
DoorDash raises $535M, now valued at $1.4B - smaili
https://techcrunch.com/2018/03/01/doordash-series-d/
======
thisisit
I haven't used DoorDash but my experience with food delivery services has been
average. As a bachelor I loved them until I found out these companies use
multiple ways to add up charges. Most of the time restaurant cost in-shop vs
cost app varies a lot. Then they charge some kind of "packing charges".
Including delivery fee some times the delivery price is 25% more than
restaurant prices.

When I talked to some of the restaurants, they said these guys can take up to
30% of the food cost. It means DoorDash et al, can take up to 50% of an order.

So, I find it surprising that these guys still struggle to become profitable.

I also think that this whole phenomena might actually end up pushing
restaurant prices up to the detriment of consumers.

~~~
bduerst
Same here. On top of that, the delivery itself can be pretty sub par. I had
one delivery person not understand the concept of entering in a code on a
keypad to get into an apartment building. Not having difficulties entering the
code, mind you, but not knowing what the keypad was even for.

~~~
gfosco
Postmates delivery folks never ever read the delivery instructions, I have to
send them all the callbox code via the app when they are close, and 25% of
them still call and have no idea what to do. DoorDash folks at least read the
instructions..

------
contingencies
In China where delivery of all kinds is omnipresent (the other day we even
ordered someone to go shop for us and had the makings for breakfast arrive
within half an hour!) it feels to me that people are beginning to see the
limitations of prepared food delivery.

While it's always great to get some food when you're hungry, the waiting
involved in a typical order is 45min+ and the experience never matches eat-in
or self-made due to factors like post-cook cool-down while in transit,
corresponding ingredient visual and textural degradation, timing
unpredictability (what if I need to bury myself in work or have a conference
call? I don't want someone at the doorbell suddenly interrupting), etc.
Limited hours of availability also suck, as do random phone calls about
parking/access/are-you-around/etc.

Some of these problems are impossible to completely solve as orders tend to be
heavily grouped at peak periods, and driver and vehicle fleet size cannot be
realistically optimized for short term burst demand patterns without
substantially increasing costs.

~~~
faluu101
Except unlike here in NA, the cost of a delivered meal in China is often times
less than their in-restaurant equivalent. The delivery platforms there are
still offering large discounts, and it's not only for new users.

For example is common to see restaurants offering, 15 rmb off for orders over
50 rmb.

~~~
contingencies
The cost is less because:

(1) the restaurant has limited sit down space and chef time during peak
periods;

(2) eating times in China are highly regimented (office lunch hour dominates);

(3) delivery customers by default can tolerate higher volatility in meal
completion schedule;

(4) the actual cost to the restaurant for a 50RMB meal outside of the the
limited sit down space represented by high rental costs and the chef's salary
(already paid by peak hour sit-down customers) is negligible, often under
10RMB including ingredients, cooking energy and packaging;

(5) delivery platforms are battling for market share.

In short, the primary issue running a conventional restaurant is limited
temporal and spatial bandwidth to serve customers. Delivery takes advantage of
resources already spent toward the primary issues, so can be substantially
discounted without loss.

------
ben174
One of the big players should launch a giant warehouse - serving as a giant
kitchen. Capable of cooking all kinds of different varieties of cuisine and
tons of automation. And a huge staff of well-trained chefs cooking, and
delivering to a ~50 mile radius.

I'd imagine they'd open this in - say Fremont - and deliver to the entire bay
area.

It would be great, because I could order Mexican food for me, Indian food for
the wife, and the kids could have a couple hamburgers.

Seems like something Amazon would be good at.

~~~
aphextron
>One of the big players should launch a giant warehouse - serving as a giant
kitchen. Capable of cooking all kinds of different varieties of cuisine and
tons of automation. And a huge staff of well-trained chefs cooking, and
delivering to a ~50 mile radius.

They did, it was called SpoonRocket. I loved it, you could get a decent meal
delivered in under 5 minutes. But they failed horribly because the economics
just don't work out [0].

[https://techcrunch.com/2016/03/15/spoonrocket-shuts-
down/](https://techcrunch.com/2016/03/15/spoonrocket-shuts-down/) [0]

~~~
wuliwong
>SpoonRocket had reached a positive contribution margin — it was selling meals
for more than it cost to cook, package, and deliver them. But due to other
costs and the frosty fundraising climate, it wasn’t able to get the money it
needed to continue operating.

