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Tony Xu, co-founder and CEO of DoorDash Inc., smiles right through the Wall Street Journal Tech Live convention in Laguna Beach, California, on Oct. 22, 2019.
Martina Albertazzi | Bloomberg | Getty Images
During 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 chop commissions.
Chief Business Officer Keith Yandell nervous that any such transfer would lead to an enormous hit to income forward of the corporate’s deliberate IPO. But Xu made a persuasive case.
“If restaurants don’t thrive, we cannot,” Yandell advised CNBC in a contemporary interview, recalling Xu’s viewpoint on the time. “We need to take a leadership position.”
The corporate ended up sacrificing over $100 million in charges, Xu later mentioned.
Since beginning DoorDash at the campus of Stanford University in 2013, the now 40-year-old CEO has navigated the notoriously cutthroat and low-margin trade of meals supply, construction an organization that Wall Street these days values at on the subject of $90 billion. The inventory has emerged as a tech darling this yr, leaping 23%, whilst the Nasdaq remains to be down for the yr in large part on tariff issues.
More than 4 years after its IPO, internet income stay narrow. But that isn’t moving into the way in which of Xu’s undertaking to turn out to be an trade consolidator, the use of a mixture of money and new debt to gasoline an acquisition spree at a time when large tech offers stay scarce. Earlier this month, DoorDash scooped up British meals supply startup Deliveroo for approximately $3.9 billion and eating place generation 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 advised CNBC’s “Squawk Box” after the offers had been introduced.
This week DoorDash introduced the pricing of $2.5 billion in convertible debt, and mentioned the proceeds might be utilized in section for acquisitions.
Doordash meals supply carrier in New York City 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 Square, now referred to as Block. About two years later, DoorDash mentioned it used to be paying $8.1 billion for world supply platform Wolt. The deal used to be its closing large transaction till this month.
When DoorDash entered the meals supply marketplace, it needed to face off in opposition to the likes of GrubHub and Seamless, which later joined forces. That mixed entity used to be purchased past due closing yr by means of eating place proprietor Wonder Group. In 2014, Uber introduced Uber Eats, which is now DoorDash’s greatest competitor within the U.S.
“It’s a very competitive market, and I think merchants do have choice,” Xu mentioned 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 did not make Xu to be had for an interview for this tale, however equipped a remark in regards to 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 mentioned. “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, whilst different gamers attacked town facilities. When Covid close down eating place eating in early 2020, DoorDash capitalized at the booming call for for deliveries. Revenue greater than tripled that yr, 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.” after Amazon founder Jeff Bezos.
Restaurants have not universally considered DoorDash as an best friend. Commissions can achieve as prime as 30%, which is a hefty reduce to fork over. Many eating places have reluctantly paid the prime charges on account of DoorDash’s dominant marketplace proportion, which reached an estimated 67%. In 2021, the corporate presented 3 tiers of pricing, with a elementary possibility at 15% for extra price-sensitive companies.
DoorDash wishes the prime charges to be able to keep within the black. The corporate’s contribution benefit as a share of general market quantity hovers beneath 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 couple of routing factor whilst accompanying him on meals supply orders. All staff, together with Xu, are required to finish orders and care for improve calls once a year as a part of the corporate’s WeSprint program.
In part of the rustic recognized for the pomp of its rich founders, Xu has an excessively other recognition.
Early employees recall recollections of Xu pulling up in a dilapidated inexperienced 2001 Honda Accord to group occasions, or collaborating in corporate knockout basketball video games known as “knockys,” subsequent to the animal health center in Palo Alto, which DoorDash in short known as its headquarters. Xu additionally for my part authorized each be offering for the corporate’s first 4,000 staff.
Xu spends many mornings answering customer support proceedings. He steadily drops his youngsters off in class and, after tucking them in at night time, hops on calls with world areas, colleagues say. Xu is an avid Gold State Warriors basketball fan however has a cushy spot for the Chicago Bulls, having spent a few years in Illinois. Once or two times every week, Xu squeezes in a morning run, and can steadily accomplish that whilst touring to discover other neighborhoods and shops.
Xu used to be born in China and moved along with his circle of relatives to Champaign, Illinois, in 1989. Growing up, he performed basketball and mowed lawns to avoid wasting up for a Nintendo. He advised Stanford’s View From the Top podcast in 2021 that the enjoy, and gazing his folks hustle, taught him how you can “earn your way into better things.”
His “characteristics became the company’s values,” mentioned Alfred Lin, an early DoorDash investor and spouse at project company Sequoia.
