[Music] besides just the constant Financial stress we had people lose confidence in the company right even internally about maybe a quarter or 20 to 25% of the company voluntarily left over those 3 years we were presented with an opportunity to take a large War chest I thought look it's not a guarantee but we get to put aside any concerns of ever having to raise Capital again and we get to just step on the gas and take what we already know is the best product and just brand everywhere welcome to Crucible moments a podcast about the
critical Crossroads and inflection points that shaped some of the world's most remarkable companies I'm your host and the managing partner of sequa Capital rof bua Door Dash is synonymous with delivery but this was far from inevitable founded in 2013 as a category Underdog today door Dash operates in over 30 countries with nearly $10 billion in annual revenue it has transformed into the global leader in on demand delivery expanding to groceries household items pet food and much more in today's episode we'll look at how door Dash broke into the competitive restaurant delivery category with a non-consensus
strategy how they survived 3 years of cash scarcity that nearly put them out of business and how difficult decisions made during the pandemic helped propel them to category leadership on a global scale it was the fall of 2012 and actually the premise that got all of us together was really how do we help small businesses my name is Tony Shu I'm the founder and CEO of door Das door das's Journey began at Stanford University Founders Tony Shu Stanley Tang Andy Fang and Evan Moore met in an entrepreneurship class at the Stanford Graduate School business called
startup garage the forsome decided to partner on a class project all of us have our own stories and terms of why we have an affinity towards small businesses mine happens to be personal in that I have a connection to a small business that my mom ran I grew up in Illinois and one of the ways in which I hung out with Mom uh as a child was actually working alongside her inside of a Chinese restaurant where she worked in champagne and so I've always had an affinity towards you know how do you help these underdogs
who you know don't really view their businesses as a profession they view it really as a lifestyle and how do you help them be successful the idea for door Dash actually didn't come right away I mean we spoke with 3 or 400 small businesses across pretty much every category retail restaurants services and you know the main question we asked them was you know tell us about all of the activities that you do every day I think that it was a lot easier to see a specific problem in plain sight than to you know try our
best interpret a generic answer of what might be a challenge for them and so one of the small business owners her name was Khloe she ran a macaroon store uh in paloalto she was a oneperson shop she showed us a booklet of delivery orders that she had refused small businesses don't have the luxury of Turning Away business I would say most people don't have the luxury of tur Away business but for small businesses who on average have 17 18 days of cash you really have no luxury to be able to turn away business and so
Khloe was turning away you know dozens of orders per week which was very strange and so when we talked to her about it she let us know that they all happened to be delivery orders and as a onep person operation there was no way that she could fulfill those orders and it just occurred to us that it was 2012 2013 and it's surprising that she would have to do this on her own you know delivery Is Not A New Concept it's probably been around for hundreds of years yet in 2012 2013 the vast majority of
restaurants and certainly the vast majority of retailers did not offer delivery prior to Door Dash there were restaurants that delivered on their own and you would get menus from them and they would be you know placed in the kitchen or you would put them on a magnet on your fridge and you would called all the different restaurants individually to order food and that was generally the way you order delivery I'm Alfred Lynn I am a partner at Sequoia Capital there was a company called GrubHub and another called seamless and they became an order taking platform
for some of those restaurants and so they took the order on the web and then they routed it to the restaurant the restaurant still fulfilled the order by making the food and then by delivering it while that was a better experience it's just so limited to the restaurants that would be willing to do their own delivery and door Dash recognized that restaurants wanted to offer delivery but they couldn't afford the delivery staff the founders were accepted to y combinator in the summer of 2013 their pitch was food delivery for every restaurant delivered to customers in
under 45 minutes they also had a larger Vision to One Day become the FedEx of local delivering not just food but any item to people's doors but but on demo day when do Dash presented to a room of investors most was skeptical we decided to pass on the seed because we weren't sure whether door Dash would be a mainstream service or whether it was only a service for college students financed by their parents yeah D Das was not the fan favorite at the YC demo day for summer 2013 batch I think there were a lot
of Skeptics around whether or not delivery in of itself would ever be economical or sustainable as an activity and you know let alone a business I think there were a lot of questions about possible competitive Dynamics heading into the future and D Das you know given that the fact that the four Founders were firsttime founders with only 12 weeks of demonstrable traction didn't really have that much to sway investors in an overwhelming way to be a fan favorite and so we were probably bottom half in in the batch I think what was most important for
