DoorDash

Well, first of all, is there like some rule that the graphics that you put in your S1 have to be just like painfully low resolution? Welcome to season 7 episode 7 of acquired the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert and I'm the co-founder of Pioneer Square Labs, a startup studio and venture capital firm in Seattle. And I'm David Rosenthal and I am an angel investor and advisor to startups based in San Francisco.

And we are your hosts. The year was 2013. Everyone had just finished cracking their jokes about how every startup is just another photo sharing app. But the wave of yet another food delivery app was just getting started. Tony Hsu and his co-founders were launching Palo Alto Delivery.com, which we all know today as DoorDash.

On this episode, we'll dive into how these Stanford students became one of the very few winners in the cutthroat food delivery category, how they raised two and a half billion dollars from VCs, the SoftBank Vision Fund, and even sovereign wealth funds around the world. How they went up against incumbents like Grubhub and Seamless, and the even more well-funded startup on a warpath for world domination, Uber.

This is the story of insanely fast growth, a company currently tripling year over year. And that's the December 2019 number before the global pandemic created the ultimate tailwind at their back to IPO. at the greatest possible time in the business's history. Yeah, they kind of nailed the timing on this one, didn't they? They did, David.

Today we will dive into the question that we're all wondering, is it even possible to build a sustainable business with positive unit economics in this category? And if so, will DoorDash actually be the one to do it? All of this and more coming up on Acquired. Ben, your hooks and intros are getting so good. Do we even need to do history and facts? I feel like you covered everything there. Oh, you know we didn't. You mean we should go through these like 15 pages of notes that I have here?

Alright, well, lots to do. Let's get to it. As always, if you love Acquired and want to hone your own craft of company building, you should join us as an Acquired Limited Partner. You'll get access to the LP show, where we dive deeper into the fundamentals of company building and investing, in addition to our monthly LP calls, where we talk with all of you directly, and of course our book club and the Zoom calls with the authors.

This is really where we have gotten to know so many of you personally. frankly this is like the set of people who have most influenced the direction of the show and kind of the set of topics that we want to tackle so thanks to all of you who who are a part of that community and welcome if you're thinking about joining If you do want to join, you can click the link in the show notes or go to acquired.fm slash LP and all listeners get a seven-day free trial.

You hear that, David? That is the Sentry merch that just arrived at my house. Are you saying sentry or century? Yeah, good point. This is audio. Sentry. S-E-N-T-R-Y. Like someone standing guard. And at some point, listeners here, we will tell you what they actually do, but first... We've got to say, this is the best merch of any company we've ever worked with. This stuff is so great. I never knew I needed a board game about fixing bugs before.

And I love this shirt that says webmaster. I don't know if listeners know this. I was the webmaster for my high school back in the day, so it feels appropriate. Of course you were. Very opinionated design style and ethos at this company. Okay, so, doing this for real. What does Century actually do? Century helps developers debug errors, latency issues, pretty much any software problem, and fix them before users get mad.

As their homepage puts it, it's considered not bad by over 4 million software developers. Over 130,000 organizations use Sentry from indie hobbyists to... probably at this point, most of the biggest companies in the world to find and fix broken code fast. Yeah. And one very fun streaming service that uses them is Disney+. We did our Disney Plus episode years ago and talked about everything that went into getting the service live when Disney added tens of millions of users all at once.

and obviously way more than that. Now, well, it turns out that Century was actually a big part of how Disney Plus maintains high-quality service and keeps their massive subscriber base happy. If something isn't working, Sentry tells them what's wrong and how to fix it before the angry emails start coming in.

I like that they have no gatekeepers or requirements to talk to salespeople or anything like that. They just want to help developers figure out what's broken and solve it as fast as possible. In most cases, getting started with Sentry only requires a few lines of code, and you can even set up an account and sign up directly from your terminal, which is just awesome.

They have an incredible customer list, including Anthropic, Cursor, Vercel, Linear, and more. We'll be sharing all the interesting ways that those companies use Sentry to monitor and fix their applications fast in the coming months. You can check out sentry.io slash acquired to learn more, and they're offering two free months to all acquired listeners. That's S-E-N-T-R-Y dot I-O slash acquired, and just tell them that Ben and David sent you. David, let's do it. Let's do it.

Okay, so today in non-typical acquired fashion, we are actually going to start with the founding of the company i thought about going way back you know doing the history of restaurants because just It's too much. We got a lot to get through here. All right. When was the first restaurant? I don't even know. That's a good question. But anyway, that is a question for another day because this story in and of itself stands on its own. Okay, so we start, as Ben, you alluded to, on the Stanford campus.

in the fall of 2012. I remember it very vividly and well because I was there. I was starting at GSB that very fall. But unbeknownst to me, right across the, kind of made their two main quads right across the way in the class was called Startup Garage. And this is kind of a legendary class at GSB. I co-taught with GSB and the design school, the D school. And it was interdisciplinary. It was a two quarter class. And the idea was you apply as a team.

a fully formed team to go build a product or service. And the idea is you're going to build a company and actually launch a company as part of this class. And so there were four Stanford students, two from GSB, two undergrad computer science students who had applied to the Design Garage class that fall and entered. Andy Fang and Stanley Tang were the two undergraduate computer science majors, and the two GSB business school students were Evan Moore and Tony Hsu.

So I think the story behind how they came together is that Evan and Stanley had worked on a project in another class the previous year. Evan and Tony were second years at GSB. And Stanley and Andy were, I think, juniors. Yeah, they were juniors undergrad. So they'd work together in another class and then they brought in their two friends and said, okay, the four of us, we're going to be the stellar team. So you have this like good mix of business school students, computer science undergrad. Yep.

the dream team yeah and interestingly i mean this is a fairly common thing in at universities for an entrepreneurship program they'll like go start a company class and it's always the dream if you're the you know instructor or professor that One of them actually goes on to become this big successful company, but the vast, vast, vast majority of time, it ends up just being an academic exercise. Yeah. And the crazy thing at Stanford is like,

Design Garage is not the only class that does this. There are like probably 16 classes across campus that all have similar premises. So regardless, here we are. They get into the class. And they start thinking about what they're going to focus on. Now, Tony had just finished interning that summer at Square.

And Square, of course, that we all know and use and love today. Public company, just about $100 billion market cap. When he was there that summer, this would have been... summer of 2012 it was about 30 employees much much different it was just the credit card reader But it was focused on, as we covered in our episode, this idea of empowering merchants and local businesses to accept credit cards. And it was clear already, at least for people on the inside like Tony, that.

This was unlocking a huge amount of commerce and commerce activity for local merchants. So they thought, okay. What else can we build? We know that this is a big opportunity. The internet is. coming to all these places like most of these places don't even have a wi-fi you know

Right. And the amazing square innovation there was like so many of these people that could never take credit cards before. They were like independent merchants that were, you know, selling things at craft fairs and food trucks that could only ever be cash businesses were now, you know, brought online. sort of trackable GDP of these categories of now digitally enabled businesses. And we'll get into this more as we go throughout the episode, but this was a huge insight.

that was completely not obvious yet to the rest of the world. I remember, like, I was starting at GSB that fall. I had been at Madrona as an associate before that. And every time we looked at a company, a startup that was going to sell to smaller local businesses, help them with the audio, I was like, no, this is a bad category. can't invest there, acquiring these customers is too hard.

They're not online. It's not going to work. These customers are notoriously difficult to serve because they have razor thin margins. They have low willingness to pay. They churn like crazy. It is expensive to acquire them and then they obviously don't retain well because either they don't know how to use your product well or in fact they go out of business and so you have to reacquire someone else.

is notoriously the worst customer segment as a venture capitalist to be investing in. Yeah, if Tony had gone and pitched this on Sand Hill Road at the time, he definitely would have gotten a lot of rejections. But as we said, Square was starting to change this. And really what changed it all was the mobile phone and the smartphone that proprietors and managers within stores were using. Okay, so they come up with a few ideas as part of the vision is how do we help these local merchants?

They go, the class sends them out into the streets, the mean streets of Palo Alto. They go and they have design conversations with local store owners. They ask them what their problems are. They start thinking about an idea. And the iPad was big at this point. It was about two years old, two, two and a half years old, and had cellular connectivity. And they're like, huh, well, you know, Square's taking payments. They're using iPads.

The store owners are... buying ipads they have them there what if we had an app also on the ipad that when customers came in the front door, the iPad would be there and it would ask, how'd you hear about us? That was the initial business? That was the initial idea. They had a couple initial ideas, but this was the one that they were testing. I think they had actually maybe built an MVP of this app.

And then like these, you know, business owners could now track their customers, where they came from. They could market to them more effectively. yeah great so they're doing these design interviews and Famously, as the story goes, and by all accounts, this is actually true. They sit down with a woman named Chloe, who owned the Chantal Guyon Macaroon Shop in downtown Palo Alto.

