DoorDash's Dominance: The Tony Xu Story
How He Created a Multi-Billion Dollar Market Leader
Hey there my friend, Justin here, and welcome to Just Go Grind, a newsletter for the ambitious. Thank you to the 132 of you who joined since the last edition, if you aren't subscribed, and want to join 1,431 other subscribers, please subscribe below:
Together with Athyna
Hire your next top performer in 5 days or less with Athyna
Discover a new way of scaling your team. Athyna bridges the gap between extraordinary talent and exciting opportunities, giving your business access to a pool of world-class professionals. Build your dream team with ease, and forget about the hassle and complexities of traditional global hiring.
Athyna handpicks from 70,000+ talents to meet your needs.
Save up to 67% compared to local hiring costs.
No search fees. No activation fees.
Pay nothing until you find the perfect match.
Ready to find your dream team (for way less time and money)?
Want to showcase your company to 23,000+ founders, operators, and investors? Get started here.
DoorDash. It’s a company we’ve all heard of, an industry leader in food delivery with a 65% market share, and is led by an impressive CEO, Tony Xu.
The company did $53.4B in gross order value in 2022, growing 27% year-over-year. This comes a decade after its founding and, to get to this point, Tony and his team have had to overcome a number of complex challenges.
Tony, who co-founded the company in 2013 with Stanley Tang, Andy Fang, and Evan Moore, has been described by a number of investors as being one of the most impressive founders they’ve ever worked with.
He not only has the ability to set the big vision, recruit, and lead an amazing team, but he understands the intricacies of his business as well:
I've never met a founder who has a deeper analytical knowledge of his business than Tony Xu. He not only has a complete model of Doordash in his head, but apparently also a complete model of everything involving delivery, and everything involving food.
— Paul Graham (@paulg)
Aug 17, 2022
After spending 20+ hours researching Tony, including looking back at all 2,406 of his tweets, it’s also clear just how well-read he is and how he continually puts in the work to improve.
There’s a lot to learn from Tony, his journey, and his approach to leading one of the world’s leading companies.
Let’s get to it.
Tony was born in Nanjing, China, and moved to the United States with his parents when he was 5.
Tony described this in an interview for Stanford University:
His mom was actually a doctor in China but no institution in the U.S. recognized her credentials so she had to give them up.
I have to say, immigrant parents are the real MVPs.
That unstructured time Tony had as a kid allowed him to try different things and helped him develop the power of independent thinking.
One of the things he did with that time as a kid was to start a lawn mowing business so he could save up enough money to buy a Nintendo.
He got an old mower and went door to door asking people if he could cut their lawns.
When he was 15, Tony and his family moved to San Jose.
With the difference in school systems moving from Illinois to the bay area, he was two years behind his classmates, but he knew he could catch up.
He actually told his teachers freshman year, even though he was behind his classmates, that he was going to graduate as valedictorian of his class.
After working hard to first catch up to everyone and then pass them, he did it. He actually became valedictorian of his high school class.
That determination would pay off and be the foundation of his later success.
After finishing high school he’d go on to attend the University of California, Berkeley, and graduate with honors in 2007.
Next, he spent two years working at McKinsey & Company as well as two years at eBay and PayPal before going back to school to get his MBA from the Stanford Graduate School of Business, where he’d meet his future co-founders.
Palo Alto Delivery
For context, at the time Tony is starting at the Stanford Graduate School of Business, Facebook is just launching the timeline, a major redesign for the platform.
Why is that relevant? It’s not really, but I’m nostalgic, found that by looking back at all of Tony’s old tweets, and thought I’d let you know. Onward.
In the summer between his first and second year of business school, Tony interned at Square, which at the time had something like 30 employees. Jack Dorsey, who founded Square, and Keith Rabois, who was the COO at the time, tried to convince Tony to drop out of Stanford and work at Square full-time.
Tony chose to stay at Stanford.
I will definitely miss this. Last day at @Square. #backtoschoolinstagr.am/p/PAtk-5S9-k/
— Tony Xu (@t_xu)
Aug 31, 2012
Can you imagine how different his life and this story might have been had he decided to leave?
