DoorDash CEO: Opportunity in Local Delivery Is ‘Vast’

As the on-demand economy has risen up in the past few years, there has been increased focus once again on how delivery and logistics services can help local consumers get what they want when they want it. DoorDash is among a handful of services in the an increasingly competitive sector that have separated themselves from the pack. Founded in 2013, the company raised $127 million in Series C funding just a few months ago — despite a tightening investment climate — and is building its product out rapidly.

Street Fight recently caught up with DoorDash CEO and co-founder Tony Xu, who will be a keynote speaker at Street Fight Summit West on June 7th in San Francisco, to talk about how he scored funding recently despite the cooling investment market, carving out a place of its own in the crowded food delivery space, and the future of delivery as a company’s primary service.

DoorDash recently raised a large round in what was viewed by many as a hard climate for delivery startups. Tell me a little about that process and what you found about the current investment climate.
I don’t think it’s a secret that the investment climate has cooled. The biggest thing that’s happening … is you’re seeing almost a return to normalcy of some form. The press makes comments around whether it’s growth or profitability. It’s always been about both. It’s always been about the basics of getting those right. That’s what I mean when I say a return to “normalcy.” Those metrics are now front-and-center in a way that maybe the last couple years that was less true from an investment point of view.

For companies in this process, the right strategy has always been the same, which is just build a fantastic business. Regardless of whatever the new normal is, if you’re building a great business, you will be successful, and that’s the mantra we’ve always held to at DoorDash. We focus on what we can control, which is the customers, the merchants, and our dashers — and if we can build the best business, we’ll let the score take care of itself.

The delivery space has gotten crowded in the past few years, but you were able to establish a very solid foothold even though others had gotten there first and with more capital. Could you talk a little about the niche that you guys have carved out and how you were able to do that?
First and foremost, the best startups are always doing more with less. And that’s no different in the case of DoorDash. For us, the core thesis and the history of the company is to build a new type of logistics company where we’re using software that makes a lot of decisions previously made by humans. We’re trying to do this in a sophisticated way that always delivers on time in an accurate way at an affordable price, and it’s not really a niche that we’re addressing. Restaurants as a vertical are a large category, but our approach is certainly very unique, which is to build a new type of logistics company. Technology is one part and the other part is being operationally excellent.

When you think about the types of consumer companies we’ve built in Silicon Valley, the first decade, 2000-2010, was really around a pure consumer Internet software where you made the change in software and you see that change right away as a user.  In the case of DoorDash and a class of companies 2010-2020, we’re moving things: we have software and people. In our case, we have lots of different types of people. We have our dashers, we have our merchants, and we have our consumers. It’s always this combination of a mass problem and a people problem that we’re solving, and to be good at both types of skills — technology as well as operational excellence — that’s the niche that we hope to accomplish.

Like a lot of local tech, food delivery services are often described as battling for dominance in specific regions — establishing beachheads to “own” particular cities or states. Do you think there is still a lot of untapped real estate in the battle to bring delivery to cities across the country? 
In the landscape of restaurants, 85 percent of restaurants don’t deliver. In the landscape of local businesses in general, just about no one delivers. So the opportunity is very vast. It’s a small, very fast-growing segment of selection that’s never been delivered before growing very quickly because delivery is something that people want.

Do you think faster delivery alone is enough to make a consumer order from a small business nearby? And is this pull of delivery specific to certain kinds of items? In other words, things like grocery and restaurant delivery have an immediacy to a consumer’s desire, but what kinds of other things do consumers really want “in an hour” — to the degree that they might be willing to pay a premium for it?
The best thing about startups is that you don’t have to guess at what a customer wants — and frankly if you asked what a customer wanted, you probably wouldn’t find out the right answer anyway. If you asked a couple hundred years ago what a customer wanted, they’d tell you a faster horse; they wouldn’t have told you a car. If you asked whether or not a person would want a computer in their pockets — even 10 years ago — I’m not so convinced you would’ve received the iPhone as the answer. So, I think the best part about a startup is what happens is you introduce something new for the first time like we are (in our case, selection that’s never been offered for delivery) and you see what happens.

The way I think about it is not exactly surveying what people are going to want but introducing it. The power of the software that we’re building at DoorDash is if we can fulfill deliveries in under an hour, we can also fulfill deliveries in under two hours or three hours. So, as a result, we can connect merchants of any kind in a city to those users in whatever time period. We can create this platform logistics network in every city that we enter.

Do you think that fast delivery will ultimately continue to sustain standalone companies, or is delivery a feature that everyone will expect from all retailers and stores in the future?
It will be a feature in the way FedEx and UPS ultimately became features. Startups almost always have this characteristic where they seemingly begin as solving one type of problem — I guess in the case of FedEx and UPS that would be solving first-mile delivery, and in the case of DoorDash that would be last-mile delivery. We have every intention of building a standalone business, and if you look at history, if you ask whether or not FedEx is a feature, I think that question has been answered over the decades.

Joe Zappa is Street fight’s news editor. This interview has been edited for length and clarity.

Hear more from DoorDash’s Tony Xu at Street Fight Summit West on June 7th in San Francisco. Click on the icon below for tickets!