I never frequented that, but it was probably too expensive for the broke students at the time of serving the VCs in Palo Alto, not the students and the startup founders. And so they sit down with her, they're pitching her this app, and she's like, and then they're about to leave. And she's like, actually, you know, I do have a problem that you guys might want to think about.

And as they write on their Medium account when they launch the business, just as we were about to leave, Chloe burst it out. Well, there is one thing I wanted to show you. She took out a thick booklet. It was pages and pages of delivery orders. This drives me crazy, she said. I have no drivers to fulfill them, and I'm the one doing all of it.

She's the proprietor. She's running the store. She's managing the storefront. She's making the macaroons. She can't take time to go out and do these deliveries, even though probably all the Sand Hill Road venture firms want their macaroons. And so they say like, huh, okay, that's interesting. I wonder if

Other businesses have the same problems. They go out and interview more restaurants and food businesses and they hear the same thing. All these restaurants, the pizza guys are doing delivery, but nobody else is. The Thai place isn't doing delivery. Most importantly, Oren's hummus is not doing delivery. Most importantly. Most importantly. And so they say, huh, okay, well, let's spin up a little MVP and see what happens here. Which is actually pretty amazing to think about this like.

When I was growing up in Ohio, if you wanted to order delivery like there was pizza delivery was a category then takeout food was another category where you'd go and you'd pick it up and like maybe there would be a Chinese restaurant or a Thai restaurant that would have figured out delivery on their own but like if you were ordering delivery food it was pizza.

Yeah, it was Domino's, it was Papa John's, it was Pizza Hut. And that's kind of the crazy thing, too. They figured it out. And nobody had made the leap yet in the U.S., at least. to, hey, people like getting pizza delivery delivered to their house, they might. Also, other food getting delivered to their house, too. And you gotta think, pizza has to lend itself better to a more regular type of delivery than other sorts of food with more complex menus and stuff.

I'm sure we'll get into that, but it's interesting to just think about why was this so obvious and prevalent and decades long for pizza companies, and yet no one had really done it for other food categories. Well, that's a good question. I think there's a very specific answer about why DoorDash made it work, which we'll get into in a sec, but that's a good question. I mean, in New York, it was happening with Seamless and then Grubhub, which merged with Seamless.

You know, when I lived in New York, yeah, you could use Seamless to get any food you wanted delivered, but it didn't really happen anywhere else in the country. So, okay, so they throw up this MVP. They bought the domain name paloaltodelivery.com. They take PDF menus of a bunch of the top restaurants in Palo Alto and they had some really good ones. They had Oren's. They had Pachi's, the pizza place. I guess Pachi's probably didn't deliver. Pachi's is a really good pizza in the Bay Area.

Life Kitchen was great. Like a bunch of good places. They had the Thai place. They had the Indian place. so they put it up and then they have on the website A phone number. So you can't order on the website. It's just on the web. It's a phone number and it's a Google voice number that rings all four of their cell phones when anybody calls it. That's awesome. And so on January 12th, 2013, this would have been...

the start of the second quarter of the winter quarter at Stanford. It's the second quarter of Design Garage. They put this up, and literally within an hour, They get a call. So they put it up and then they put it on a couple, like, they blast it to a couple email distribution lists at Stanford. And within an hour, they get a call from a guy who wants to order, I think it was Thai food. And they're like, wow.

holy crap so they drive over they get the food they go and they uh they drop it off and they're like uh tony talks about this he actually gets out his his phone and they interview him they want to know like how to hear about us What's going on? Why'd you order this? And it turns out it was this guy named Bruce Barkat who lives on Bainbridge Island in Seattle. And he works for Leafly, the marijuana company. He had written a book called Weed the People. about legalizing marijuana

And he was a visiting author at Stanford. And he was staying, I don't know if it was on Stanford Housing or something, over on Alpine Road, which is kind of behind the dish, if you know the Stanford campus. Over there, there's not, like, you're pretty far from University Ave. There's no... Food over there. And so he was probably like, yeah, I just didn't want to get in my car and drive all the way over to go get this food. This is great. Perfect for his customer. Yeah, pretty great use case.

They do this and they just put it out on the email distribution list. So people start using it like all over the GSB. People are using it. The undergrads are using it. Jenny and I used it. The total move was get orange on this, especially if you're having people over your big party, get a big thing of orange. And Palo Alto Delivery will come and make it happen for you. And you remember it being called Palo Alto Delivery? Well, I remember, I think by the time...

I was trying to recall, I went back and I looked through my email history. I think by the time we actually did our first order, they were NYC and they had changed the name to DoorDash. but everybody knew that this was happening. Like people were like, my classmates were easy to go to a party and like the food was there from Palo Alto delivery.

So they had hacked it all together. This was total like find a problem, solve the problem, you know, not design focus, design focus just in terms of like solving the problem. So they were using Square. to take payments. So you would call the number. It would ring their cell phones via Google Voice. One of them would pick up They would take your order down. They would then call the restaurant, put the order in with the restaurant. They would go and pay.

And then when they would drive it over, you know, drop it off. And then they would take out a square reader and you would swipe your credit card to pay them back. Unreal. That sounds like a tax and accounting nightmare. Are you basically losing money because you have to pay taxes on... the income that you're well they didn't actually incorporate the company until they applied to yc so this is all lost to history in terms of the accounting uh and it was also super cool the other

Really smart thing they did once they started bringing on some other drivers to do delivery for them. They used Find My Friends on iPhones. to track the deliveries in real time. So they could like route people and be like, okay, this courier is closer to this restaurant. We've got the order coming in over there. Like, hey, you, when you finish this, like go over, grab this.

you know it's so crazy thinking this is probably the first company we've covered on acquired on the main show here that is started sort of in this modern The iPhone is already ubiquitous era. Like you think about Uber's founding or Airbnb, which we'll do tomorrow, or so many of the companies that we covered in the 2018, 2019 IPO booms. All those stories developed

alongside the mobile revolution. And here you are, you already have a very modern set of tools. There's Google Voice, there's Square, and there's Find My Friends, all of which were not available to the previous generation of startup. Exactly. And that was the key point that made this work.

even though probably people had tried this in different ways in the past. And Grubhub actually, Notoriso Grubhub had merged with Seamless. We'll get into their model in a minute. They acquired lots and lots of local delivery companies. Actually, one of them was one of my classmates in the year behind Tony and Evan. He had sold his company in Atlanta, I think, to Grubhub. And so he showed up. He had the second nicest car in the GSB garage behind the guy who had started a...

Zynga clone in college but didn't raise money and just kept all the cash flow. I feel like there's a lesson in there somewhere, but... I don't quite know what... There's many lessons there. Yeah. We'll unpack that on an LP, so... So anyway, back... With a psychologist. Yeah. Back to... why now with Palo Alto delivery and, and mobile and these tools, like it's actually in this find my friends thing was really important because

unlike uber where it was you know you just had the consumer the rider and you had the driver you had these two pieces and like you could give the driver smartphones and like coordinate everything with DoorDash, it's like the 3D chess version of ridesharing. You have this third element, which is the restaurant, which is a participant in the system, both from an operations perspective and from a business model perspective. So consumers need to be able to place the order easily and efficiently.

Fine, mobile helps with that. You've got the dashers, right, of what they end up being called, the couriers. They need to be tracked just like rideshare drivers, but they need to be routed to the restaurant and to people's. homes so it's like doubly difficult then you've got the restaurants you gotta know where the restaurants are you gotta know the status of the food you gotta have them

Get the orders coming in, accept them, know that they've gotten it. This is super hard, and there's no way any of this could have happened without all of these players having smartphones. Again, restaurants, still today, most restaurants don't have Wi-Fi.

Right, that's such a good point. And like to flashback to a previous era of business that's working really well now but failed previously you look at instacart you look at webvan like Aside from there just weren't enough people on the internet yet, there definitely weren't people doing this on mobile phones yet. And frankly, the technology stack wasn't sophisticated enough in that Web 1.0 era to facilitate all this real timiness and keeping everyone in sync at the same time.

As you were talking there, David, it hit me that Not only, of course, do you have to split the money one additional way in food delivery because you've got the, you know, in addition to the dasher and the person ordering the food and the company facilitating the transaction, you have the restaurant involved, which is different than ride sharing. So there's sort of. Money has to flow into four different or out of one pocket into three others instead of out of one pocket into two others.

But there's also an unbelievably operationally complex component here where the timing has to be perfect. you're heating food. There's a very narrow window where you can get there too early or too late and that be okay, you know, just in the kitchen, let alone then having it sit out for a while, then having, you know, the right...

amount of time that it takes a driver to get to a person's house. Everyone's very familiar with thinking through this problem from a consumer perspective, but just thinking through the technology infrastructure is Really crazy. I was talking about this with some friends and did research for this episode who are former Uber employees.

