Technology
DoorDash CEO Tony Xu is taking at the function of business consolidator in meals supply
Tony Xu, co-founder and CEO of DoorDash Inc., smiles all the way through the Wall Boulevard Magazine Tech Reside convention in Laguna Seashore, California, on Oct. 22, 2019.
Martina Albertazzi | Bloomberg | Getty Pictures
Right through the depths of the Covid pandemic, with eating places across the nation dealing with an existential disaster, DoorDash CEO Tony Xu had an unconventional proposal. He sought after to decrease commissions.
Trade Officer Keith Yandell nervous that this type of walk would lead to a immense strike to income forward of the corporate’s deliberate IPO. However Xu made a persuasive case.
“If restaurants don’t thrive, we cannot,” Yandell informed CNBC in a contemporary interview, recalling Xu’s point of view on the presen. “We need to take a leadership position.”
The corporate ended up sacrificing over $100 million in charges, Xu next stated.
Since creation DoorDash at the campus of Stanford College in 2013, the now 40-year-old CEO has navigated the notoriously cutthroat and low-margin industry of meals supply, construction an organization that Wall Boulevard as of late values at similar to $90 billion. The retain has emerged as a tech darling this 12 months, leaping 23%, pace the Nasdaq remains to be ill for the 12 months in large part on tariff issues.
Greater than 4 years nearest its IPO, web income stay thin. However that’s no longer getting into the best way of Xu’s project to change into an business consolidator, the usage of a mix of money and brandnew debt to gasoline an acquisition spree at a presen when large tech offer stay scarce. Previous this date, DoorDash scooped up British meals supply startup Deliveroo for approximately $3.9 billion and eating place era corporate SevenRooms for $1.2 billion.
“What we’ve delivered for a customer yesterday probably isn’t good enough for what we will deliver for them today,” Xu informed CNBC’s “Squawk Box” nearest the offer have been introduced.
This life DoorDash introduced the pricing of $2.5 billion in convertible debt, and stated the proceeds might be worn partly for acquisitions.
Doordash meals supply provider in Unutilized York Town on Feb. 13, 2025.
Danielle DeVries | CNBC
The San Francisco-based corporate has a historical past with scooping up competition to develop marketplace proportion. In 2019, it purchased meals supply competitor Caviar for $410 million from Sq., now referred to as Forbid. About two years next, DoorDash stated it used to be paying $8.1 billion for world supply platform Wolt. The offer used to be its latter large transaction till this date.
When DoorDash entered the meals supply marketplace, it needed to face off towards the likes of GrubHub and Seamless, which next joined forces. That mixed entity used to be purchased past due latter 12 months by means of eating place proprietor Wonder Group. In 2014, Uber introduced Uber Eats, which is now DoorDash’s largest competitor within the U.S.
“It’s a very competitive market, and I think merchants do have choice,” Xu stated within the CNBC interview. “What we’re focused on is always trying to innovate and bring new products to match increasing standards and expectations from customers.”
DoorDash didn’t assemble Xu to be had for an interview for this tale, however supplied a commentary concerning the corporate’s acquisition technique.
“We’re very picky, very patient, and conscious that, for most companies, deals don’t work out in hindsight,” the corporate stated. “When we see an opportunity that brings value to customers, expands our potential to empower local economies around the world, and has a path to strong long-term returns on capital, we tend to push our chips in.”
Taking at the suburbs
DoorDash differentiated itself early on by means of cornering suburban markets that had fewer supply choices, pace alternative gamers attacked town facilities. When Covid close ill eating place eating in early 2020, DoorDash capitalized at the booming call for for deliveries. Earnings greater than tripled that 12 months, and grew 69% in 2021.
Colleagues and early traders credit score a customer-first center of attention for far of Xu’s good fortune. Gokul Rajaram, who joined DoorDash thru its Caviar acquisition, described Xu as “the best operational leader in the U.S.” nearest Amazon founder Jeff Bezos.
Restaurants haven’t universally viewed DoorDash as an ally. Commissions can reach as high as 30%, which is a hefty cut to fork over. Many restaurants have reluctantly paid the high fees because of DoorDash’s dominant market share, which reached an estimated 67%. In 2021, the corporate offered three tiers of pricing, with a modest possibility at 15% for extra price-sensitive companies.
DoorDash wishes the prime charges to deliver to stick within the dim. The corporate’s contribution benefit as a share of overall market quantity hovers underneath 5%.
Colleagues who’ve identified Xu for many years say the meals supply entrepreneur hasn’t modified a lot because the early days of the corporate.
Yandell stated Xu as soon as took recommendation from his younger daughter, who complained a few routing factor pace accompanying him on meals supply orders. All staff, together with Xu, are required to finish orders and take care of backup yells each and every 12 months as a part of the corporate’s WeDash program.
In part of the rustic identified for the pomp of its rich founders, Xu has an overly other recognition.
Early staff recall recollections of Xu pulling up in a dilapidated inexperienced 2001 Honda Accord to crew occasions, or collaborating in corporate knockout basketball video games known as “knockys,” then to the animal sanatorium in Palo Alto, which DoorDash in brief known as its headquarters. Xu additionally for my part licensed each and every trade in for the corporate’s first 4,000 staff.
Xu spends many mornings answering customer support lawsuits. He steadily drops his children off in class and, nearest tucking them in at night time, hops on yells with world areas, colleagues say. Xu is an avid Gold Condition Warriors basketball fan however has a cushy spot for the Chicago Bulls, having spent a few years in Illinois. A couple of times a life, Xu squeezes in a morning run, and can steadily achieve this pace touring to discover other neighborhoods and shops.