Crazy how important decisions end up being in hindsight.
At GSB, Tony, his fellow business school classmate, Evan Moore, and Stanford undergrads Andy Fang and Stanley Tang, team up through the Stanford Startup Garage class.
They start talking to businesses in the bay area to find problems they can potentially solve for them.
Through this discovery process, they end up meeting the owner of a local macaroon store in Palo Alto. She’s turning down 10-15 orders per week because she has no drivers to fulfill them.
Tony and his co-founders decide this is a problem they’d like to tackle.
He would end up driving for Dominoes and FedEx for a few weeks during business school to learn more about how delivery works.
In January 2013, their company is called Palo Alto Delivery, and while they want to eventually build last-mile delivery, they realize that’s too big of an endeavor to start with.
To start finding solutions to their delivery problem, they asked a few questions to get to the core of the problem:
And this questioning led them to the lowest level of detail that Tony often talks about:
But how does Tony impart this thinking across DoorDash?
He offered up this explanation later on in 2021:
But that would come much later.
At this point in their journey, they start testing Palo Alto Delivery on Stanford’s campus.
They put together 8 PDF menus from local restaurants on a website and connect a Google voice number so their cell phones will ring when someone wants to place an order.
They sent out an email to some Stanford distribution lists, made their website live, and then something wild happened.
They got their first order within 45 minutes of the website going live.
Tony and his co-founders would give an estimate to the customer of the time it’d take, call the restaurant on the way, and make the deliveries themselves.
When they arrived, they’d use a Square card reader to take payment.
They actually videotaped (with permission) their first-ever order. It pains me that I couldn’t find the video.
Remember, they’re still at Stanford at this time and making all the deliveries themselves, so they end up being available for deliveries a short time in the afternoon and for a few hours in the evening.
They’re getting 5-10 orders per day, half from their friends, but the critical part was that they were validating their concept.
The interesting piece from this time was that they were using the Find My Friends app to track deliveries in real time.
Tony reflected on those early days:
And those early days were also filled with plenty of struggles:
Those early struggles, of course, ended up being worth it.
They also helped get Tony and his co-founders into Y Combinator.
Y Combinator & Getting Off the Ground
First day. (@ Y Combinator w/ @stanleytang@evancharles) 4sq.com/16oGvpw
— Tony Xu (@t_xu)
May 1, 2013
While going through YC in the summer of 2013, the DoorDash name is born.
They were looking for two-syllable, easy-to-spell names that had the domains available as well.
How’d they find them?
By running a script to crawl third-party services that listed domains. DoorDash was available, they liked it, and here we are:
Very excited to launch our new redesign doordash.com (formerly Palo Alto Delivery). Order food delivery today!
— DoorDash (@DoorDash)
Jun 21, 2013
By the time Tony is giving his YC Demo Day pitch, DoorDash is averaging a 44-minute delivery time compared to the 68-minute time of their peers, they have 31% week-over-week order growth and $1.5M in annualized sales from restaurants.
While competitors like GrubHub and Seamless are basically only lead gen for restaurants and services like Postmates and Task Rabbit are operating as couriers, DoorDash is doing something different.
Tony and his team are not only aggregating menus, but they’re also providing the delivery drivers and actually partnering with the restaurants themselves.
And how were they getting their early customers?
They would print out flyers and stuff them in takeout bags at restaurants. Tony talks about printing 100,000 flyers and basically breaking all the color printers on the Stanford campus.
I had to laugh at the one. Startup life - do what it takes to get your company off the ground.
On the restaurant side of things, Tony and his co-founders would go door to door to signup the first 50 restaurants before eventually calling more of them to continue to grow their selection.
By September 2013, after completing YC, they launch their app and announce a $2.4M seed round led by Keith Rabois at Khosla Ventures and Saar Gur at Charles River Ventures. The round also included David Lee of SV Angel, Paul Buchheit of YC, Andy Rachleff the co-founder of Benchmark, Russell Siegelman, and Pejman Mar Ventures (Which would become Pear VC).