And the thing is like, you know, Uber and Lyft and ride sharing, right? You know, canonically, everybody found like, hey, once you get the wait times down to, you know, five, maybe 10 minutes, like that's fine. It's all good. But to your point, with food, it's not all good. The degree of diminishing returns is much, much higher for food delivery because I want it fast. but it also needs to be high quality and still good if it's fast but it's only halfway cooked.

Like I'm never going to use your service again, you know? Yeah. And the far more forgiving side is it took too long and, you know, the food can stay, you know, warmish under a heat lamp for a while. But like, I think everybody knows when they've gotten food that's been sitting under a heat lamp for too long. Yeah. totally so okay so like they're they're hacking these pieces together this is kind of cool from the beginning

The business model was basically already there and they haven't changed it much since under the hood a lot has changed. But so initially it was a flat $6 delivery charge to the consumer for getting your food delivered. And obviously that has changed since then in terms of how it's calculated. Jenny and I ordered Chinese food last night from Mama G's here in San Francisco. Great Chinese place.

They're on DashPass. We paid a $7 tip to the Dasher and got our food. It was basically the same from our perspective. They also...

started going to the restaurants really early on. This is even, I think, during the Palo Alto food delivery days and said, hey, we're bringing you these incremental orders. Will you pay us a cut of the revenue so that we can make this work the six dollar seven dollar you know delivery fee that'll go to paying the couriers uh and then we're bringing this revenue to you we'll take a little bit of cut of the food and the restaurants

said, yeah, I've been Tony's talking about this. Like they basically never had a problem with it. And I think it was because there, for many restaurants, this behavior had already kind of been established. with the Grubhub and Seamless model. So this is probably a good time to take a step back and say like, Okay, what is unique and different here? Because I think we were texting before the show, like most People, I think, don't understand the difference between Grubhub, CMLS said.

and what DoorDash and Eats are doing. I mean, it took me until actually diving in and doing the research to realize, like, and I'll just spoil one little bit here, that it was only pretty recently that Grubhub started actually having fulfillment, like drivers, as a part of the thing and not just dumb pipes that you order through. Yep. So, okay. We rewind back. Grubhub, I think Grubhub was started maybe like early 2000s.

seamless, Brad Stone writes about this in The Upstarts, had been started in 1999 in New York. And they were the same thing. They merged in 2010, maybe, I want to say. But their models were you could go to their websites or you could call them. In the early days, it was calling Seamless. It was calling Grubhub, just like Palo Alto Delivery. They would take down your order. They would call the restaurant, just like Tony and Tim were doing in the early days.

But then they'd stop at that. They'd just say like, hey, you know, Ben wants... Ben wants pad thai. Go ahead. Go forth. And so then the restaurant, by the way, it was 2013. So then the restaurant, the onus was on them to have a driver that could actually get the order to you. To have a courier or a driver and do the fulfillment. Yeah, and in many ways... Yeah, New York is probably a, you know, bike messenger type person. Exactly. So this is why this caught on so well in New York.

And then other cities, this existed, you know, restaurants were on, it was mostly Grubhub outside of New York. And then they acquired all these small local players. This was a pretty good model and Grubhub went public, was a well-regarded internet stock because this was a super capital light model. Notably, they're a very profitable business. Yeah, very profitable. They acquire customers and they did all sorts of

Interesting things, shall we say, to acquire customers via some SEO hacks. And then they would pass on the orders. Restaurants would pay them a commission fee on the orders for bringing the orders. and then call it a day. And so this worked super, super well. Now what Tony and DoorDash is doing is obviously very different. And the downside of the Grubhub model is that most restaurants don't want to, aren't equipped or aren't even thinking about.

doing the logistics. And even if you were thinking about this, You're saying, okay, great. I'm going to hire a courier. Okay, you're going to hire one, maybe two couriers. You're going to use those. heavily during the rush hours for eating or whatever your type of food is that you're preparing.

breakfast lunch or dinner probably lunch or dinner um the rest of the day they're going to sit around but then when you need them you're only going to be able to fulfill a couple delivery orders like this is a nightmare Right. And probably not fair of me earlier to use the term dumb pipes, but I guess more to say what they really were, were a demand aggregation company where their primary... Um...

business activity was consumer marketing and retention. You keep the people, you are the mechanism by which they they order, but then the market is still constrained to the set of restaurants who are willing to take on this delivery stuff on their own. And in a place like Palo Alto, which is not a very dense city, even though there are a lot of people that live on the San Francisco Peninsula.

It really doesn't make sense. And so you didn't have any of this really operating, again, outside of the Domino's, the Pizza Hut's, and the Papa John's. So this is... Another super cool thing that Tony and team do. They realize as they get going on this, like, hey, we're not building Grubhub and Seamless. We're building... dominoes we're building FedEx and we're just taking it to every we're building a logistics network we're taking it to every business

So what do they do? They go and they work for Domino's and FedEx for a couple of weeks just to like learn how. their logistics systems operate. Oh, no way. Yeah, so they signed up. Tony was a driver for Domino's delivered pizza for a week or two and took notes on how everything worked. And he talks about this. He was really surprised.

These are world-class operations. And so you learn a lot and realize like, hey, this is a complex business that we're going to have to build. And delivery times are super important. Density is super important to make this work. but these aren't tech businesses. So like Tony talks about dominoes being run on, you know, paper and not on, not with find my friends and not with.

smartphone technologies and mobile ordering systems and mobile app logistics at the endpoints. And so I said, like, oh, okay. This is really interesting. And so he talks about, like, it was basically during this period that there were three... questions that they wanted to answer one of which was just simply like do people want this is there a reason on the demand side where

food delivery of non-pizza restaurants doesn't exist really outside of big cities. And the answer to that was a resounding yes. Everybody in Palo Alto and Mountain View wanted this. Two was, can they find a way to do this? to pay the drivers enough and keep them utilized enough with making trips. that they look more like Domino's and FedEx than they would like a restaurant trying to do this themselves and not being able to utilize their drivers enough to make it worth it.

That clearly is a guess. Well, how do they do that? So people want food from 12 to 2 and from 5.30 to 8. How do they handle off-peak? ah well you're coming to this is going to show up later in the story but this is the gig economy that makes this work Oh, I see. So since they're variable expenses, the business doesn't have to worry about paying people during the hours where there's no demand. Yeah, exactly. You can do this as 1099 contractors. You don't have to go.

I don't know what Domino's and FedEx was doing in those days if they were W2-ing their employees or if they were 1099s. But who very clearly already started to pave the way for this whole... Right, so this was ostensibly legal. Yeah, exactly. Ostensibly legal. And now post Prop 22 in California, definitely legal.

So that makes it work on the driver's side. And then on the restaurant side, with the restaurant... be happy to pay us for these incremental orders that we're generating for them and again like yeah apparently it was super easy they were all willing to pay them and so do you know at this point had they started thinking about getting back to my question on like

What if people do want to work between 2 p.m. and 5.30? Were they already thinking about non-food options at this point in order to sort of utilize that workforce over more hours? I think they were, um... You're going back to the original macaroon shop, Chloe at Chantal Macaroons. That's not a meal. That's not a meal, yeah.

But I suspect what happened was just that the food, the meal delivery became so big and like clearly had product market fit that that just became all consuming. But now you read the S1 and they talk about... hey, we do want to be the local, the on-demand delivery, local logistics network, FedEx for small local businesses.

We want to do flowers. We want to do groceries. We're already experimenting with that. But it's a small, small percentage of the business. Okay, so question number one is do consumers want this? Question number two is... about can we make this work for drivers yep and question number three then is the restaurants is the restaurants and so yeah so then at this point how are they thinking about like

How much can we take from restaurants without them A, getting mad or B, having an unsustainable business? And then how little can we take and still have a business ourselves? That's a good question. I don't know. But I do think, as we'll get into as we go along the story, one thing. similar to Bezos and Amazon in the early days.

One thing about DoorDash is they've been willing to fly very low to the ground, so to speak, on this. Tony talks about this a lot, though, like, hey, by us improving our density. and being able to do more, fulfill more orders more quickly.

that improves the economics in the system. If we can give that back to consumers, they've definitely given it back to consumers. I mean, it's crazy that you pay five six seven dollars to get somebody to drive across the city and deliver food for you um uh and we also give it back to restaurants that'll allow us to grow the market more yeah or grow our share more

Okay, so they figure all this out in the Palo Alto delivery days, and then the school year is coming to an end. They apply to Y Combinator. They get in and say, okay, we're going to go do this for real now. They ditch the Palo Alto delivery name because, you know, it's hard to imagine that playing well in Wichita.