Xu used to be born in China and moved together with his public to Champaign, Illinois, in 1989. Rising up, he performed basketball and mowed lawns to avoid wasting up for a Nintendo. He told Stanford’s View From the Supremacy podcast in 2021 that the revel in, and looking at his oldsters hustle, taught him easy methods to “earn your way into better things.”
His “characteristics became the company’s values,” stated Alfred Lin, an early DoorDash investor and spouse at challenge company Sequoia.
Xu steadily attributes his entrepreneurial spirit to his oldsters. His mom labored as a physician in China, and juggled 3 jobs within the U.S. for over a decade, preserve up plethora to sooner or later viewable a scientific health facility. His father labored as a waiter pace pursuing a Ph.D. Xu stated at the podcast that looking at his mother gave him a deep working out of what it takes to run a petite industry, which got here in to hand in DoorDash’s early years as he used to be looking to convert eating places into shoppers.
‘Ten occasions tougher’
Staff say Xu has a name for detecting undercover skills amongst his colleagues. Jessica Lachs, the corporate’s prominent analytics officer, used to be operating as a normal supervisor aiding with DoorDash’s Los Angeles creation when Xu guided her towards her hobby for information.
“He believes in leaning into the things you’re really good at, rather than trying to be mediocre at a lot of things,” she stated.
Next Toby Espinosa, DoorDash’s commercials vice chairman, misplaced a offer with a significant speedy meals corporate all the way through his early years on the startup, Xu informed him to paintings “10 times harder” and change into knowledgeable in his ground. A couple of years next, the corporate connect the partnership, Espinosa stated.
Grit and aim outlined the early years of DoorDash. The initiation crew of 4 controlled deliveries round Stanford and Palo Alto despite the fact that a Google Tonality quantity directed to their mobile phones.
DoorDash emerged out of a Stanford industry college route referred to as Startup Storage, taught by means of Lecturer Stefanos Zenios. The category calls for scholars to offer a industry concept, check it, and after tone it to traders.
Zenios stated Xu stood out together with his data-driven means and herbal management qualities. The crew examined two other concepts, together with a platform that helped petite companies higher monitor the effectiveness in their advertising, he recollects. Zenios known as the speculation to focus on suburban farmlands a “brilliant insight.”
Xu and his crew entered Y Combinator in the summertime of 2013. The 3-month startup accelerator program is understood for spawning corporations like Airbnb, Stripe and Reddit. Every session culminates with a demo day in front of some of Silicon Valley’s biggest investors.
The DoorDash idea excited Paul Buchheit, creator of Gmail and a partner at Y Combinator. But like many other potential investors, Buchheit was skeptical about the economic model.
“You had a talented team of founders working on what I thought was an idea that had potential,” he said. “That’s basically the formula for a good startup.”
On pitch day, the company failed to lure any venture firms, but Buchheit later participated as a seed investor.
Shortly after demo day, DoorDash encountered Saar Gur of Charles River Ventures. Gur had been looking for a food delivery platform to back and was conducting due diligence on another company when a friend led him to DoorDash.
By the end of their first meeting, they were “finishing each other’s sentences,” Gur said.
Sequoia’s Lin initially passed on DoorDash after the Y Combinator pitch, but kept in touch with the team. Lin said he wanted to see data that showed the platform could penetrate beyond Stanford and Palo Alto, and retain customers. He ended up leading two institutional rounds, attaining a 20% stake for Sequoia at the time of the IPO.
“Tony always believed that his company would succeed, or they’ll find a way to succeed,” Lin said.
A food delivery messenger is seen in Manhattan.
Luiz C. Ribeiro | New York Daily News | Tribune News Service | Getty Images
Shortly after its Y Combinator stint, DoorDash hit an early roadblock. Following a Stanford football game, a rush of orders bombarded its delivery system causing massive delays, Xu told Y Combinator’s CEO Garry Tan in an interview this year.
The founders refunded the orders and spent the night time baking cookies, after riding them to shoppers early the then morning.
Oren’s Hummus co-owner Mistie Boulton stated DoorDash nonetheless takes that means. The crew comes to fulfill together with her each and every quarter and she or he serves as a beta tester for brandnew merchandise.
The eating place, which began in Palo Alto and has since expanded to a half-dozen places around the Bay Branch, used to be considered one of DoorDash’s first purchasers, latching onto the chance to achieve extra shoppers past its petite established order that ceaselessly had strains snaking out the door.
“We just fell in love with the idea,” Boulton stated. “The number one thing that encouraged and enticed me to want to work with them was Xu’s passion. He really is one of those people that you can count on.”
Wall Boulevard is now reckoning on Xu’s skill to blast large offer, even with the corporate having this date surpassed $10 billion in delivery orders international.
The purchase of Deliveroo, founded in London, marks a renewed aim by means of DoorDash to make bigger its presence in a foreign country, following the acquisition of Finland’s Wolt 3 years in the past.
The money offer for SevenRooms, a Unutilized York Town-based information platform for eating places and lodges to govern reserving data, takes DoorDash into a completely brandnew section. Xu informed CNBC that DoorDash is a “multi-product company now that’s operating on a global scale.”
Following the purchase bulletins, which coincided with a disappointing income document in March, analysts at Piper Sandler reiterated their book advice at the retain.
One explanation why for fear, they stated, used to be that “integrating multiple acquisitions at once may create some noise near-term.”
WATCH: DoorDash CEO Tony Xu: Deliveroo & SevenRooms offer assemble us a multi-product corporate on a world scale