Alfred Lin from Sequoia passed on DoorDash at this point but would come back in a big way.
At the time, DoorDash is delivering food from 70 restaurants.
For almost the entire first year of DoorDash, Tony and his co-founders did all the deliveries, something they still did as of 2021, proving its importance:
Of course, they did end up hiring more people and building out their network of drivers through their app.
Tony, reflecting on early hiring, preferred candidates with a bias for action and who weren’t scared of different types of problems.
And here’s how they’d test candidates in the early days:
As DoorDash grew, investors would later say Tony’s superpower is recruiting.
In fact, this has been core to Tony’s beliefs for more than a decade, even before he started DoorDash:
Can't ever emphasize recruiting or culture enough. techcrunch.com/2012/07/08/rec… via @TechCrunch
— Tony Xu (@t_xu)
Jul 9, 2012
As DoorDash would continue to grow, Tony took this approach when hiring executives:
But let’s not get too far ahead of ourselves.
DoorDash launched in Palo Alto and by January 2014, their second market is East San Jose, as co-founder Evan Moore would tweet:
DoorDash is in San Jose! We're out here making friends all day.
— Evan Moore (@evancharles)
Jan 15, 2014
They gained confidence with each successive city that they launched in and seeing customers from all backgrounds engage the same way as the initial market did was a good sign.
By March 2014, the team is 12 and they were working out of a house converted into an office.
Photo Credit: Silicon Valley Business Journal
DoorDash announced its $17.3M Series A round of funding on May 22, 2014. This round was led by Sequoia Capital, with Alfred Lin joining their board. Khosla Ventures, Charles River Ventures, and Pejman Mar Ventures also participated.
DoorDash at this point is valued at $73.5M and 1 in 6 households in the peninsula of the bay area are using their service.
Why is DoorDash so popular at this time?
Here’s how they laid it out in a company blog post:
This same year, they launch a new logo and, in August, Uber Eats is started by their competitor.
Just worth noting, you should check out how they solve the complicated dispatch problem.
This is such a difficult business operationally and goes to show how amazing of a team Tony and his co-founders put in place to pull this off.
By 2015, they expand internationally and get another major investor on board.
In March 2015, less than a year after raising their Series A, DoorDash announces a $40M Series B led by Kleiner Perkins with legendary investor John Doerr joining their board.
They’re now valued at $600M and operating in 8 markets.
He’s right, they’re going gangbusters and not slowing down at all.
This year, they also launch in Toronto, Canada and on June 21 they turn two years old:
By July, they have their first national partnership with Taco Bell.
As they’re expanding into new markets, Tony mentioned this about hiring former athletes early on:
Taking it a step further, here’s what Tony had to say about approaching new cities:
At this point, they’re humming along, growing like crazy.
But it’s never a smooth climb to the top.
In November, In-N-Out files a lawsuit against DoorDash for delivering without their permission. They’re forced to take them off of their system.
And, while DoorDash adds 19 markets by the end of 2015, they struggle to raise their next round.
At the time Tony is ready to raise DoorDash’s Series C, the tech bubble is bursting and companies are failing all around him.
While, in 2016, Tony does raise a $127M Series C led by Sequoia with participation from Khosla Ventures, the Y Combinator Continuity Fund, and Wellcome Trust, it’s at a $700M valuation.
In other words, it’s a down round, with their price per share decreasing from their Series B in 2015.
But Tony isn’t worried:
They finish 2016 with 28 markets, only adding 6 more compared with the 19 they added the year before, but, as Tony mentioned, they’re still in an okay place.
However, they’re in a capital-intensive business, and they’re not out of the woods yet.
In 2017, they almost run out of cash and end up raising a $60M bridge round of financing.
By June 2017, they’re in 500 cities, have 59,000 restaurants listed, 100,000 Dashers across the US and Canada, and a team of 400 people.
They survive 2017 and the next year would be an absolute game-changer.
Prior to 2018, Tony had raised a couple hundred million dollars for DoorDash.