By the way, do you know the other famous example of someone that had to do this but took a little bit of a different track? Also in the restaurant space, also in the food delivery space. I don't know. People from St. Louis will know what I'm talking about, if that's a clue. Panera Bread. Oh, Panera Bread. Wow. To this day in St. Louis is called the St. Louis Baking Company.

st louis bread company something like that but i remember my first trip to st louis i was like what that's the panera logo and it's like called the st louis what is this and when they expanded outside of that region they just decided we're going to leave the ones locally here at the same with the same name and you know everywhere else it'll just be called Panera and just to wrap this full circle they actually win it alone and they basically run their own single client DoorDash and are

sort of the black sheep that created their own version of a full end-to-end fulfillment system order on their website and app and they deliver to you. I think they're one of the few restaurants who actually does that independently. Interesting, even to this day. I think so. It was true as of Q1 2019. Interesting. There's... There is this other, I guess, category of restaurants that have done this historically, which is this kind of lunch catering, office catering, sandwich type shops of which...

Panera is obviously consumer-facing, but I think about specialties, right? I think they're in a bunch of cities. you're doing a lunch business meeting, they'll deliver and cater that for you. That's true. That has totally been a market that has existed for a long time. And there's a different set of startups going after that. And obviously DoorDash and these folks are starting... trying to create an offering for those business customers too. But yeah, that's a little bit of a different market.

Yep, yep. Okay, so they do, I see. Coming out of YC, they raised a $2.4 million seed round in the fall of 2013, which was a good, great seed round, but nothing.

crazy here. At the same time, there were companies coming out of YC raising five, six, seven million dollar seed rounds already. This is the go-go days. And it's led by Interestingly, Keith Raboy, who had just joined Khosla, now Keith, before that, of course, PayPal Mafia member, and now a partner at Founders Fund, He had been the COO of Square while Tony was there over the summer, so I'm sure...

Did he know Tony from that? I guess it was only 30 people, so they had to. I'm sure they knew each other. That would have also explained why he probably was more likely to get this. than other VCs at the time. Right, we saw the sort of like online-ification of independent merchants and particularly around food.

Yep. So he leads the seed. CRV, SB Angel, and Pear also come in in the seed. And, you know, to this question that you said about, like, what types of delivery are they doing? What types of logistics? They write a Medium post at the time saying, ultimately, our vision is to become the local on-demand FedEx. We are a logistics company more so than a food company. We help small businesses grow. We give underemployed people meaningful work and we offer affordable convenience to consumers.

we're tackling some of the most difficult logistical challenges that come with on-demand delivery, true, both in engineering and operations. So, and I think as Tony tells the story, that was also part of what helped them raise coming out of YC was pitching this bigger vision of like, hey, this isn't just meal delivery, you've already heard of this, Grubhub exists, but this is actually a logistics network and this is something different.

Okay, I want you to name all those investment firms again that participated in this initial round. So it was Khosla, CRV, SB Angel, and Paris. None of those appear in the S1. Those are all below 5% shareholders. And as we will talk about later, this company underwent a tremendous amount of dilution in order to scale the way that they did. Oh yeah, we are still in act one of this story here. So, okay, let's wrap up Act 1.

They raised this seed, $2.4 million, and they realized, okay, we're going to change the name to DoorDash. We're going to expand beyond Palo Alto. Let's go to our first... bigger market now the natural thing to do that all the ride sharing guys did was go to san francisco and you think like hey a city like natural use case for food delivery like it was for ride sharing you should go there

Tony had the insight. He grew up in Illinois, in Champaign-Urbana, but in high school, his family moved to San Jose. So like, you know, Champaign-Urbana and San Jose, like these are, while San Jose is a big metropolitan area, it's much more suburban in feel than it is dense like a city. Tony said, you know, actually, like the mass market is out there. It's not. In San Francisco, it's not in cities. They launch in San Jose and in East San Jose specifically as their first market.

And this was just... brilliant it's been talked about elsewhere but going to the suburbs versus the cities there was no competition like it was dominoes or nordash It's really interesting thinking about, and much ink has been spilled on this concept, but I think it's really worth diving into here.

Intuitively, you would think launching in cities is better because there's much more density. It's been working in New York for a long time. People really value convenience there. It's sort of the convenience economy. People have lots of disposable income.

But what that meant was, number one, they didn't have any competition in the suburbs in terms of other mechanisms of delivery. Number two, Drivers were much easier to come by in the suburbs because everyone has a car, whereas in cities, like 10 to 15% of people have a car, so there's much more available.

sort of dasher supply and on top of all of that there's no traffic and parking is not an issue and so you can actually deliver a higher quality of service at a lower price point with greater supply of dashers like there's all sorts of reasons why it was actually great to be out there and they had a wide open lane to themselves because these incumbents weren't playing there at all well that's the thing you know that um

one end or dash is core values, which usually core values are a bunch of baloney. But in this case, I think actually makes sense is operate at the lowest level of detail. And Tony talks about this, like, yeah, in cities, you've got this density, but like, think about what that means. You know, this is not ride sharing where you pull up to the curb, somebody gets in and you drive off.

You pull up to the curb, you've got to park, you've got to get out, you've got to go get the order. And if you're getting the order at the restaurant and there's a queue, you've got to wait in the queue and then get the order. And then you've got to go drive and then you've got to drop it off and you might be dropping it off at a 12th floor apartment building.

You know, in New York, this can work okay because everybody's couriers are on bicycles. And as we'll talk about later, DoorDash did really embrace different forms of vehicles for dense cities. But in the early days, even in San Francisco, are you going to bike around and do this? No, you need cars and motorcycles. Yeah, this operate at the lowest level of detail thing is really, I think, one of the things that makes this company special.

The quote is, averages in our industry are meaningless. It's the distribution that matters. No consumers care if our average delivery time is 35 minutes if they receive their food in 53 minutes. And it's such a great point. It's a very Amazonian way of looking at it where you're obsessed with every customer on an individual basis rather than rolled up metrics.

And I think for this business in particular, you know, one bad experience, you could lose trust and never rely on them to deliver your dinner again, especially if you have company over or you're really hungry or whatever the thing is. you can blow it with one bad customer experience. Yeah, so this going to San Jose was brilliant, and it works. amazingly well. So bye. They did YC in the summer of 2013.

by the beginning of 2014. So we're now just about a year since they had that first delivery to the Weed the People author on Palo AltoDelivery.com. Literally one in six people on the San Francisco Bay Peninsula, so not San Francisco itself, but the peninsula below, San Jose, Mountain View, Palo Alto, Cupertino, like there are millions and millions of people that live there have used DoorDash. They just ran the table on the market very, very quickly.

So on the back of this in May, they raised, you know, they went from being like middle of the pack in YC, raising a, you know, good seed round from great people, but like. clearly not as large as some of their peers. There is a $17 million Series A from Sequoia at a $73.5 million post-money valuation led by... friend of the show, Alfred Lin, former Zappos COO. And it's off to the races here. So they say, okay, we're going to use this money. We're going to expand out to other markets.

uh later that summer in june they go to la they run the same playbook in the suburbs there and then they go to boston next which was interesting i assume also in the suburbs but they also go into the urban core in boston with Cyclops. And Boston's a great city for this because it's flat. Oh, yeah. It's like you do this in any West Coast city. You're in a world to hurt. Yeah, exactly. Exactly. And this is before e-bikes and scooters of all various types had really become a thing.

So that's all. So it's all going great off to the races. This was summer and into fall of 2014 by early 2015. So we're now less than a year after the Series A. They are live in eight markets. They raise a $40 million Series B. Again, we're two years removed from Palo AltoDelivery.com launching led by Kleiner Perkins at a $600 million valuation. John Doerr.

basically comes out of retirement. He's ready to move along. I think he's chairman of the firm at this point. He joins the board. And for folks who don't, I mean, if you've listened to the show for a long time, you know the name John Doerr, but like, google amazon amazon the point to drive home here is john is arguably the greatest venture capitalist of all time and he came in

personally did this deal if you think about that 40 million on on 600 they sold what is that like eight percent of the company like less than 10 percent of the company in that series b and got freaking john door john door to do the deal so like

the one to read into this is like the company is going gangbusters and has a lot of leverage at this point absolutely i mean today It's not uncommon to see Series Bs happening within two years of a company's life, raising this amount of money at that valuation with less than 10% dilution.

This was not common back in those days. Yes, seed rounds were happening at expensive prices already, but this hadn't trickled down or trickled up to the Series A and Series B parts of the market yet. This was This was an eye-popping round that happened.