the four of us at the time and certainly what got us through any initial bouts of rejection was the fact that we really enjoyed working together and we felt first and foremost we owed it to ourselves to answer the question you know is this worth our time is this a product that customers would be willing to pay for would restaurant tours be willing to partner with us and pay us a commission for that partnership and incremental business and finally you know the Dashers the drivers on our Network would we be able to partner with them
and actually afford payment that they would find attractive and so those were the questions that really we were pretty maniacally focused on answering despite initial rejection from investors the founders refused to give up our first crisis as a company came in September of 2013 it was the first home football game at Stanford and we had uh very little money I mean days maybe a couple weeks of Runway left in terms of our cash balance and the football game had the effect of just giving door Das a lot of orders now a lot at the time
was like 100 orders or something like that and it was certainly a volume that we were not prepared to handle and I remember pretty much anything that could have gone wrong went wrong every single order was late probably by an average of at least 45 minutes some orders were as late as over an hour it was one of the worst days of of certainly the first 100 days of of the company's life at the time everyone at the company were the only ones doing deliveries and so we fulfilled all the orders and it was late
into the evening and the founders came together and said look if we wanted to do what's right by customers the refund would cost something north of 40% of our bank account and when you have days of Runway that decision seems a bit more consequential it took us maybe 15 seconds to hit the refund button and on top of that we actually stayed up all night and baked cookies that we all delivered before 5:00 a.m. before the customers who uh we wronged would wake up and and and hopefully um make right by them to us it
was we had a vision of what high standards were we'd rather die trying to achieve Excellence than live to be mediocre I'm very proud that you know that story really became became the centerpiece of what inspired the company value of being customer obsessed not competitor focused there are many things that stood out about Tony and Stanley and Andy they they were outliers they were a group of people that had very sharp insights into the the restaurant industry and in particular Tony had an incredible amount of founder market fit for this business yeah we we passed
on the seed but I just there was just a level of effervescence about Tony that I really um liked and so I continue to follow him for a period of time uh and we met with them uh multiple times but the one meeting that I remember most was sitting down with them at dinner at a Chinese restaurant I I believe it was Chef CH in palto he you know in this dinner conversation I sort of was able to see this he thought about things that are very h strategic level and then would break down a
an idea or a problem down to smaller and smaller and smaller problems or smaller and smaller ideas that you can go execute on while he didn't use the word at the dinner operating at the lowest level of detail that's what he was doing when he and I were talking at that at that dinner and that was just very impressive to me that he could take a highlevel idea or problem and break it all the way down to its lowest level s and just iterate that again and again and again right after that dinner that I
talked about I I immediately brought them in they had also been meeting with other uh firms and their series a was just easier to raise partly because the business was growing and it was it was growing nicely I'm not sure it was easy for me to convince my partners but I think they got tired of me speaking about how I grew up in New York City and in New York City restaurants delivered grocery stores delivered cleaners delivered and why was the rest of the country so backwards that a service like door Das should exist for
the rest of the country I think I just wore my partners down in May 2014 sequa LED door das's series a financing you know for the four of us when we were starting door Dash we always had the same vision which was to build this last mile FedEx or the FedEx of locals is what I believe I pitched over 10 years ago at this point and while that Vision has always remained the same it wasn't obvious exactly how we'd get there food delivery is a notoriously difficult business on top of providing an experience where food
arrives on time and at the right temperature margins are Raaz thin for a food delivery service to succeed it needs enormous order volume because profitability requires such scale the category can only sustain a few winners door Dash faced an early Crucible moment how to break into the delivery category and differentiate itself from competitors which by this point included Postmates caviar and more Tony and his co-founders needed to develop a strategy for quickly gaining market share and finding product Market fit for companies just getting started how you set them up does matter if you get a
right doubling down can carry you really really far and if you get a wrong it can be really painful and take a really long time to fix and in the earliest days we were pretty clear eyed in the sense that the most important thing was to find product Market fit and from a business perspective you know in terms of making deliveries sustainable and economic you need high density to get high density you need to go to a place like New York City but this missed in my opinion completely the perspective from the customer you know
in New York City well we can just walk down the stairs or take the elevator down and get whatever we wanted within minutes however that's not true anywhere outside of the city center and so to me if there were ever a place to create a company from scratch or create a category from scratch it would be outside of the city centers I was initially somewhat skeptical about the suburb strategy this was not obvious everyone else um focused on large cities believing if you won the cities you could have a decent business is look I mean
