Crucible Moments: DoorDash ft. Tony Xu - The “Wrong” Moves That Built a Giant

Hosted by Roelof Botha of Sequoia Capital

Introduction: The Birth of DoorDash

Timestamp: [00:34] - [02:05]

In this episode of Crucible Moments, Roelof Botha introduces DoorDash, a company that, from its humble beginnings in 2013, has grown into a global leader in on-demand delivery. DoorDash now operates in over 30 countries, generating nearly $10 billion in annual revenue and expanding its services beyond food to include groceries, household items, pet food, and more. The narrative sets the stage for exploring the pivotal decisions and challenges that shaped DoorDash's trajectory, featuring insights from Tony Xu, Founder and CEO, along with key figures like Alfred Lin from Sequoia Capital and Keith Yandell, Chief Business Officer.

Founding Vision and Early Challenges

Timestamp: [02:05] - [07:13]

Tony Hsu shares the personal motivations behind founding DoorDash, rooted in his childhood experiences helping his mother's small Chinese restaurant. This deep-seated affinity for supporting small businesses drove the founders—Tony Hsu, Stanley Tang, Andy Fang, and Evan Moore—to identify inefficiencies in the delivery process.

Tony Hsu recounts, “Doordash was not the fan favorite at the YC demo day for summer 2013 batch” ([05:35]). Despite facing skepticism from investors and being in the lower half of their Y Combinator batch, the founders remained committed to their vision. They focused on answering critical questions about product-market fit, merchant partnerships, and dasher (driver) sustainability, prioritizing customer obsession over competitive focus.

Securing Initial Funding and Scaling

Timestamp: [07:13] - [16:31]

After initial rejections, Alfred Lin describes his pivotal dinner meeting with Tony Hsu at Chef Chu's in Palo Alto, which impressed him with Tony’s strategic thinking and operational detail. This led Sequoia Capital to invest in DoorDash’s Series A in May 2014.

Tony Hsu elaborates on their strategic focus: “If you get it right, doubling down can carry you really, really far” ([12:18]). DoorDash chose to target suburban areas—contrary to the prevailing focus on large cities—believing that delivery services were more valuable in less dense areas where transportation times were longer.

Alfred Lin explains the brilliance of this strategy: “Everybody was going into cities and every order was not profitable because there is so much competition in the cities” ([13:29]). This non-consensus approach allowed DoorDash to capture underserved markets, facilitating scalable and profitable growth.

Facing Financial Struggles and Series C Funding

Timestamp: [16:31] - [24:02]

By 2015, DoorDash had achieved 1 million deliveries across 22 U.S. markets. However, the aggressive growth model required continuous funding. Alfred Lin initially declined to invest in Series C, but Tony Hsu emphasized the company’s resilience: “We were probably bottom half in the batch” ([05:45]).

As DoorDash moved towards its Series C in early 2016, the market sentiment had dramatically shifted, labeling food delivery as a "cash incinerator." Tony Hsu candidly reflects, “We were not yet profitable” ([20:06]). The company struggled to secure funding amidst growing skepticism about the sustainability of last-mile delivery.

Sequoia's Crucial Investment and Series D

Timestamp: [24:02] - [33:05]

After enduring a tumultuous Series C fundraising period, Alfred Lin became instrumental in persuading Sequoia Capital to lead the Series C despite internal resistance and the company's precarious financial state. This decision was fraught with challenges, requiring extensive internal memos and unanimous agreement within Sequoia.

Alfred Lin shares the intensity of the situation: “It was a very stressful time for me and Michael Amidson and Matt Huang” ([22:10]). The Series C closed in March 2016, albeit at a slightly lower per-share price, marking a "down round" despite DoorDash’s continued growth. This experience taught the founders valuable lessons about resilience and strategic funding.

Keith Yandell recounts the difficulties of raising a Series D: “We heard more no's than I can count” ([26:11]). Eventually, SoftBank offered a term sheet, but delays due to their involvement with Uber created immense uncertainty. Simultaneously, Sequoia proposed a competing offer, leading to a high-stakes decision.

In a critical juncture, Tony Xu explains, “We were presented with an opportunity to take a large war chest” ([33:44]). Despite concerns about dilution and loss of board control, the founders chose to accept Sequoia’s investment, believing in their long-term vision over immediate financial pressures.