And let's talk about what it takes to launch a city because now they're ubiquitous in the U.S. They're in every suburb. It's crazy. I think there's some stat that it's either 85% or 95% of the... uh u.s population it lives in an area that has doordash at this point but at this time like what is it for them to launch any city Because they haven't really signed a lot of big national chains yet,

it's just as hard to launch your eighth city as it is your second city because you need to go get all the restaurants you need to go get all the drivers you need to do all the consumer marketing because people don't move that much between cities so just because you're live in palo alto in boston doesn't mean that someone in Tallahassee has heard of you. Exactly. So it was actually in July of 2015.

shortly after the Series B that they signed their first partnership with Yum Brands to do Taco Bell in the markets that they're in. And then later, Yum also owns KFC. They add KFC later. This was another- Yeah, a great company. It was part of Pepsi. It spun out of Pepsi. It was Pepsi's restaurant brands, Taco Bell.

And KFC. Then it spun out. Now it's an independently traded public company. And I don't remember if it's still this way, but at some point Pizza Hut was sort of lumped in there and that's why you had those Contaco huts at Highway Rest Stops. I think Pizza Hut is now independent. I'm not 100% sure on that, though. Yeah, that's actually, when Acquire drifts into conglomerate land and out of tech, that'll be a fun one to cover. Oh, yeah.

but that's a good point that they start you know again like the theme here is these guys figure out what it takes to operate at the lowest level of detail and make these launches and this crazy business work. having these national brands to be able to go in and open markets with like

hey, you've never heard of us, but do you want Taco Bell and KFC delivered? Especially if you live in the suburbs. And lots of people want that. It's an appealing enough value proposition even before they sign any local restaurants. Exactly. So... After this round and with this going on, this big national partnership, they start to attract some attention. And specifically, they attract attention from... Well, two audiences. But first...

Uber. Pretty early on in Uber's life, I think we talked about this on the Uber episode, they started experimenting with other things. They had Uber everything. They were delivering ice cream. They were, I remember one year early on, they had like, puppy hugs or something like that. Uber puppies. In 2015, they did Uber Health so you could get a flu shot. That was a nurse that got Ubered to your office.

In fact, you mentioned the ice cream thing. I remember from that promotion, I actually still have the t-shirt. uh that i got when when i got my uber my uber delivered ice cream cone so uh yes they were that must have been a marketing stunt totally was as was uber puppies but the you know um they they definitely were experimenting a lot with like well what else could take an uber to your house or your office besides a person

Yep, because they also get, you know, as much as anyone besides DoorDash at this point, like density is super important. Utilization of drivers in the network is super important. So they're looking at this. and they launched Eats in 2015. But this is how hard it is that DoorDash was doing.

they uber said like i don't i don't think we can really make this work in the same way because this is so hard all the reasons that we said so the first version of eats that they launch i don't know if you remember this

it was they partner with some restaurants in a city a small number of them and they load up in like the late morning food and heaters in the back of uber drivers and have their uber cars just driving around the city waiting for orders to come in for like salads or you know hot meals

David, yeah, a mutual friend of you and I who did operations for Uber at this time was telling me about the massive industrial strength refrigerators that they had purchased and kept in the Uber engineering office because they didn't have a separate facility for this yet.

And so like the mad rush at like 1030 was all of the Uber drivers showing up to get the food out of the refrigerators and that had been like heated up and then put into the heaters in the back of the Ubers to go and start the delivery route. Yeah, and of course, Montri would try similar things as well at dinner. I can't remember if Eats was definitely, the first version of Eats was big at lunch. I don't know if they did dinner as well.

They probably added it at some point. And was the name not Eats? Like the name was something slightly different too. I think it was Eats. They first had Fresh. But fresh, I think, was more groceries and drugstore-type things. Interesting. I find my history right. So quickly Uber then is like, wait, actually what people want is what DoorDash is doing and we need to invest in building out the infrastructure to do that too.

Well, it's interesting. They do get there. And they get there in 2016. They realize that pretty quickly. But the narrative shifts so hard on this space here and i think I don't know if this is true, but as I'm looking back on this now with the historical perspective, I wonder if what Uber did here was part of how everything shifted so hard.

perception-wise against DoorDash. Like, here you've got Uber, this titan, you know, of startups along with airbnb everybody says you know one of the two canonical at this time the two canonical next generation uh you know company internet companies being built in silicon valley

Uber is basically voting with their feet that you can't make this operate profitably. The full logistics network that DoorDash is doing, they're having to resort to doing this driving food around in cars to make it simpler. Interesting. Meanwhile, DoorDash has raised all this money. They're growing quickly. People, consumers at least, love the service. They're entering all these markets. There is the $40 million Series B. Their plan is to...

spend the money. They're going to blow through it and keep raising. And to do that, of course, as you're launching these markets, it does take a huge amount of capital. As you're saying, Ben, you got to go acquire the consumers, you got to acquire the restaurants, you got to acquire the dashers. So then, this is another moment of an acquired history, in November 2015, another blow against the perception of businesses like DoorDash.

square goes public and we covered this on the show this was such a great one of my favorite all-time acquired episodes our square ipo episode and i gotta just like We don't do this often, but we nailed that. I just feel so good about that episode, even today. I mean, it was a little bit in our sort of older style. You know?

it's not as enjoyable to listen to. I don't think as more recent ones, but like in terms of the analysis, I think... certainly the market had decided when they IPO that it was not a good stock but for years afterwards I think people had a lot of hate toward this company and like they just grew 30% year over year over year over year and still are. And I think the narrative has shifted now where people love Square, especially with, you know, cash. But... And Bitcoin. Yeah.

Well, yeah, to get meta for a moment, we were texting yesterday about the Stored Out Dash episode and the Airbnb episode we're going to do tomorrow. And Ben, I think you had such a good point about us and acquired you. when we do these live on-the-scene episodes, it's actually when we're at our second best. We're still good. They're better than the average acquired episode. Not that the average one is bad, hopefully. But our best acquired episodes are when we have a view on...

company that other people don't and don't realize yet and that was the case with Square so what all are we talking about for people who don't remember the history Square had been also a Silicon Valley darling, raised money from Sequoia, plenty of other great firms. multi-billion dollar valuation. They were in this first group of unicorns talked about alongside Airbnb and Uber and Lyft and the like.

And then they made the crazy decision relative to their peers to go public. So they go public in fall of 2015. And the market completely turns against them. This was the down round IPO. They price at $9 a share for a less than $3 billion market cap. Oh my goodness. Today they are trading at $213 a share and a hair under $100 billion market cap.

But memes start popping up all over the valley and TechCrunch and the like about dead unicorns and this is going to be the reckoning and the bubble has popped. And the impact on that for employees, that share price was under the last... to Rhyme Rounds. Rhyme Rounds. Rhyme Rounds.

stock options in the last like two and a half years before they went public were completely underwater and worthless unless you held them all the way through you know the stock recovering people did but yeah ratchets too which those private rounds have been at high valuations

but had terms in there that if the company were to go public at a lower share price, those investors would get trued up to the new lower share price. So it was just a bloodbath. And I think one of the... things that the public markets really penalize square for was this question of like, hey, this payments business looks like a bad business. It looks like poor unit economics on like, you're basically operating these payment rails for your small business customers.

at lower margins than, say, Visa or MasterCard or Amex. This seems bad. You're selling dollars for 90 cents. We're going to put you in the penalty box. And of course, now Tony had worked at Square, so there was that connection. But it's a similar sort of story here of like, we're serving small businesses. and we are operating this crazy, complicated logistics network for them in a way that Grubhub wasn't doing, just like Square was operating this

payment rails for them in a way that Visa and MasterCard weren't doing. And everybody's like, yeah, you're just giving away free value here. This doesn't make sense. Infinite customer demand when you're selling dollars for dimes. I don't doubt you can grow fast. So meanwhile, the other... The other thing that happens here is the first big lawsuit hits DoorDash.

They had been delivering In-N-Out in California without In-N-Out's permission. They didn't have a deal with In-N-Out, but they were, you know, making the argument of, like, if people want to order it, we'll come in. The non-partner restaurants. So In-N-Out sued them in November 2015. And then there would be many other lawsuits along the way with DoorDash.

Okay, so you've got Uber and Square that are creating these really bad public narratives for DoorDash for their prospects. And you've got lawsuits hitting. Meanwhile, through all this, DoorDash is investing capital they've raised. They're growing super fast. Clearly, consumers like this. Sequoia and Alfred say to the team,

Things are going great. You're going to need to raise another round. We're in. We're in for our prorata. We're even in for more than our prorata in the next round. We're going to commit. that we'll do up to $40 million in your next round at up to a billion-dollar valuation. But we want somebody else to come in and price it. And the last round had been that $600 million? $600 million.

the year before. Okay, so Sequoia's like, we're not going to lead, but... We're not going to lead, but our money's good. And I got to imagine this was a huge lesson for Sequoia as well. This was before the Global Growth Fund. It was later after this that they just said, we're not going to mess around with anybody else. We'll lead the rounds. But they said, we're not going to lead.

