina Albertazzi | Bloomberg | Getty Photos
Throughout 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 needed to chop commissions.
Chief Enterprise Officer Keith Yandell anxious that such a transfer would end in a large hit to earnings forward of the corporate’s deliberate IPO. However Xu made a persuasive case.
“If eating places do not thrive, we can not,” Yandell informed 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 Road right now 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 earnings stay slim. However that is not getting in the way in which of Xu’s mission to change into an business 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 expertise firm SevenRooms for $1.2 billion.
“What we have delivered for a buyer yesterday most likely is not adequate for what we are going to ship for them right now,” Xu informed 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 might 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 rivals to develop market share. In 2019, it purchased meals supply competitor Caviar for $410 million from Sq., now often known as 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 in opposition to the likes of GrubHub and Seamless, which later joined forces. That mixed entity was purchased late final yr by restaurant proprietor Surprise Group. In 2014, Uber launched Uber Eats, which is now DoorDash’s greatest competitor within the U.S.
“It is a very aggressive market, and I believe retailers do have alternative,” Xu mentioned within the CNBC interview. “What we’re centered on is at all times attempting to innovate and convey new merchandise to match rising requirements and expectations from clients.”
DoorDash did not make Xu out there for an interview for this story, however supplied a press release concerning the firm’s acquisition technique.
“We’re very choosy, very affected person, and acutely aware that, for many firms, offers do not work out in hindsight,” the corporate mentioned. “After we see a chance that brings worth to clients, expands our potential to empower native economies world wide, 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 buyers 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 primary possibility 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 proportion of whole market quantity hovers under 5%.
Colleagues who’ve recognized Xu for many years say the meals supply entrepreneur hasn’t modified a lot for the reason that early days of the corporate.
Yandell mentioned Xu as soon as took recommendation from his younger daughter, who complained a few routing subject whereas accompanying him on meals supply orders. All staff, together with Xu, are required to finish orders and deal with assist 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 repute.
Early staff 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 known as its headquarters. Xu additionally personally authorized each provide for the corporate’s first 4,000 staff.
Xu spends many mornings answering customer support complaints. He usually drops his youngsters 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 delicate spot for the Chicago Bulls, having spent a few years in Illinois. A few 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 save lots of up for a Nintendo. He informed Stanford’s View From the Prime podcast in 2021 that the expertise, and watching his dad and mom hustle, taught him how you can “earn your manner into higher issues.”
His “traits turned the corporate’s values,” mentioned Alfred Lin, an early DoorDash investor and associate 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 clients.
‘Ten instances more durable’
Workers say Xu has a repute for detecting hidden skills amongst his colleagues. Jessica Lachs, the corporate’s chief analytics officer, was working as a normal supervisor aiding with DoorDash’s Los Angeles launch when Xu guided her towards her ardour for knowledge.
“He believes in leaning into the belongings you’re actually good at, relatively than attempting to be mediocre at lots of issues,” she mentioned.
After Toby Espinosa, DoorDash’s advertisements vp, misplaced a cope with a serious quick meals firm throughout his early years on the startup, Xu informed him to work “10 instances more durable” and change into an professional in his discipline. A couple 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 known as Startup Storage, taught by Professor Stefanos Zenios. The category requires college students to current a enterprise concept, check it, after which pitch it to buyers.
Zenios mentioned Xu stood out together with his data-driven method and pure management qualities. The crew examined two totally different concepts, together with a platform that helped small companies higher monitor the effectiveness of their advertising, he remembers. Zenios known 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 understood for spawning firms like Airbnb, Stripe and Reddit. Each session culminates with a demo day in entrance of a few of Silicon Valley’s greatest buyers.
The DoorDash concept excited Paul Buchheit, creator of Gmail and a associate at Y Combinator. However like many different potential buyers, Buchheit was skeptical concerning the financial mannequin.
“You had a proficient crew of founders engaged on what I assumed was an concept that had potential,” he mentioned. “That is mainly the method for a very good startup.”
On pitch day, the corporate didn’t 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 good friend 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 needed to see knowledge that confirmed the platform might penetrate past Stanford and Palo Alto, and retain clients. 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 strategy to succeed,” Lin mentioned.
A meals supply messenger is seen in Manhattan.
Luiz C. Ribeiro | New York Day by day Information | Tribune Information Service | Getty Photos
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 informed 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 clients early the following morning.
Oren’s Hummus co-owner Mistie Boulton mentioned DoorDash nonetheless takes that method. The crew comes to satisfy together with her each quarter and she or he serves as a beta tester for brand 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 clients past its small institution that steadily 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 wish to work with them was Xu’s ardour. He actually is a type of individuals you can rely on.”
Wall Road is now relying on Xu’s capability 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 increase 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 knowledge platform for eating places and lodges to handle reserving info, takes DoorDash into a wholly new class. Xu informed 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 motive for concern, they mentioned, was that “integrating a number of acquisitions directly could create some noise near-term.”
Correction: A previous model of this story had an incorrect determine for whole supply orders.