a lot of times conventional wisdom is called conventional wisdom because it's correct and we had studied actually the case studies of many companies that had come before us you know web van Cosmo lots of great companies who tried really hard to make similar ideas work in a previous era and it is interesting virtually all of them started in City centers and you know that made sense and in terms of where deliveries were happening kind of naturally it happened in City centers and so the idea to go outside of the city center we recognized was not
the most popular idea yet from what we had heard from customers in a place like pal Alto where we started the company or San Jose where you'd have to drive to pretty much get anything that person would tell us over and again how much of a timesaver some would even use the word Lifesaver we were it just kept on repeating itself as the number one thing to focus on they sort of walk me through their logic everybody was going into the cities and every order was not profitable because there is so much competition in the
cities and this Insight that it was less competitive in the suburbs and we can make more money in the suburbs it's more valuable for your food to be delivered to you because it's not down the street was in itself compelling he like yeah that's right I have to actually get out of my house get in the car drive a fair distance go pick up the food and bring it back so that Insight was Point number one from a consumer experience it's actually more valuable for a consumer in the suburbs to have their food delivered to
them then the second Insight that Tony had which is in almost all small towns there was a main street and I was like really huh and at Stanford off of Stanford there's University Avenue where all the restaurants were in pal Alto there was California Street and so then I sort of went and checked ACH bunch of other places small towns and small cities and it's true that many of the restaurants were Consolidated there were aggregation points there were starting points for for where you can radiate out and that just made the problem of logistics a
bit easier than you would have thought if you thought restaurants were randomly dispersed throughout a small town in a small City so with those facts I was convinced then over the years with the data that they showed on their ability to make the subbs more profitable and faster that just that was very convincing time and time again as the entrepreneur you certainly need conviction but you also need evidence along the way to make sure that you're not delusional I think we always saw the the evidence as we rolled out cities number two 3 four five
Etc you know the same types of behavior and the same types of responses from customers and Merchants and Dashers that gave us the conviction that we can repeat this across all parts of the US in general I would say door Dash has always been very good at making the right but non obvious decisions and there are lots of examples suburbs is one of them they have a three-sided Marketplace consumer Dashers and Merchants and they chose to be Merchant first which was very clarifying and it's very focusing for the company but it's not necessarily what most
companies would pick they would probably have picked consumer first and their focus on Merchants was why they were able to win Merchants over which was then their ability to then provide Mass selection for the customer and so instead of having just a few restaurants in a neighborhood you got all the restaurants in the neighborhood if you have the whole neighborhoods restaurants I'd go to Door Dash the other thing early on that they focused on was this concept of having a accurate delivery time estimate and that seemed like wait why are you focus on that so
much and it turns out that getting that time estimate down is really really important to setting customer expectations the other non-obvious thing is when you get the delivery time accuracy right you set the customers expectations but it also allowed us to batch things and much better ways which then led to a much more efficient Dasher operations on the national chains instead of just winning one or two such as McDonald's or Starbucks they wanted to win over the top 100 National chains that allowed them to stay true to who they are which is about providing selection
and also having all of them kind of pulled in nationally and made for a much more efficient expansion nationally than going City by city by 2015 the company had hit 1 million deliveries and was operating in 22 us markets door Dash was growing quickly but growth necessitated rounds of financing some of which would bring difficult lessons and test the company's resilience the business continued to grow and grow very very quickly before they went out to raise their series B in 2015 we tried to convince Dr Dash to take an offer from Sequoia for 250 to
300 million they didn't really laugh at us they did kind of chuckle at the price and then they would later go on to raise that round at $600 million valuation from cler prickets it just happened to be that the series B was a very competitive round that came inbound to us and we received multiple term sheets in half a week and I think the competitive dynamics that that's tends to be how some of these very high valuations come about not everyone was excited about the lofty valuation is this very concerned when a company's valuation grows
so quickly and while I had belief in the company I was very very concerned that it would be very hard to clear the $600 million valuation at the next round and I absolutely discussed those concerns with Tony and he had a lot of confidence in the business then and he believed that he can grow into that valuation you know it was a time where it seemed like door Dash could do no wrong and everything was moving up and to the right but on the flip side you know momentum can shift really quickly raising its series
