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BUSINESS PROFILE
The Unprofitable Company Everyone Is Talking About
How DoorDash’s Risky Business Moves Paid Off in 2020 The last time you had a meal delivered,
share. Shares closed at $189, leaving the company at a $72 billion valuation. Risky Business DoorDash’s November 2020 filing with the Securities and Exchange Commission (SEC) includes more than 50 pages exclusively covering risk factors — as it should. From the very beginning, DoorDash was a risky venture, but the founders’ ability to make fearless leaps has turned out to be one of the company’s biggest strengths. The company’s first big risk was entering the insanely competitive food delivery market, going up against established players like Uber Eats, Grubhub, and Postmates. According to Digital Media Solutions, it used a savvy multichannel ad campaign to pull ahead of the competition, capturing 27.6% of U.S. market share in 2019 compared to Grubhub’s 26.7% and Uber Eats’ 25.2%. DoorDash took a second big risk with its labor model. The company is responsible for paying its drivers, and that’s difficult with wage pressure from competitors and new immigration, labor, and employment laws, which constantly affect hiring practices. This year, DoorDash won a victory in that department when it took the risk of fighting for Proposition 22, a California ballot measure that overturned state law requiring DoorDash and other gig economy companies to treat their workers as employees. The effort cost DoorDash and its compatriots more than $200 million.
This year, the business took another risk by dabbling in politics while many others steered clear. It rode the year’s political waves the smart way, introducing local business specials as lockdowns spread across the country and supporting Black-owned businesses in response to national protests against police brutality. DoorDash biggest risk, though, is operating daily with the prospect of bankruptcy. The company is a household name, even though it’s been historically unprofitable. Despite making $1.9 billion in the first nine months of 2020, it was in the red by $149 million. Still, pushing ahead is slowly paying off. The 2020 loss is less than its last year’s loss, and the company even made a 3% profit in the second quarter of 2020 — a first in its nine-year history. Is DoorDash the Next FedEx? When Xu, Tang, Fang, and Moore started DoorDash, their goal was to be “the local, on-demand FedEx.” Food delivery is just a stepping stone on that path. DoorDash wants to “grow and empower local economies” by providing a suite of merchant services, including marketing and analytics tools and delivery subscription services, according to its November 2020 filing with the SEC. For those who know the DoorDash story, it’s no surprise that the company will continue to take risks and innovate, putting passion (at least temporarily) over profit. That’s the story of its success and a strategy that every entrepreneur should consider when setting goals for 2021.
how did you order it? There are at least a dozen options to choose from: Grubhub, Postmates, and Uber Eats to name a few. But we’d be willing to bet that the app you use most often is DoorDash — a now-ubiquitous delivery service founded, like Facebook, by a group of college students. The idea for DoorDash came to Stanford students Tony Xu, Stanley Tang, Andy Fang, and Evan Moore in a Palo Alto macaron shop in 2012. By 2018, the food delivery app was available in more than 850 cities. In 2020, the COVID-19 pandemic sent its profits soaring and made it a household name. The Pandemic Payout It’s not surprising that COVID-19 juiced DoorDash’s business. With so many people staying home, food delivery became the default for many families. In the first nine months of 2020, DoorDash’s 18 million customers spent $16 billion on the app. That translated to $1.9 billion in revenue and 226% year-over-year growth from 2019, according to Protocol. This was a huge leap from the $587 million in profit the company made in the first nine months of 2020. That bump can’t be attributed entirely to the pandemic. DoorDash was already growing rapidly before COVID-19 (it reported 204% revenue growth between 2018 and 2019), but the virus no doubt helped push it from the millions into the billions. On Dec. 9, DoorDash raised $3.4 billion with an initial public offering of $102 per
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