And Tony goes out to fundraise and it is just like a slog. Nobody wants to lead this round and invest in this company. And I remember this so well. I graduated from GSP at this point. I was back at Madrona. talking with all my other VC friends. Tony didn't come pitch us at Madrona. We were only did early stage at the time and wouldn't have led this around anyway, but everybody was like, man, DoorDash came to see us. Unit economics are terrible. Doesn't make sense.

I can't believe Sequoia's putting their money in here. So what was it that Sequoia saw then if people believed that unit economics were terrible? Because what we can kind of see now is like cohorts over time, and we'll touch on this later, but basically when people retain... they start spending more and make this a regular behavior and need less incentives. Yeah.

I don't know. It's a good question. I mean, it's hard to tell. Certainly, we don't have that time frame in the S1. Because the only time frame disclosed is like the last 18. Two years. Yeah. But... But for whatever reason, you know, whether it was blind faith or actually based on the numbers, knowing Alfred and Skoy, I think it was probably based on the numbers. um they did really believe in the company um so the net of it is tony's out there fundraising for like six months

He can't find a lead. Nobody wants to invest in the company. So ultimately, in March of 2016, even though Sequoia had said they didn't want to lead, they do lead the round. They lead a $127 million Series C. They bring in... The GIC, the Sovereign Wealth Fund from Singapore, comes in as part of the round as well. And they bring in some of Sequoia's LPs as well to bolster the round.

And it happens at a 700 million post money valuation. So 127 at seven posts. A little down. Down. So the share price is actually down. This is a down round that happens. And this was. So hard. I mean, for all of this, I don't really know Tony personally at all. I haven't spoken to him since GSB, but I just have to imagine this was... crushing and just a complete says so much about him that he persevered through all of this right and the whole team that stuck with because at that point you know

you're starting to see stars in your eyes because all the internal numbers are going up. You hold a number of shares and the way people probably think about it is really I hold this percentage of the company and you're told it's going to get you know diluted down over time but you sort of in your head you're like well not that much and then something like this happens and you're like oh wow i can get diluted down a lot Yeah, Nutella, and we're just getting started here. We're only in Act 2.

So Tony writes on the company's Medium account announcing the round. He says it's easy to look at the landscape over the past few months and think that the technology industry has had its best days behind it. However, at DoorDash, at least, I take the contrarian view. We are growing fast while building a scalable business that is built to last. Other VCs must have just been laughing in their shoes reading this.

In 2015, we added 19 markets to DoorDash, including two in Canada and have completed millions of deliveries across our footprint. We've built a business based on first principles that is helping grow local businesses across North America. And we have more than doubled our staff by recruiting great, you know, blah, blah, blah. The fact that we were able to raise the fact that in a tough economic market and in a crowded space, we were able to raise more than 125 million.

Here we go. Without resorting to valuation gimmicks and employee on friendly terms is a testament to the incredible team technology and opportunity at DoorDash. Oh, man, because, yeah, that's right at this time. Everyone was so obsessed with being a unicorn and being a billion-dollar company that people were taking crazy, like, participating preferred terms and, like...

Yeah, basically high liquidation preferences, like the ultimate downside protection many rounds before you would have that sort of downside protection built in. Yeah, really private equity style. capital coming in and it was private equity firms like it was tpg was doing this you know you saw

Big traditional private equity firms come in and say, oh yeah, I'll make that trade. You're basically guaranteeing me my money with some upside. So that you can write your medium post and say you're a unicorn. Yeah. They have this capital, though. they pull back on market growth. So...

They finished 2016 with 28 markets that they're in, broader markets, so they're individual cities and towns within the broad geographic market. They only had six that year, even though, what did Tony say, they added 19. the previous year so clearly they're trying to conserve cash same deal in 2017 and actually in 2017 towards the end of 2017 they signed their next Really big national distribution deal with Wendy's.

Yeah, before we move on to it is worth in the blog post, there's two words in there or three words where Tony talks about the economic climate. It is worth remembering that there was a macroeconomic stock market hiccup. in, I think, Q1 2016. I'm trying to remember exactly when that hiccup was, but there was all this narrative around the longest bull run in history and the S&P's at an all-time high and tech's a bubble.

And there was a moment where the market got scared and obviously came roaring back. And then even through a global pandemic, came roaring back again. But I just want to like... The first time I read that Medium post, I was a little confused by the economic climate term that he referenced. And then I was like, you go back and you look at stock tickets you're like oh yeah i forgot about that okay so by end of 2017 even with

slowing market expansion, trying to conserve cash. It is still incredibly capital intensive to run this business. And so they're out of cash at the end of 2017. And they can't raise money. So they do. This was not announced. We only found out about this by going through the S1. It's in the S1. They do a $60 million inside bridge round just to keep the company alive at the end of 2017.

That was led by existing investors and one new investor, according to the S1. Not sure who that was. I don't think it was SoftBank yet. DVD I'm sure that was I'm sure one of the existing investors, at least, was Sequoia, stepping up to keep this company alive. And that's, I mean, what you hear Sequoia doing here over and over again, that's how you build a position in a company, especially if you have a big fund.

sequoia owns how much of this company at ipo like 18 or something like that and like you're seeing in the narrative here how they sort of built that position over time especially having conviction when others didn't and and yeah as you alluded to at the top of the episode, everybody else who had invested along the way, they're not in the S1 because they got massively diluted here.

Meanwhile, just one more quick comparison. Uber in its private lifetime raised something like $8 billion and were like, they IPO'd in 2018. So by 2017, they had already raised the majority of that. So this is like, DoorDash is a company that's raised in the low hundreds of millions at this point, and their biggest competitor is a better part of $8 billion funded juggernaut.

Yeah, and that also has this other business, other synergistic business to finance what they're doing. Theoretically synergistic. Theoretically synergistic business. We'll get into it. Yeah. Okay, so end of 2017, we're now, you know, remember it was March 2016 when Sequoia stepped up to lead that inside round. We're now end of 2017, 18 plus months later. Companies out of cash have to do a bridge round. I mean, it looks like death's door here. And then history turns.

Well, I would say on a knife point, in this case it turns on a singular man and his vision, one might say. Yeah. We're now in March 2018 and Dora Dash's fortunes change.

the big deal wasn't quite in the back of a taxi cab like adam newman's was but uh you know that i don't think uh this one doesn't have quite the same story to it around like masa telling adam that um the crazy man beats the smart man or whatever it is in the in the fight um but kind of the same approach it's funny it's the same you know i love that So the quote is, you know, Masayoshi Shan, of course, of SoftBank and the Vision Fund, which is what we're talking about here.

When they invest in WeWork, there's the story of, you know, back of the Uber, I think, or taxi with Adam Neumann and says, crazy man beats the smart man. And obviously that went horribly wrong. In this case, actually, I'm going to make the argument and the markets are proving SoftBank right here today. This was the smart, not the crazy bet.

Yeah, I mean, SoftBank is looking like a genius out of all this. So David, how did this deal go down? And then more importantly, how did they do this and Uber? Yeah. Oh, boy. Well, that's a... I don't know the answer to that. I mean, I guess the answer is DoorDash was desperate for cash. And SoftBank was already a big investor in Uber at this point.

Yes, I believe this is 2018. I'm pretty sure at this point, yes, they're already the largest investor in Uber, I think, at this point. So they come in and do a... $535 million Series D in the company. That's check size, not valuation. So this company has raised like, yeah, what did we say? Like a little over 200 million previously in all the capital that they've raised.

SoftBank comes in over $500 million pumped into the company. So I said a minute ago that I thought this was the smart move, not the crazy move. why would SoftBank do this? Like, were they just being cowboys? Maybe, maybe, and they had some dumb luck here. But I don't think so. They did certainly do plenty of nutty stuff, but there's, you know, remember SoftBank is basically investing in, they're investing globally, but most of their dollars are going into two markets at this point.

the U.S. and North America and China. And they are not investors in this company in China, in Meituan, which had at this point merged with Yanping. It was Meituan Vanping. But they were active investors in the Chinese ecosystem, and I think maybe in one of the competitors. And Meituan is food delivery? Well, Meituan has a very interesting story of its own that we need to tell one day on Acquired. But at this point, Meituan has become food delivery and they are starting to dominate.