a financing had been easy in 2014 as was the series B in 2015 but when Da went out to raise its series C in the first quarter of 2016 the sentiment had changed within a matter of 2 or 3 weeks everything went from oh yeah this will be a fairly straightforward financing to continue the company's expansion plans to the industry is toxic and the start of three very very difficult years for the company we just got no after no after no I think some people called food delivery a cash incinerator we were not yet profitable
I remember investor perception that you know there's no way that you could ever make money doing last mile delivery you can grow very quickly but there's no way you can do it sustainably and and those became very powerful forces when we look at financials we want to see lots of Revenue in black and lots of profits in green on the bottom line door das's financials were not that much revenue in black but a huge amount of losses in red on the bottom companies like door Das are what I call minimum efficient scale businesses where up
to a certain point of scale you're not making money you're investing in the growth of that geography or that product line and if you know how to do that very successfully and build the highest quality product with the highest you know retention and and frequency then you can keep investing and and if you can in parallel improve your unit economics at some point of scale the numbers turn to the other side very quickly but it does take some amount of patience to get there and it does take some amount of capital to get there and
even though we always had the formula investor patience during that 201617 era uh was fairly thin for companies like ours struggling to raise money door Dash faced a cash crunch I always was nervous and and I think a lot of people involved with door Das was very nervous about you know our our our solvency we were always worried about running out of cash and it and it was you know 3 years of of being worried after dozens of rejections Alfred approached the SE team to make the case that we should lead the round the series
C was hard for door Das because they're going to run out of money it was also hard for seoa it was hard for me and didn't really matter how much we love Tony or how much we believe than the market we needed to prove ourselves mathematically uh in spreadsheets that this could be a good business and it was not that easy to do it took three memos to convince the partnership to lead the serc the data that was positive was the customer retention and the cohorts of the retention was really strong you break down the
retention and you could see a set of customers that kept ordering more and more and more they were the power users and the power user group was growing and then the order baskets kept growing for those customers and so maybe the first order wasn't profitable but maybe the second or the third or the fourth and all the orders after that were all profitable it was a very stressful time for me and Michael Aon and Matt Hong who were working on the three memos that got us to a decision to make the investment because we just
didn't take not for an answer it was strained inside partnership conversations because there were Partners who didn't believe we should do this investment we had to slowly answer for all of their questions their questions were all valid and the best part about Sequoia is we make investments as a team but we also always keep an open mind and so when we were able to answer all the questions we were all on board to make the investment and we made the investment as a team and then we said okay it's all hands on deck to make
sure that door Dash becomes a winning company over time door das's serc financing closed in March 2016 securing desperately needed resources but the round came at a cost the headline valuation was slightly above its last round the cap table that we received didn't account for the option pool we had agreed on a headline price then when we did the math for per share price it was a 5% lower per share price than the previous round there was a lot of swirl around the series C being a Down Round even though the headline price is slightly
higher and Tony had to go deep deal with that with the employees and forget about the slight down round of 5% why are we even taking a flat round if the business continues to grow and I often tell Founders your traction does not mean an equivalent Traction in valuation especially since you knew that you needed to grow into a prior valuation that you took at the series B but we got the round together and that seemed like it was a good outcome for the company there was this notion and at the time I forget whoever
said it um but there is a thought that yeah series C would be the last round we would raise and and of course when you go through that kind of an experience why would you want to raise money again but the company did raise money again this time it wasn't just to keep the lights on it was with a specific goal in mind the tide was turning there was always going to be a large amount of competition and one company would be the leader in this business because you need so much scale you need there
to be one to three players at most D Ash was growing and growing fast and so was GrubHub and so was Uber Eats Uber Eats was growing very very quickly and winning against Uber Eats was not easy because Uber had a lot of cash and you were fighting against someone that had a lot more cash than you as much as D Ash raised it was tiny tiny compared to the war chest that Uber had and their ability to direct that at the Uber Eats business so they started thinking about raising a series D to try