In March 2018, he made his biggest announcement yet, with SoftBank committing to lead a $535M Series D round for DoorDash, valuing the company at $1.4B.
Jeffrey Housenbold from Softbank, who joined DoorDash’s board, had this to say about Tony and DoorDash at the time:
This capital infusion ends up being rocket fuel for DoorDash.
In 2018, they’d 5x the number of markets they’re in, totaling 3,000 towns and cities by the end of the year.
But here’s the craziest part - they raise $250M more in August 2018, just 5 months after raising $535M and bumping their valuation to $4B, adding Coatue and DST as investors.
This same year, they pass Uber Eats for second in U.S. food delivery sales and they also launch the DashPass subscription.
The funding also continues to flow, with DoorDash raising $400M valuing the company at $7.1B in February and then $600M in May at a $12.6B valuation.
All in 2019!
By March 2019, in between those funding rounds, they pass GrubHub to take the market share crown.
How did they do it?
Tony offered a few key lessons on competing with incumbents:
This is also the year they were under pressure for questionable tipping practices, which they ultimately changed. I don’t want to belabor the point, but it had to be mentioned.
Controversies aside, they’d end the year on an upswing, acquiring Caviar from Square for $410M.
Little did Tony know, the next year was going to set them up for the biggest moment in the company’s history.
During the COVID-19 pandemic, DoorDash is the fastest-growing meal delivery service.
They’re already a behemoth, leading the industry and coming off of $8B in gross order value in 2019.
In March 2020 alone they grow 20%.
But they also do their part to help struggling restaurants at this time:
In June 2020, Tony raises another round of capital, this time $400M, valuing DoorDash at around $16B.
They also expand their service offerings, adding grocery delivery.
Reflecting on that period of hyper-growth and lessons up until this point, Tony had some gems to share:
IPO & Beyond
On December 9, 2020, DoorDash goes public, raising about $3.37B in their IPO.
Shortly after this time, Tony mentions in an interview that he and his wife have tried delivery from 1,100 different places in the bay area so far.
Kinda makes me want to expand from the three places I order from over and over again.
Amazingly, according to multiple reports, it was only months before, in early 2020, when DoorDash was already valued at billions of dollars, Tony was still driving his 2001 Honda Accord, the same one he used to make deliveries in the early days of the company’s history.
In April 2021, DoorDash is named one of TIME’s most influential companies:
In 2020, as restaurants suspended indoor dining, customers went online to order takeout. DoorDash—the U.S.’s most popular meal-delivery app—saw sales surge, and a December IPO valued the company at over $70 billion #TIME100Companiesti.me/3nt9gNE
— TIME (@TIME)
Apr 27, 2021
By August, they hit an incredible milestone of 2 billion orders, just nine months after achieving the 1 billion order mark.
DoorDash would continue its expansion into new cities and new countries, making its biggest acquisition to date in November 2021, paying $8.1B to acquire Wolt, an on-demand delivery company based in Helsinki.
Fast forward to today and DoorDash is the clear winner in the market:
Source: Bloomberg (SecondMeasure.com)
Tony is still leading the company, they continue to expand, and they’re powered by their mission to grow and empower local economies.
What a journey for Tony and DoorDash over the last decade!
In each edition of the Just Go Grind newsletter, I like to include a few more quotes at the end from my research into the founder who is featured, sharing their wisdom.
Tony’s 6 attributes of excellence he looks for when hiring:
People who love operating at the lowest level of detail
People who have a very strong bias for action
People who are able to hold two opposing ideas at the same time
People who are strong recruiters
People who care about getting 1% better every day
People who inspire followership
On building a successful business:
His personal decision-making framework:
On decision-making at DoorDash:
On discovering superpowers in colleagues:
What did you think of today's newsletter?
Thanks for reading! If you found this valuable, please consider subscribing and sharing it with a friend 😊
And if you enjoyed this profile, take a look at the first six:
Finally, if you’re interested in sponsoring this newsletter, and getting your product or service in front of thousands of founders, you can learn more here.