I wouldn't describe that as "failing horribly". They just couldn't raise
money. I was under the impression that they were turning a profit. Maybe this
article isn't accurate, do you have other information? I'm actually quite
interested in this story, seems like a cool idea but I imagine the financial
side of this needs to be really well managed. So many possible places that
costs could get away from you.

~~~
rargulati
Others in this space: Sprig (failed) and Munchery (still around) come to mind.

------
mooreds
My guess is they're raising to follow the path of deliveroo:
[https://techcrunch.com/2017/09/24/deliveroo-
raises-385m/](https://techcrunch.com/2017/09/24/deliveroo-raises-385m/) which
is opening kitchens to allow restaurants to increase production (and, who
knows, maybe create a few brands of their own).

Ah, middlemen. There's always a peril in letting someone else own your
customer.

------
tyingq
Doordash is a tire fire. 10x worse than Uber Eats for basic service. My
experience is less than 50% success at delivering what I ordered. Missing
items, wrong items, wrong totals, completely failed deliveries, and non-
equitable compensation. Then, shit follow up when they fail. I’ll savor in
more than a little Shadenfreud when they fold.

~~~
dmode
I have ordered with Doordash 10-15 times. It failed me only once when the
"dasher" delivered my food to a random neighbor (who actually ate all of it)

~~~
tyingq
Guess it's a regional issue then. Upvoted. Dfw is honestly terrible. Less than
50/50\. I'd be embarrassed.

------
Gasparila
Wow that's a lot of dilution for a late stage round. I feel bad for the
employees that suddenly have their equity cut by 60%. If I'm doing my math
right, ($865 MM pre-money) then it means even with the higher valuation
preferred price goes down

~~~
wskinner
Correct me if I'm wrong, but couldn't the preferred price stay flat, even with
dilution? The company issues new shares and sells them at e.g. the current
preferred price. Now there are more outstanding shares, and a higher post-
money valuation, but a close to flat pre-money valuation. In this case the
preferred price in real percentage of the company terms is higher since there
are now more shares outstanding, but the price per share is flat.

I imagine the 409a (common stock price went down), but I don't think you can
infer from this that the preferred price went down. The missing figure is how
many shares were issued.

~~~
cgb223
Is there like a good blog post out there that can explain the difference
between preferred and common stock, dilution, and all the other nuanced things
about equity?

------
kels
I really want to like all of these services. I've used Grubhub, Uber Eats and
DoorDash. My problem with them is that it costs way more than eating at the
restaurant. It's usually 30% - 40% of the cost of the food for delivery,
service fees and tip.

I've always wondered why it wasn't cheaper to do take out than eat at a
restaurant. I'm not taking up a parking space, table, using facilities, or
taking up as much of the employees time but I still incur that overhead.

~~~
mmanfrin

      I've always wondered why it wasn't cheaper to do take out
      than eat at a restaurant. I'm not taking up a parking 
      space, table, using facilities, or taking up as much of the 
      employees time but I still incur that overhead.
    

You're also not buying high-margin drinks or being swayed to buy the specials
(which are often used to balance inventory).

~~~
Falling3
The impact of drinks really can't be overstated. As a booze-loving city,
Portland restaurant's economy is especially interesting. At least half of the
meals I eat out are at bars and you can get a quality meal for $8-12. But this
all hinges on drinks subsidizing the rest of the meal.

------
Mitchhhs
"Xu said the company became “contribution margin positive” in the last year,
which means that it’s profitable on a per-order basis. In fact, DoorDash has
become profitable in its earliest markets."

Its funny this is a milestone for a company at this stage. Congrats you aren't
losing money on every order!

~~~
WisNorCan
> Congrats you aren't losing money on every order!

I think this misunderstands how marketplaces are built. Traditional economics
would agree with you and say that selling $1 at $0.90 is insanity. Traditional
economics have been slow to catch up with marketplace economics although there
have been some recent papers that start explaining a better framework.