to win the market these guys have nerves of Steal I remember my first day we had a dashboard and I logged on and I think we did 19,35 deliveries and coming from Uber I thought that it must be broken like they forgot a zero or two on the dashboard because we were small we were growing really fast uh it was exciting but it was just a different Universe than I had been at before my name is Keith yelle and I am the chief business officer at doores I was working at Uber at the time as
a lawyer and a friend of mine had told me about door Dash and thought it might be a good fit for me both given my experience and because of the culture I'm motivated by wanting to have impact and we were definitely the upand comer GrubHub was maybe eight times our size Uber was well capitalized moving quickly Postmates was about our size maybe a little bigger than us and then caviar was out there so it was hyperco competitive Marketplace so when I joined we had just raised our series C we had adequate Capital but not indefinitely
we went out to raise the series D starting in Q4 of 2016 the business was doing well the cohorts looked good if you roll those forward you definitely see a path to profitability or so I thought but it was a very very difficult fundraise yeah I think the series D in many ways was a continuation of the challenges we experienc in the series C six to nine months we heard more NOS than I can count and then we got a term sheet from SoftBank in mid 17 and that was a very exciting thing it was
a welcome relief to get the term sheet I think it was a pre-money valuation of maybe 800 50 million which was a slight step up from the last round and even though we thought we were worth a little bit more we' kind of learned the lessons from the series B before and a little step up was okay and so that was a happy day to get that in the door but at the same time soft Bank was working on another investment a much larger investment in a different company and so they were somewhat distracted and
eventually we found out that the other company that they're working on on was Uber and there was real concern that SoftBank would not close um until they get clarity on what their investment opportunity was going to be in in Uber they were very clear with us that Uber was their priority and they did not want to close our deal unless and until they had cleared the HSR process with with Uber and that process drag on for many many many months the days we were waiting for the soft Bank funding to come through were probably my
toughest days at the company was there a time I thought the company might not survive absolutely almost every day from late 17 to early 18 it was a painful time I mean it was a constant period of stress of not knowing whether or not we could ever raise money Tony would call me almost every night at about 8:00 and we'd kind of go through the options of what we could do to conserve money if there was anything we could do to try to make the round come together more quickly we started making contingency plans that
we hoped we'd never have to use but recognizing that we were getting to the point where we're talking about weeks of Runway rather than months or years we put together a plan for who we'd have to let go and what we would have to do which was really to become a niche business we were going to have to become a lot more like caviar looked at the time which was a high basket size high-end restaurants limited selection and a very Niche user base was the the backup plan that we H we would never have to
go to because we didn't think that was the winning formula besides just the constant Financial stress we had people lose confidence in the company right even internally about maybe a quarter or 20 to 25% of the company voluntarily left over those three years the people that stayed shared a similar mindset and it was people who liked to be the underdog and they wanted to solve the hard problem and that was another core value of that came out of this which was one team one fight because others were better funded or they were bigger than us
we had no innate Advantage other than each other and I looked around when we were solving those problems and there's people I want to spend time with and that's still true today and so I think I even recognized it then that I'd rather be the underdog in this fight than a cog and a machine of a fight that seemed like I wouldn't really have a significant impact in the war companies usually take on the ethos of of their found ER and Tony is very frugal person and we always had a very frugal approach I think
what shifted was a maniacal focus on the unit economics of the business so we were hyperfocused on shaving every second off we could from the time it took to do deliveries how do we make it more efficient how do we eliminate defects that are a bad customer experience but also really expensive for us before we were cash strap people would come in and say well do you want to focus on growth or do you want to focus on profitability and we quickly realized if we were going to survive this time we had to do both
at the same time eventually we just made it a core value it says it's and not or you can't pick or choose we must grow and we must become more profitable as the company worked to stay alive Alfred decided to go out on a Lim once again so since we didn't close the series D at the end of 2017 and it was now 2018 I decided to ask the partnership whether we would consider the series D and Lead it ourselves and I thought I was going to get fired from seoa for going back again and
again to propose that we lead the series C for the series D it's like you're going to come back and ask for more money when we just led the series C and you had told us that maybe the company would never have to raise again and you want to invest this large round I thought I was going to get fired again but everybody was quite receptive because the business is growing and doing well and all the metrics were working and so we decided that uh we would consider it it was less than what Tony wanted
