
DoorDash Raises $127M in ‘Down’ Round - mathattack
http://blogs.wsj.com/digits/2016/03/22/doordash-raises-127-million-in-down-round/
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stephenitis
The most important piece of this article.

>DoorDash isn’t profitable and has struggled to keep some of its delivery
staff, known as “dashers,” from remaining with the company for longer than a
few months, raising costs to attract and train employees, according to people
familiar with the matter.

>A DoorDash spokesman said the company is “cash flow positive” in its
“earliest markets,” including applicable marketing and overhead expenses. He
declined to name those markets. Overall the company operates in 22 urban areas
in the U.S. and Canada, according to its website.

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semil
Earliest markets are Palo Alto and Stanford.

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danieltillett
It is good then that these markets are typical of the rest of the USA.

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hobo_mark
I was visiting Palo Alto one afternoon last year and as we were grabbing
dinner one thing I noticed (from the tshirts) were all the "dashers" waiting
for take away just like we were.

Considering all the time we had to wait I could not help but think that,
surely, it would have been more efficient to schedule other deliveries in the
mean time and just come pick up the food when it was ready? As a logistics
company you want to minimize the time your couriers sit around...

The kitchen already knows roughly how long it's going to take anyway, and with
enough data computers could do that automatically too, I guess all delivery
services work the same but I never use them, do other incumbents do these
things more efficiently nowadays?

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potatolicious
The trick with DoorDash is that many (most?) of the restaurants in the system
aren't voluntarily participating with DoorDash.

A smart system that summoned delivery people when the food was ready/close to
ready would require integration on the restaurant's part (see:
Seamless/GrubHub/Caviar), but DoorDash seems to be going in a different
direction.

This has been a point of controversy - DoorDash offers delivery for
restaurants that do not participate in delivery by simply sending someone
there, ordering, and bringing you the food. This is terrible for the delivery
people obviously, and DoorDash has also been caught marking up the prices on
these menu items without informing the customer.

Overall, highly doubtful about the sustainability of this business model. Or
the ethics.

Side note: Postmates also does similar - some of the restaurants in their
system are not official partners, and so the delivery person gets to make the
order and wait around. This is a large part of why I stopped using them -
they're getting paid peanuts as it is and now they're sitting on their ass for
20+ minutes to bring someone $20 of food and foregoing much needed tips.

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clairity
sure, there is plenty to be skeptical about with doordash's business model but
they just convinced some of the best-funded venture funds in the valley to
invest in doordash. rather than simply tearing them down, it would be more fun
to try to figure out how and what he said in those closed-door meetings,
like...

    
    
      * who could be a likely suitor waiting in the wings to snatch them up?
      * what do the unit economics look like in their best and worst markets?
      * have they actually found a novel solution to the massive logistics problem they face with individual deliveries?
      * do they have a viable plan to pivot/expand to non-food deliveries?
      * are they getting a big contract from a giant corporation to be their last-mile delivery service?
      * is there a strategic partnership that changes their business for the better?
    

there is certainly something(s) that got previous and new investors excited
about doordash's prospects. what is it? what could it be? the suspense is
killing me! =D

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throwaway_exer
I don't see how delivering somebody else's food can be profitable, or even how
they can guarantee that the food is edible as a middleman.

Maybe somebody can explain what the business model is here.

It sounds like the founders get to play big shot for a couple years while they
bleed their VCs.

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ryporter
It's a straightforward and logical business model. Restaurants want a way to
deliver food to their customers. They provide this service, and are
compensated for it.

They ensure that the food is edible by working with restaurants that customers
already dine-in at. Sure, they can't guarantee that the food is edible, but no
delivery service can guarantee anything about the product that they are
delivering. They have to rely on the reputation of the sender.

The problem is instead that this is too common of a business model. There
doesn't appear to be anything particularly innovative about what DoorDash is
doing, and they don't appear to be executing very well. It's not a
fundamentally flawed business; it's just a uninspiring one that was probably
overvalued.

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vegabook
Deliveroo, Hungry House, Deliverance, Just Eat. That's the (well entrenched)
competitive landscape in London alone. And I doubt those are sucking in
numbers like 127m of funding (at god knows what valuation). These guys at
doordash must have one helluva good pitch.

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laurentb
Deliveroo raised $100M (~£66M) back in November '15, that's $27m short but
still. source: [http://uk.businessinsider.com/london-startup-deliveroo-
has-r...](http://uk.businessinsider.com/london-startup-deliveroo-has-
raised-100-million-for-its-restaurant-delivery-service-2015-11)

~~~
vegabook
Fair enough, at valuation of more than 1billion GBP so double that of
doordash.

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swingbridge
The business model is broken. Surprised they managed to raise more funds at
all.

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danieltillett
How can I invest in this company as a common stock holder?

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nxzero
Companies like SharesPost and EquityZen allow accredited investors to invest
in some venture-backed companies.

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danieltillett
I think I need to make my snark a little more obvious.

I am sure that there are some common stock holders in DoorDash looking to
offload their stock, but I can’t think of a more certain way to lose all your
money than to invest in the common stock of a startup who has just taken a
down round.

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arunaugustine
Sometimes, the devaluation might be just due to a wider market correction and
not specific to the company itself (which in this case appears not to be if
its having the problems described). But if that's the case, then it would be
an opportunity to invest, wouldn't it be? That is if the fundamentals of the
business are on a strong base?

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danieltillett
It might be if the earlier investors didn't have preference shares. Typically
once you have a down round the common stock holders are wiped out if there
have been a significant numbers of preference share issued.

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jacquesm
> Typically once you have a down round the common stock holders are wiped out
> if there have been a significant numbers of preference share issued.

That all depends on several unknowns at that time. It definitely increases the
chances of the holders of common stock to be left without compensation if and
when the company sells or there is some other 'liquidity event', but it
definitely is not a given.

A down round is simply the issuing of new shares at a different valuation than
the previous shares. There could very well be a round at a higher valuation
later on, the difference between the previous share issue and the current one
could be small, the number of shares issued could be small to the number of
shares already outstanding and so on.

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danieltillett
Jacques all of these are true, but more typically once you go through a
significant down round with a lot of new capital raised the common stock
holder is wiped out. The holders of preference shares may be smart about it
and make sure the current employees are protected, but you don't want to be a
normal common stock holder.

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gjvc
This is an excellent example of throwing good money after bad.