The Chinese food delivery market. They are on a clear path to becoming the winner. This is the dream. This is what everybody was chasing with Uber and Lyft. And in theory, the same thing here with food delivery was, yeah, you might have competition. Yeah, you might have bad unit economics while you're investing and growing the market. but at a certain point you're going to get to a spot where you have enough density that you can have

low enough prices to all participants in the ecosystem and just have enough volume of transactions going through that you're still able to eke out a marginal profit at that while having way lower prices than any competitor. You tip the market, you become... a monopoly essentially you win and this is happening in China with Meituan So now Meituan, real quick, we'll do a whole episode on them someday. They actually started as a Groupon clone in the early 2010s in China. Of course they did.

Went through a whole long, you know, crazy history. But by this point, they had pivoted into food delivery, merged with their biggest competitor, Deon Ping. And they were dominating the food delivery market in China, which is even bigger than the food delivery market in the US. They went public later that year in 2018 at a $50 billion plus market cap. And today, Meituan, which we'll get into later, is much more also than food delivery. Now the Series A investor in Meituan.

Sequoia Capital, China. So they knew what was going on here too. So good. So good. Okay, so SoftBank comes in. They do this big round. There's a catch, though. And what's the valuation on the $500 million they're putting in? Yeah, you'd think, you know, oh, man, $500 million a round. It's got to be like a $5 billion valuation. Nope. $1.4 billion post-money valuation. So DoorDash is now a unicorn, but that is coming at a very high cost.

38% of the company that they sell in this round to SoftBank and the other investors. And the crazy, here's the really crazy thing. So they raise all this money, $1.4 billion valuation, the actual share price is still lower than the Series B that Kleiner led at a 600 post back in the day because the dilution is so large here. that while the post-money valuation is obviously much higher, over 2x higher, the share price at which shares are being sold is still lower than the Series B. That's crazy!

I did not realize that this could possibly be a down round, but yeah, you're right. There were two down rounds that happened. Okay, so SoftBank now owns a ton of this company. And still today at IPO, the largest shareholder. Well, I bet. I mean, hard to dilute that down. Now, other existing investors did come in for pro rata as well, I assume Sequoia and others in this round. But yeah. But...

this changes the game. And this... I mean, they're back in it. That's a new breath. Not only are they back in it, I mean, this deal, as costly, literally costly as it was to the company and its existing shareholders. creates a whole new life and opportunity here. So DoorDash goes, back on the offensive. We're now in 2018. Remember, Uber is getting ready to go public on their own. They've got the new CEO, Dara. They're going through all of this stuff.

They've got their own investors and prospective public market investors breathing down their neck about profitability, path to profitability. Postmates. They certainly had their own challenges aside from that too. Exactly. We haven't talked about Postmates yet on this episode, but they're struggling. They haven't raised money since 2015. Remember, capital-intensive business, Three years without raising. Three years without raising money. Going to be pretty hard to keep winning share here.

doordash has all this money they say we're going big um they go on they literally 5x so multiply by five the number of markets that they're in during this year in 2018. By the end of 2018, they are operating in over 3,000 towns and cities in America. enormously wider footprint than certainly Postmates or Caviar or their other independent competitors and approaching and probably even surpassing in terms of footprint Uber at this point. and they start taking a ton of share in the market.

They quickly become the fastest growing food delivery company. They overtake Uber during this year for the number two spot behind Grubhub. Grubhub is still the biggest in 2018. and on the back of this, presumably, we don't have access to the data, but as they get this density, even though they're spending all this money to acquire new customers through promotions, the unit economics and the retention

starts to work and it starts to play out like things have in China with Meituan and they build loyalty on the platform. So before the year is even out. In August of 2018, they raised another $250 million from CO2 and DST at a $4 billion valuation. So we're now six months. They're failing themselves again. Yeah, they're six months after, less than six months after that. highly dilutive soft bank round. Now they raise a quarter billion at, what is that? 5%, less than 5% dilution.

Incredible. Got the leverage back. Got the leverage back. Then in the next year, in March of 2019, they finally pass Grubhub and become literally the number one player in North America. Summer of 2019, as we've talked about on the show, they acquire Caviar for $400 million from Square. That adds even more restaurant supply. and order diner demand to the platform so they consolidate there.

They raise even more money at increasing valuations by the end of 2019. They are at a, I think they raised $600 million at a $12.6 billion valuation. So now we're 10x. the price of the soft bank round already within a little over a year. Um, and so what, what tipped there? Cause they went from like on the ropes to. I mean, being a darling, obviously having $500 million to spend can give you the opportunity to do a lot of growth quickly, which we saw in the new markets.

What was changing around the company that would change people's opinions on why they're willing to bet on this thing so heavily? The two hypotheses I would have are one, simply watching Meituan in China, and that they are making it work, they are becoming a dominant number one player in the public markets at this point in time, and their stock is performing exceedingly well. I think they are now at or over $100 billion market cap as we record today.

And then two, all the other players have suddenly either shot themselves in the foot or taken themselves out of the game. So Square gives up with Caviar and sells to DoorDash. Uber is now public and going through all the struggles that we've chronicled on the show, not to mention pre-public with Travis. That's in the past. Early 2017 was no cakewalk for them. So they've had multiple years now of self-inflicted wounds. Postmates can't raise money. Meanwhile, DoorDash is out there.

spending money. They're the only player doing it. I think that's the window finally opened, I think, to realize or attempt to realize this dream you know the meituan dream of become a number one player in a highly competitive market right and then then you know

A thing that we see in markets is an explosion and then consolidation, especially when they're these low margin, highly competitive ones. And so you're right, as everything started to consolidate around them and they suddenly had a large balance sheet. it became possible to see how they would be the one left standing who would roll up others rather than being forced to join one of the big guys on unfavorable terms. As we've seen, I think it's even become a question of

Do they need to roll up anymore? Or are they just going to take so much share? It doesn't matter. So by the end of 2019, they finish with 800. This is the first year, or I guess the second year we have full. financials for them in the S1, $885 million in net revenue, up over 3x. Year-on-year, 263 million orders, also up over 3x. $8 billion in total gross order value. And this is, I thought, really interesting too. 60% year-over-year, same-store sales growth on the platform.

So taking out new market launches, taking out new restaurants added to the platform just for existing restaurants that were on the platform last year, doing 60% more sales. the next year in 2019. And the question you're asking yourself if you're one of those restaurants is, is all 60% of that new customers or is that some of my old customers shifting their behavior toward... ordering through this thing where I don't make as much profit.

Before we get into that, the other thing that happens in 2019. Hopefully it's come across. We're so excited and laudatory of just this journey that DoorDash has been on because they have really faced the fire here and pulled out of it. On the other hand, we can't let them off the hook. The other thing that happens in 2019 is tips. Yeah. So we're going to dive into it because it's a really important thing to know about the company. This may just sound very familiar to lots of you.

I want to open this by saying the company's response to their tipping scandal is completely nonsensical. Like I have listened and watched and read many interviews with people at the company trying to explain. what they thought they were doing that was right here. It was, it is like just absolutely predatory and wrong. And honestly, none of the, none of the explanations make any sense to me, but David, what was happening? Well, so what was happening was... always, or at least from the early.

post-Palo Alto delivery days, early DoorDash days, as a consumer on the platform, you would order, you would pay for the food, and then there would be a service charge, and then you'd have the option to add a tip for your Dasher. Well, it comes out, I think the New York Times did a big investigative piece in mid-20, it was July 2019, that that tip.

That you assume when you're tipping your courier, that money is going to the courier like it would in a restaurant when you tip the waiter and it goes to the waitstaff and the cook's in the kitchen. And, you know, maybe there's a tip pool, but it's all split between the employees. That tip is going to DoorDash. and DoorDash is combining the tip into the total value of the order.

And then they are splitting up the economics of the order according to their, you know, their fee splits. Right. Basically what they were doing is they were only paying the tip out to the driver. that

driver basically didn't make enough in their base from DoorDash from the order that they delivered. And they're like, oh, I guess we have to give you some of your tip because you didn't hit the minimum. But if you did hit the minimum, then DoorDash was keeping the tip. Yeah, it was like the minimum and the maximum.

Yeah. And honestly, for anybody who wants to listen to the company's response to this, it kind of sounds good and you're nodding your head until you're like, wait, that literally doesn't make any sense. like they try and blame it on a UX issue sometimes they try and blame it on it's actually originally intended to help the Dasher and you're like how could it possibly have been trying to help the Dasher

It just goes to illustrate what a freaking tight margin business this is and what a tightrope they're walking to make this thing profitable. Yeah. That said, there's no excuse for it. Nope. But they fixed it. They did a complete 180. The tips are real tips now as they needed to do. Exactly. And I think that's interesting. It was...

Maybe it was. There's no way to know. Maybe it was part of what helped make the unit economics work during this period. That doesn't make it right to do it. It makes it wrong still. But now they fixed it. And now the business is unit economic positive, even with not stealing the tips. So let's pick back up. How does this happen? Basically, 2020 has been a rough year for a lot of people. It has been the opposite of a rough year for DoorDash. DoorDash had their Zoom moment.