I think our number our round was 190 million not 250 million but it was also more than what we thought the company needed we're waiting for the soft bank money to come in and we're getting down to the felt as they say in poke early we are almost out of cash and then seoa came in with a term sheet of its own and it was slightly less money pre money valuation than soft Bank was and they said let's just take our money and let's go forward and execute and then SoftBank came back and said we're
ready to close a Twist the offer from SoftBank was back on the table and so we had two term sheets from two partners we valued SoftBank had been the first to show up but hadn't closed and SEO had backed Us in every round and had really catalyzed the series D coming together and we didn't want to take that much money but they both really wanted us to pick that [Music] him this was a crucible decision the total amount on the table was $535 Million door Das needed to decide how much money to take and which
partner to choose Tony and I were sitting in the lunchroom and we had decided to take just the Sequoia check and he didn't look like he was feeling very well and I said Tony what's going on and he says I can't explain it but this just doesn't feel right but I'm not sure what else to do and Andy Fang who was one of the other co-founders came by and said why don't we just take both checks at the time it seemed outrageous because it was like half a billion dollars on a sub billion dollar pre-money
valuation the delusion would have been crazy the company was going to take a lot of delution the founders also would have lost you know control of the board in terms of the number of seats that the founders would have had access to it was one of these decisions where I knew it would be consequential I think ultimately for me it was thinking about what do we want to be true in 10 plus years if I was just looking at this I think in a very short time period perhaps you know we didn't need to raise
the quantum that we did in the series D but when I put things in perspective around we believe we have the leading product we had spent no money on marketing at the time we had over three years of difficulty raising even a dollar when I put all of those things together on one side and I compare it to the amount of you know dilution or cost of the capital that we would have incurred as well as the loss of control on the board do I think that you know we could have created a company that's
worth 10 times the cost so to speak of what we gave up and to me it was conviction in in that path we were presented with an opportunity to take a large War chest I mean to me this was just a moment in time where I thought look it's not a guarantee but we get to put aside any concerns of ever having to raise Capital again and we get to just step on the gas and take what we already know is the best product and just bring it everywhere after raising the series D it was
pretty obvious to me that the right thing to do was just to take our Playbook everywhere we went from launching maybe a dozen cities a month to launching 3,000 cities in six to 9 months it it became this Sprint where we felt like we had created the the leading product in our category and it was time to just bring it to all audiences and see how far we can take it the company knew its numbers and knew its competitor numbers down to a very very fine level of detail Tony was very comfortable raising a large
amount of money even though it's a small fraction of what Uber had because he had a particular Insight that for every dollar door Dash spent on customer acquisition they were able to acquire twice as many customers as their competitors they were just a lot more efficient at acquiring customers when you have that kind of Advantage it's almost like saying you can run a 4minute mile when someone else is running a 5 6 7 8 minute mile and it's just a matter of when you want to turn on you know the engines to actually Blow by
in the race and that's kind of you know how I felt we were set up and it was against you know the entire field and so once the money came it was just go time in 2019 door Dash surpassed both GrubHub and Uber becoming the US category leader in food delivery but as we all remember early 2020 would bring new challenges when March 2020 rolled around it was not obvious whether or not the pandemic would be a massive headwind or a massive Tailwind for door Dash the pandemic was a time of great emotional twists and
turns ups and downs High variance environment and I remember right when shelter and place happened our volume fell absolutely off a cliff and I thought we might go out of business because people weren't sure how Co was transmitted and it might be transmitted through food and so you're definitely not ordering online delivery if you're worried about that so our volume cratered and then almost as quickly as it cratered it doubled in a way that I don't think we were fully prepared for we doubled I think order volume in in a week I I want to
say somewhere towards the end of March maybe when you go back in time and see the demand start increasing you realize wait do I need to scale up for not a a 50 or 100% increase but now a 200 or 300% increase what do you need to do we need it site stability first and foremost the infrastructure is super sensitive to how many people are ordering at at any given moment and the engineers had been building a business to scale quickly I mean we were doubling every year doubling or more every year so it wasn't
like it was a slow growth business but to double and then some almost literally overnight was not something that the infer team had planned on which meant that every Friday at 3:00 the site would go down there just these natural times of the day where you're ordering breakfast natural times of the day where you're ordering lunch and natural times of the day when you're ordering dinner that becomes very very busy do we have enough Dashers can we mobilize enough people in addition to meeting unprecedented demand from customers door Dash had to consider the other two