If you know that a marketplace has strong network efforts and improved
performance at scale. The right strategy is to understand the trade-off
between time and $ required to get to scale in your marketplace.

The optimal strategy often means subsidizing a market at a price below your
actual cost for early markets. The fact that Door Dash talks about their
business in terms of early vs. late markets with different economics means
that they are using this playbook.

There are of course many companies that think they are building a marketplace
with a network effect when they are actually just losing money. I don't know
DoorDash specifically.

~~~
ghaff
I'm not sure I even understand what the network effects are here. I _guess_
there are some potential efficiencies with having a single delivery company
that handles deliveries rather than individual restaurants but it seems like a
stretch. People I know who live in cities tend to just have a stack of take-
out pizza/Chinese food/etc. menus for places that deliver (or not). Maybe I'm
missing something but it doesn't really seem like an area that's crying out
for "disruption."

~~~
fnovd
Using DoorDash or UberEats as your delivery service instead of building your
delivery staff in-house is like using AWS or DO instead of building your own
in-house ops team. Since most delivery workflows are pretty much identical (go
to restaurant, pick up food, deliver food), it seems like any restaurant other
than a "typical delivery" place would benefit from using someone else's
infrastructure.

~~~
ghaff
Except that "building your delivery staff in-house" more or less consists of
hiring some teenagers to work for tips. It's not exactly architecting a
datacenter. Furthermore, delivery is going to inherently be a local business
even if you're a nationwide company.

I actually do think that there's something to be said for having a
standardized service that a restaurant already offering take out can just sign
up for. Maybe delivery is something they just never got around to offering. It
just seems like a service that's hard to do well at a price people are willing
to pay.

------
concernedctzn
I won't use them after I tried one of their 'free delivery' codes and then the
next time I went to place the same order it came out to the exact same price
with delivery included, they seemed to have increased the price of the food to
cover it the previous time.

~~~
pavanred
The problem I have with doordash is that though they say the delivery fee is
$x, there are a lot of hidden charges. You are actually paying a lot more than
that, a markup on food items + a delivery fee + 8% service fee + taxes + 15%
tip (optional but selected by default) + a small order fee (if your order is
less than a predefined min order value)

For instance, there's a a particular dish served at a local restaurant that I
like, and I recently noticed that it is $11.99 at the restaurant but in
doordash it's priced $13.99, delivery fee of $4.99, service fees of $1.88 and
optional but pre-selected tip of $3.81. And, of course taxes in addition to
this. At this point in some cases, its perhaps more economical to take an
uber/lyft to the restaurant and back.

~~~
ac29
DoorDash doesn't mark up menu prices any more, at least in my market.
Supposedly restaurants didnt like the hidden markup, so they moved all of
their fees into the delivery fee and the service fee.

Its not terribly fair to consider taxes and tip as "hidden charges", IMO. The
taxes you pay even if you go to the restaurant yourself, and the tip is the
majority of what the drivers get paid -- they dont work for free. I'd prefer a
flat driver's fee, though, its not twice as much work for someone to deliver
$50 of food vs $25, so I generally don't make large orders on DoorDash.

~~~
pavanred
I agree taxes are not hidden charges, but it does sound a little deceitful to
me that doordash bundles taxes with their service fee as one line item on
their checkout page.

And, I don't share the same sympathy for the doordash drivers. I was already
charged a delivery fee and a service fee separately, why is it still my
responsibility to make sure the drivers get paid enough and not doordash's.
Besides, the idea of tip for me is that I pay extra if I am happy with the
service, and now I am expected to mindlessly pre-pay a tip before knowing if
the service is going to be good or not. A reason why I prefer ubereatz, its a
rating system but after the delivery.

~~~
dahdum
The crazy thing is with all those fees, service charges, and markups they are
still just barely contribution margin profitable.

Amazon Prime Now / Restaurants guarantees a delivery driver a certain wage
(say $XX/hr, depends on market). However what that really means is while your
tip is _technically_ going to the driver, until they exceed $XX/hr, you're
just saving Amazon from having to pay them instead. I still tip, but my
generosity went down when I realized that most of my tip is really just a
handout to Amazon.