Xu steadily attributes his entrepreneurial spirit to his folks. His mom labored as a physician in China, and juggled 3 jobs within the U.S. for over a decade, saving up sufficient to in the end open a scientific medical institution. His father labored as a waiter whilst pursuing a Ph.D. Xu mentioned at the podcast that gazing his mother gave him a deep working out of what it takes to run a small trade, which got here in to hand in DoorDash’s early years as he used to be seeking to convert eating places into shoppers.
‘Ten instances tougher’
Employees say Xu has a name for detecting hidden abilities amongst his colleagues. Jessica Lachs, the corporate’s leader analytics officer, used to be running as a common supervisor helping with DoorDash’s Los Angeles release when Xu guided her towards her interest for records.
“He believes in leaning into the things you’re really good at, rather than trying to be mediocre at a lot of things,” she mentioned.
After Toby Espinosa, DoorDash’s advertisements vice chairman, misplaced a maintain a significant rapid meals corporate right through his early years on the startup, Xu advised him to paintings “10 times harder” and turn out to be a professional in his box. A couple of years later, the corporate secured the partnership, Espinosa mentioned.
Grit and battle outlined the early years of DoorDash. The founding group of 4 controlled deliveries round Stanford and Palo Alto although a Google Voice quantity directed to their mobile phones.
DoorDash emerged out of a Stanford trade faculty route referred to as Startup Garage, taught by means of Professor Stefanos Zenios. The magnificence calls for scholars to offer a trade thought, check it, after which pitch it to traders.
Zenios mentioned Xu stood out along with his data-driven way and herbal management qualities. The group examined two other concepts, together with a platform that helped small companies higher observe the effectiveness in their advertising and marketing, he remembers. Zenios known as the speculation to focus on suburban spaces a “brilliant insight.”
Xu and his group entered Y Combinator in the summertime of 2013. The three-month startup accelerator program is understood for spawning corporations like Airbnb, Stripe and Reddit. Every consultation culminates with a demo day in entrance of a few of Silicon Valley’s greatest traders.
The DoorDash thought excited Paul Buchheit, author of Gmail and a spouse at Y Combinator. But like many different possible traders, Buchheit used to be skeptical in regards to the financial style.
“You had a talented team of founders working on what I thought was an idea that had potential,” he mentioned. “That’s basically the formula for a good startup.”
On pitch day, the corporate didn’t entice any project companies, however Buchheit later participated as a seed investor.
Shortly after demo day, DoorDash encountered Saar Gur of Charles River Ventures. Gur were searching for a meals supply platform to again and used to be carrying out due diligence on some other corporate when a chum led him to DoorDash.
By the tip in their first assembly, they had been “finishing each other’s sentences,” Gur mentioned.
Sequoia’s Lin to begin with handed on DoorDash after the Y Combinator pitch, however stored involved with the group. Lin mentioned he sought after to look records that confirmed the platform may penetrate past Stanford and Palo Alto, and retain shoppers. He ended up main two institutional rounds, reaching a 20% stake for Sequoia on the time of the IPO.
“Tony always believed that his company would succeed, or they’ll find a way to succeed,” Lin mentioned.
A meals supply messenger is noticed 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 soccer recreation, a hurry of orders bombarded its supply machine inflicting huge delays, Xu advised Y Combinator’s CEO Garry Tan in an interview this yr.
The founders refunded the orders and spent the night time baking cookies, then riding them to shoppers early the following morning.
Oren’s Hummus co-owner Mistie Boulton mentioned DoorDash nonetheless takes that way. The group comes to satisfy together with her each quarter and she or he serves as a beta tester for brand new merchandise.
The eating place, which began in Palo Alto and has since expanded to a half-dozen places around the Bay Area, used to be considered one of DoorDash’s first shoppers, latching onto the chance to achieve extra shoppers past its small status quo that steadily had strains snaking out the door.
“We just fell in love with the idea,” Boulton mentioned. “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 Street is now reckoning on Xu’s skill to execute large offers, even with the corporate having this month surpassed $10 billion in supply orders international.
The acquisition of Deliveroo, founded in London, marks a renewed effort by means of DoorDash to amplify its presence out of the country, following the acquisition of Finland’s Wolt 3 years in the past.
The money deal for SevenRooms, a New York City-based records platform for eating places and resorts to control reserving data, takes DoorDash into a wholly new class. Xu advised 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 profits document in March, analysts at Piper Sandler reiterated their grasp advice at the inventory.
One reason why for fear, they mentioned, used to be that “integrating multiple acquisitions at once may create some noise near-term.”