sides of its Marketplace would Dashers be willing to make deliveries would restaurants themselves even survive how should door Dash show up it was the kind of Crucible moment that not only determines your strategy but clarifies your values and what role you want to play in the world a lot of it has to do with what your beliefs and convictions are I think this was true when we thought about how to differentiate our service in the earliest days to how we would show up during the pandemic so how do we secure and also distribute tens of
millions of units of PPE to keep all Dasher safe how do we ship no contact delivery how do we make sure that Merchants can get liquidity immediately while keeping all their staff safe how do we make sure that consumers um can get greater access how do we get free lunch to all the schools how do we get free meals at all times to all the the doctors the nurses the staff at all of the largest hospitals we partnered with all of the largest hospitals across the country to do that it it was a very just
intense period of time for everyone but it it was also one that it was very easy to know what to do right but there were also so decisions that proved controversial we cut our commissions by half we were the only platform to do this which at the time was controversial internally because we were not yet profitable but this would have been a over $100 million expense at the time I think just about everyone on the management team was against that decision that was a hotly debated topic that maybe I was on the wrong side of
history on my take was it's going to cost us I don't know $100 million no one's asking us to do it today and if we're trying to go public that could be you know at a 25x ea multiple you're looking at $2.5 billion in market cap we're shaving off when no one's asking you to do anything differently I was just saying like why don't we wait and see and Tony very thoughtfully listened to the debate and at the end there was absolutely no question in his mind and he correctly said I was I was thinking
a little short term which I want to do every now and then and he said this is the right thing to do for our customers and doing the right thing for your customers is never the wrong thing to do for the business and I'll never forget that and I think it really helped not only to keep businesses going at a critical time but also help people in the community view door Das a little differently advertising our competitors I think was a controversial decision internally we spent millions of dollars buying a national TV campaign that was
called open for delivery where we highlighted us but all of our competitors as well to tell consumers Nationwide just order we don't care who you order from I think the question was why collaborate across the industry for every single one of these companies it was hard enough as it is we were competing with each other I think all the food delivery companies were making very little margin on each delivery and I think 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
and I think it was question for a hot second and then you heard Tony's compelling argument and his passion for helping the industry and that's the right thing to do and I don't think there was a the a question after after that I remember that when we advertised all of our peers what ended up happening was on social media you saw restaurants also advertising their peers and and they're competitors obviously and and and I just thought it was um you know that was not you know a an outcome that we were forecasting and certainly not
why we made the decision but I think sometimes you kind of have to have the courage of your convictions just to make the decision without having any assumption that you'll gain the benefit the pandemic became a a crucible moment for door Dash this was a year where door Dash showed its medal and the ability to go even harder and stronger and take a leadership position across the industry we often use the race car analogy where we talk about how you can't overtake 18 cars on a sunny day because everybody is driving a Peak Performance but
you can on a rainy day and during this crisis this Health crisis door Dash surpassed all its competition and became a market leader in the food delivery industry I would never say the pandemic cemented door das's Market leadership it helped propeled it to Market leadership but there's nothing that is written in stone in business door Dash has changed a lot over the last four years you know four years ago in 2019 heading into 2020 in the pandemic door Das was largely speaking a one category so restaurant delivery business in one market the United States today
we have a portfolio of five businesses so we certainly still have restaurant delivery um in the US we also deliver other categories in the United States whether it's grocery convenience alcohol retail categories in June of 20122 the company began to consider another type of expansion Tony brought up the idea of expanding to Europe planting a flag in a different region of the world and the opportunity in food delivery in Europe was just as big as it is in the United States and we just thought it was a a good idea instead of going to Europe
ourselves to do that with a partner I was in in Europe and meeting with various players in the space we felt like we built a pretty good product and wanted to bring that to more geographies and I actually hadn't planned on talking to Vault during that trip because they're pretty small compared to others Walt is a finished delivery company founded in 2014 that operates across Europe and in parts of Asia I got a call from a mutual investor and said you're making a huge mistake if you don't stop and talk to these folks I said