~~~
lazerpants
I think NY state forced them to hand over tips to drivers (at least they did
for GrubHub/Seamless), but I don't know if that has changed in other markets.

------
i0exception
I really hope they use some of this money to better screen dashers and improve
customer support.

We used to order lunch on Doordash once a week till things got so bad that we
decided never to use Doordash again. Orders would regularly have missing or
incorrect items. Some dashers would leave the food in the lobby, text me, and
leave. Delivery was hardly ever on time and there was no way to get in touch
with a human on customer care except through some unlisted numbers. We've
switched to Caviar([https://www.trycaviar.com](https://www.trycaviar.com))
since and have no complaints.

------
simonbw
I'm surprised I've never heard of them before. Are they doing the same thing
as Uber Eats, Postmates, Eat24, GrubHub, Amazon Restaurants, etc? That seems
like a really tough market to succeed in. How is so much money being funneled
into it?

~~~
eridius
DoorDash is literally a Postmates clone.

------
tootie
Food delivery has officially become a very frothy market. Is GrubHub/Seamless
actually vulnerable? They seemed to be the 800 lb gorilla of the market. And
based on my observation, the competition seems to be private labelled delivery
service.

~~~
bfrog
They're all pretty much mediocre. GrubHub especially I avoid after having
several orders simply disappear without warning. Waiting an hour only to check
by calling up the place and finding out they never got the order is
frustrating. Twice and I was done, I just call now for delivery.

------
natethinks
I don't understand the appeal of DoorDash, I had an ad pop up for free
delivery for a first time user and I happened to not have my car that day so I
thought I would give it a go. "free" delivery only got rid of 1 of 3 service
charges which had me spending $6 on top of a $9 dollar meal (not including
tip). And that was "free" delivery for the first time I ever used the service.

------
Pigo
This is purely anecdotal, but I've never had a good experience with this
service. But I have some friends that are so lazy they don't care if it takes
2 hours for the food to arrive, so that works in their favor.

------
anonytrary
DoorDash seems to cater to the 1%. Even when we had free lunches at work
($10^7 funding), we avoided using DoorDash. For two people, we would end up
paying the equivalent cost of three people.

I enjoyed DoorDash's interface and checkout experience, but +50% is a high
premium for delivery, especially if you're close to food. If I live in the
middle of a city and I'm only getting food for a few people, I usually just
walk. I wonder if DoorDash would be more useful for very large parties (N >
10).

------
nextstepguy
I swore not to use doordash anymore after a few bad experiences even if after
placing a complain for each occurence I got $10 off the next order (resetting
the fee and the tip.) Beside some of their fees are high. Mind you, I would
still use them if the service was great. From incomplete orders to bad CS to
cold food on arrival to even missing the basics of delivering location, I
can't believe this is getting popular.

------
cocktailpeanuts
This is a business that should be run by a company that can afford to lose
money while subsidizing it by connecting the userbase to their other
businesses, for example Amazon.

Basically they're sandwiched between both the vendors and the users who both
want cheap price--users want cheap delivery, vendors don't want to pay a lot
for delivery service.

Just look at the dilution based on this single raise, I'm guessing the
founders are so diluted out at this point that there's not enough motivation
to go on further unless there's a black swan type success to their business.
I'm guessing the only reason they're raising this much is so they can work the
same strategy of growing userbase with no viable plan and then selling to a
larger company like Amazon or Google, or try to merge with companies like
GrubHub.

Personally, I've only used doordash for their "free delivery" options, but
stopped using them when I realized their "free" is not actually free, and they
have hidden their cost into other parts of the price, which actually makes it
much more expensive, not to mention it's unethical.

------
prepend
I had bad experiences with doordash. I ordered a pizza. It showed up 40
minutes after the estimate. It was cold. It was all messed up. Driver
apologized and said she dropped it and took off.

Being an Uber eats user I wasn’t worried as I went into the app and said what
happened. App did nothing immediately. In a few minutes got a template email
saying “sorry, we’ll give you your $5.99 delivery fee back” Didn’t happen.
Emailed support saying what happened, no response.

Uber Eats is on top of food orders. Any errors result in new deliveries to
replace or refunds on food.