Pandemic Pivot: Navigating a Global Crisis

Timestamp: [37:23] - [44:34]

The COVID-19 pandemic in early 2020 presented an unprecedented crucible for DoorDash. Initially, lockdowns caused a dramatic drop in order volumes, leading to fears of insolvency. However, as the situation evolved, demand surged exponentially.

Tony Hsu reflects on the rapid change: “We doubled, I think, order volume in a week” ([38:01]). The company had to scale infrastructure swiftly to accommodate the 200-300% increase in orders, ensuring site stability and dasher availability.

During the pandemic, DoorDash made several critical decisions that tested and ultimately reinforced their values:

• PPE Distribution: DoorDash secured and distributed tens of millions of units of PPE to protect dashers.
• Commission Cuts: They reduced commissions by half, costing over $100 million, a move initially opposed by the management team. Keith Yandell shares, “Tony correctly said, this is the right thing to do for our customers” ([40:46]).
• Collaborative Advertising: DoorDash launched a national TV campaign, "Open for Delivery," that positively highlighted competitors, fostering industry-wide collaboration during the crisis.

Alfred Lin praises these decisions, stating, “Tony just made this really compelling argument that if we can't collaborate during a crisis like this, when are we ever going to collaborate?” ([42:43]). These actions not only aided communities but also solidified DoorDash’s reputation as a customer-centric and morally responsible company.

Global Expansion and Acquisition of Walt

Timestamp: [44:34] - [47:45]

In 2022, DoorDash set its sights on international expansion, culminating in the acquisition of Walt, a Finnish delivery company operating across Europe and parts of Asia. This strategic move aimed to replicate DoorDash’s success globally by leveraging Walt’s established presence and operational expertise.

Keith Yandell discusses the strategic alignment: “They were hyper focused on retention” ([46:40]). The acquisition was a significant challenge due to cross-border operational complexities but was deemed essential for DoorDash’s ambition to become the global leader in delivery services.

Tony Hsu emphasizes the alignment of visions and cultures: “We were bringing together two very like minded teams” ([47:17]). The successful integration of Walt into DoorDash’s ecosystem demonstrated the company’s ability to execute large-scale international partnerships effectively.

Lessons Learned and Concluding Insights

Timestamp: [49:09] - [52:26]

Alfred Lin shares key takeaways from DoorDash’s journey:

• Dream Big: “Instead of trying to think small, we should just think big” ([49:48]).
• Investor Belief: Encourages investors to “just dream with the entrepreneur and just believe” rather than dismissing unconventional strategies.

Tony Hsu reflects on the importance of facing challenges head-on: “There was no way that Doordash would be where it is today without those challenges” ([50:13]). He emphasizes the role of championship habits, team camaraderie, and making tough, conviction-driven decisions that prioritize long-term vision over short-term gains.

The episode concludes by highlighting DoorDash’s evolution from a single-category food delivery platform to a multifaceted global delivery powerhouse, underscoring the vital crucible moments that tested and ultimately shaped the company’s resilience and strategic direction.

Notable Quotes:

• Tony Hsu: “We had a vision of what high standards were. We'd rather die trying to achieve excellence than live to be mediocre.” ([07:13])
• Alfred Lin: “DoorDash recognized that restaurants wanted to offer delivery, but they couldn't afford the delivery staff.” ([05:11])
• Keith Yandell: “I was in Europe and meeting with various players in the space... I knew immediately that they could uplevel our execution outside.” ([46:40])
• Tony Hsu: “These championship habits start early, and they tend to get built when you have a team around you that really believes in the same things about what excellence looks like.” ([50:13])

Conclusion:

DoorDash's story, as detailed in this episode of Crucible Moments, is a testament to strategic non-conformity, resilience in the face of financial adversity, and the unwavering commitment to a founder-driven vision. Through pivotal decisions—often perceived as "wrong" moves at the time—the company navigated skepticism, market shifts, and global crises to emerge as a dominant force in the delivery industry. The lessons from DoorDash’s journey underscore the importance of believing in bold strategies, maintaining operational excellence, and fostering a unified, mission-driven team.