okay okay I got connected via email and went out and met Mickey in Helsinki our goal was never to get acquired by anyone like our goal was just to build the strongest possible Standalone company that we could you know eventually go for an IPO and continue to build the company as a public company my name is Mickey kusy I'm the co-founder and CEO of Walt in the fall of 2021 we were in the process of uh finishing a new round of financing which was around $1.1 billion uh which is when Keith Yandel the chief business
officer of door Dash reached out yeah it took me about five minutes of talking to them to see the cultural alignment just the way they talked about the business was so similar to how we talked about it they came from a customer first mindset they were hyperfocused on retention they had also been cash constrained compared to their peers which led to them having the best retention we had seen by a pretty wide margin and at the time for us the most scarce resource had moved from cash to Executive bandwidth and so we were really looking
for a team that we thought could help us from a team perspective as much as anything else and meeting micking I knew immediately that they could uplevel our execution outside of the US I remember telling my co after the meeting with Keith that like man I'd like to hire that guy which is a good signal about you know culture fit we were never really serious about uh proceeding with door Dash we kind of saw that okay this is a learning opportunity but ultimately through that process of getting to know Tony and the door Dash team
better and like talking about like you know the industry and what kind of company we wanted to build and so forth we kind of realized that like you know with Walt we could build a leading company in our industry globally but with door Dash we kind of saw the opportunity that we could build the leading company in our industry globally door das's acquisition of Walt closed in June 2022 so we had acquired some companies in the past we acquired Cav in 2019 that was a much smaller business we were co-located both in San Francisco there
was no time zone differences there were cultural differences but not crossborder cultural differences and V brought all of that complexity of operating in near 30 incremental countries across a 9 10 hour time difference into Focus for us and it was a a whole different kind of challenge I I was concerned about whether or not we could make the volt partnership successful I mean on the one hand um it was very large in size and I think secondly these types of businesses were they're very local in nature they're very highly operationally complicated um and that's really
hard to do country to Country to Country to Country to Country and so there were a lot of risks that presented themselves when it came to partnering with vul it was a very big um partnership especially for a company like door Das that doesn't tend to do much in the world of m&a um but it was one where you were bringing together two very like-minded teams that Co incidentally had gone through very similar challenges I think in how they were kind of forged through the fire of being under resource relative to their peers and and
getting to category leadership and then I think you know just two groups of people that had the same vision for what the instate is in terms of what we want to build together but also the same you know beliefs on how we should build the company to get there and I think it's really hard to find those types of you know partnership opportunities and so um we've been thrilled with the partnership um thus far and you know it it certainly was a big move but it was one that um has really paid off there are
many lessons from D Ash's story for one for me is to dream with the entrepreneur and I think it it was easy for me and my partners to dismiss door Dash as just a food delivery company but they were already at the seed talking about being the FedEx of local delivery uh all the way back then and instead of you know trying to think small we just think big and to turn down a company like door dash at the seed or the series a purely because you don't believe sometimes you just dream with the entrepreneur
and just believe be a believer our demo day pitch of summer 2013 it is the same pitch that we have for the company today which is we believe that you know ultimately door Dash um is going to be the infrastructure you know for how all things get moved around inside of a city where we will connect every local consumer to every local business and I think in life the the only real way to grow is to do the thing and take all of that comes from it you know all of the challenges all of the
um mistakes that might be made and you know also all of the successes that you may um have from doing those things I'm I'm not sure there's any other way so you know first and foremost when I think about all of the tough times or especially the tough times that dores has had I'm quite grateful for them there was no way that door Dash would be where it is today without those challenges really no way and it's very possible I and I could see in an alternative world where had we not had those challenges that
perhaps we wouldn't be in the position that we are in today you know I I I really believe that these you know 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 as well as the broad Strokes of how to get there I think the team camaraderie as well as just you know the lessons that we've learned in terms of how do you evaluate some of these very consequential decisions that almost always come with conflict and pain
in the short run that is very quantifiable with an unknown gain on the other side that's quite uncertain and I think you know especially as an entrepreneur a lot of times we are a um we're a basket where we only have one thing where we're wholly committed to and so you just got to make it [Music] great this has been Crucible moments a podcast from sequa [Music] Capital crisal moments is produced by the Epic stories in Vox creative podcast teams along with seoa capital special thanks to Tony Shu Alfred Lyn Keith Yandel and Mickey Koozie
for sharing their stories in Dental audio created by 11 Labs a seoa partner [Music]