I assume that a company with bad customer service agorithms has other
problems. I tried again and it was ok. But don’t use them as alternatives are
way better.

------
foepys
I deeply despite those third-party food delivery services. The people
delivering the food are often working for less than minimum wage and are
mostly using their private equipment (smartphone, bicycle, car) for
delivering.

One might argue that people then should not work for those services but on the
contrary why don't the services pay a fair wage and provide vehicles and
devices necessary for the job? If the price gets too high, then maybe there is
no market.

All of this ignoring that SV venture capital is subsidizing the erosion of
other comparable jobs at small businesses that try to pay their delivery
drivers a fair wage.

~~~
gehwartzen
I could probably develop a network of 5 driving-age teens in my neighborhood,
call in an order at a restaurant, and then send out a "who wants to make 10$
cash picking this up for me?" group SMS. I'm sure the service would be better
and I'm sure they would make more money than through DoorDash.

------
econner
Wow, seems like everyone is taking 40% dilution on this deal and SoftBank
probably has huge liquidity preference. I believe DoorDash's last round was
also done with a multiplier on the liquidity preference. Crazy.

------
traviswingo
Unfortunately I no longer use DoorDash. The concept was amazing, but I’ve had
one too many questionable people deliver my food that the last time it
happened I didn’t even eat it.

I’m a huge fan of the “1 million jobs” type of companies like this, but
there’s a level of trust that comes with allowing someone to handle the food
you eat. I’m not even a judgemental individual, and I hate people that are,
but I shouldn’t feel uncomfortable about my food delivery. I now go get my own
food. Oh well.

~~~
ggg9990
My mom never used to let us order pizza delivery because she didn’t want a
pizza delivery guy to know who we were and where we lived. Remember going out
to the pizza shop in 5 degree F weather with my dad.

~~~
dexterdog
I'm well into my 40s with numerous kids and I still drive to the pizza place
to pickup whenever I order. I never understood delivery unless there is some
urgent need to stay home.

~~~
tudelo
It's Sunday. You're extremely hungover. Chinese food sounds great. What's not
to understand about ordering delivery? Ultimately it boils down to
convenience.

------
partycoder
Doordash has frequent system-wide outages.

[https://twitter.com/DoorDash_Help](https://twitter.com/DoorDash_Help)

During their outages your items will never arrive, your order may still appear
as active and customer support may handle your case in 48 hours. Plus, their
outage messages are misleading.

On the other hand, Amazon almost never has outages, you can live chat with
support at any moment, and if they're slightly late they will even give you
money.

~~~
glitch003
>On the other hand, Amazon

Amazon does restaurant delivery?

~~~
partycoder
as a part of Amazon prime now

------
fapjacks
DoorDash in particular is exorbitantly expensive. Absolutely terrible markup
and horrible experiences ordering through them. They're on my list of personal
trade embargoed companies along with Dell and Domino's. Hmm. All three are "D"
companies (and also their names start with the letter "D").

------
cjcfjrf
Why would you sell a third of your company? Do you need 0.5b to run ops? Who
would invest so much when the "value" is 1.5b? Unless they already think it's
worth multiple times more? But then the opposite party doesn't think so? Can
somebody explain please?

------
dawnerd
Since moving just outside of Portland, none of these delivery companies cover
my area with the exception of uber eats. It's insane considering how many
large corps are all around (intel, nike, etc).

Edit: Apparently grubhub decided my address was in their area, nice!

~~~
ghaff
The availability of most of these delivery services seems to be very dependent
on density and demographics. You get out of the core metro areas of relatively
large cities and the options for these types of services tends to decrease
dramatically.

~~~
dawnerd
I think in my case its more of my address being brand new. Hell, the zipcode
fails validation on a lot of sites even since they just recently split it
apart.

------
martin_bech
If you are "Per order profitable", why do you need 535M USD? I dont get valley
valuations/Metrics..

~~~
thesimon
Because you need money to cover fixed costs.

~~~
martin_bech
But if you need 535M USD to effectively deliver pizzas... I think you are
doing it wrong. Specially if you make money on every order.

------
mesozoic
Just put $1 billion into a bank account for your lemonade stand and claim you
started the newest Unicorn! ...