Yeah, they basically had their Zoom moment in the private markets. So when the pandemic hits in March, in the U.S. at least, DoorDash grows over 20%. that month which was already coming off an eight billion dollar plus which is pretty incredible. For context, a company growing 20% a month is like way... It's like what a really good seed stage company with product market fit can do. And this is... a company that did $8 billion the previous year in gross order volume. Yeah.

and I actually don't have the stats for the other platforms handy right now. They grow, too, with the pandemic, but nowhere near the degree that DoorDash grows, so their share-taking of the market just accelerates further. throughout COVID such that by the time the S1 hits, which we'll get to in a sec, DoorDash now has 50% of the entire food delivery market.

in america up from 20 something the year before yeah i mean it was like uh over the year and three quarters between the beginning of 2019 and when the IPO, as one was filed, they just had an extraordinary run of becoming the dominant player in the space. And I, it's actually, it's kind of hard to figure out why. Like, I don't really know why they smoked Uber Eats so hard.

and uber eats grew too but in terms of share how doordash went from like a one of four players with a you know 20 something percent share to like now over 50 percent If I had to hypothesize, I think it's two things. I think it's one, being willing to spend on customer acquisition.

You know, just in San Francisco, at least, I noticed, especially at the start of the pandemic, way more billboards for DoorDash than anything else, than any of the other. I don't think I saw, like I've ever seen any of Postmates. I'm sure they exist somewhere. Two though, it is, I think, also related to this being willing to fly low to the ground that DoorDash has always operated with. The prices that you are paying as a consumer are notoriously opaque in this space.

but I do generally think this is a feeling more than any data that I have that generally ordering on DoorDash I am relatively paying a fair or pretty close to price of the food that I would also pay if I were to go order from the restaurant directly. Now I'm also paying the... the tip to the courier to deliver it.

And the additional fees. And the service fee. But it's all reasonable. But there's a delivery fee. So the food may or may not cost more. You're saying it doesn't. There's a delivery fee. There's a service fee. there's a tip, and then there's tax. I think DoorDash just has the service fee. If you're ordering with DashPass.

Ah, so that's, yes, that's the important distinction is that the delivery, one of the fees drops to zero and one of them gets shaved by like three bucks. Yeah, delivery drops to zero. Um, Well, the other thing that we didn't talk about is they do a deal with Chase and Sapphire. Before I looked it up, because I hate just throwing out wrong numbers on this show.

In the two and three quarters years from January 2018 to October 2020, they grew from 17% market share to 50% market share. So just an extraordinary last two and a half years. Well, I guess to finish the point I was going to make before, certainly on Postmates. And also, again, it's a feeling to an extent on Uber Eats.

I've ordered from those platforms and then looked at the bill and been like, this is crazy. How am I paying $70 for two dishes from a Thai restaurant just from all the markups that they were doing on the food? Yeah, I think that's really fair

I think it's totally fair. I will say it feels nicer as a DashPass member that the prices do somehow feel more reasonable at the end of the day. The prices go down just enough where you're like, okay, it's meaningfully cheaper to order compared to Uber Eats. And we should explain what DashPass is. You pay $10 a month. It's basically Amazon Prime, so they knock off some amount of the fees, and it makes sense for you if you're ordering a lot of DoorDash.

some numbers on that. And they do call this, they call it a membership program to the physical world, which I think is an interesting way to build it. We're gonna get into discussing that when we get to narratives. So they've got 5 million customers on DashPass. So if you actually, you know, if everyone paid for that, it would be a $600 million revenue business on its own, just DashPass.

Now, obviously, there's some internal accounting there because they are losing the fees that they would be making if you weren't on DashPass. Much like Amazon Prime, I'm sure they make up for it in the amount that you are now loyal to and conditioned to have a habit of using DoorDash instead of... uh competitors or frankly just making food on your own you know i think the way i mean they're retaining your own platform

right the way amazon prime famously works is uh you know originally they were like well if we can just break even then it'll be nice to be able to increase the number of orders people make and now i think it's very much the mindset of We actually don't need to break even because we just know how much more that makes people invest in the Amazon ecosystem. People can correct me if I'm wrong on that, but that's my impression of, despite the price hikes, how they feel about it.

I mean, it's got to be the amount of value you get as a consumer out of that. What is it? $129 a year. It's crazy. And David, to your comment earlier on Chase Sapphire Reserve, the way that I have DoorDash is not at all because I felt like I should pay $10 a month to have DashPass. is because my credit card came with it for free this year. And so... Interestingly enough, I do think it worked, at least for me personally, wildly anecdotal. This is not data.

it did make me a more loyal DoorDash customer to the point where I think maybe three times I compared my exact same cart in DoorDash versus Uber Eats and it was like... five eight ten bucks cheaper on doordash so i was like great i'll keep and i don't check anymore in the same way that i don't price check amazon anymore um so that totally worked and the thing that is interesting to me about that chase sapphire reserve deal is the customer segment they're going after because the Sapphire Reserve

It's a fascinating credit card. It's a $550 annual fee of which you can get some meaningful amount, 300 bucks or something back. Yeah, 350 back. Travel credit. But then you can basically get the rest of it back in these other benefits in lift pink, which is the same thing as dash pass, but for lift. in the Dash Pass, which has a value of $100-ish a year. Now they're crediting back your Peloton, some amount of your Peloton membership. Oh, it's huge for you.

Were we still flying? You effectively get a It's like an effective 7% back as long as you redeem it for travel because you get the, what is it, 5%, but then it has the 50% kicker. So it's this amazing card if you like. have a particular lifestyle where you eat out and you travel. And, you know, frankly, it was, I think, famously a wildly successful program. They ran out of aluminum. They were printing them on paper for a while in the initial batch, and they couldn't sell enough of these things.

Very interesting for DoorDash to say, we want to throw in with this lot and get this crowd to be DoorDash customers. Because I do think it probably skews a little bit more city. then so like the suburb strategy was a great go to market and now they're I think saying like Okay, now we need all customers. And I'll be very curious, I don't think they'll ever disclose it, but how many of these 5 million people that are currently using DashPass

are via this Chase Sapphire Reserve program and how many of them are actually paying. And to contextualize that 5 million number, How many people are currently DoorDash customers, David? Do you have that off the top of your head? 18 million, I believe. So that's a meaningful chunk. I mean, that's a little under a third of their total customer base are on this reduced fee program. Yeah. So the net of all that, you know, in Q1, of which it's only March in Q1, that is the pandemic month

for the company. Because they're so US-based. They have almost no international penetration. Canada and Australia, but very small in each. Right, so it wasn't until March that they would have seen anything. And really the end of March. Yeah. They reach overall.

for the whole company positive contribution margin in q1 and to define contribution margin for a second why this is so important contribution margin is so you've got your revenue their uh you know what was it 885 million ish revenue that the net revenue that they did in 2019 If you take out all of the variable costs associated with that revenue,

cost to serve, support, and most importantly, sales and marketing, how much sales and marketing spend, how many promos are you doing to acquire all the customers and retain all the customers that goes into generating that revenue base. take that all out for the whole rest of the company's life up until this point, they were losing money at this point. Like they were literally giving away dollars for less than a dollar. 97 cents or something. Yeah.

At this point in Q1, it flips. So they're now contribution margin positive. Now they're not... either cash flow or net income positive as a company at this point yet because they still have their fixed costs you know their engineering base their gna their headquarters their rent we'll see if they keep that uh all that they're paying um but this is a huge moment in any company's life And I believe I did some work based on what I could tell from Uber's 10K for 2019.

Uber only in 2019 just barely hit this mark. They were essentially contribution margin break-even in 2019, despite being way older, way bigger, having multiple products around for a long time. DoorDash hits this in... Q1 and then continues to accelerate throughout the pandemic and the rest of the year. Accelerate in growth or get more contribution margin positive? Well, the answer is both. Definitely growth.

and contribution margin. So in the last quarter, Q3, ended September 30th, contribution profit. improved to 215 million, which a year ago they had lost 52 million in Q3. And I believe the total contribution profit for the nine months of 2020 so far is $433 million. So they did half of that in Q3. So spread across Q1 and Q2, it would obviously be... less so they're accelerating.

Yeah, so their contribution margin was negative 70%, then negative 20%, then negative 20, and then... exactly what you're talking about in Q1, it flipped where they were positive 7%, then Q3 positive 29%, or I'm sorry, Q2, and then Q3 was positive 24%. Having 25-ish percent contribution margin is great. The big question will be, will this continue after the pandemic, after they have

I think I was in one of the sources that you can check out in the show notes. I remember reading that someone was like, they're effectively essential infrastructure for the country right now. I sure hope they can be profitable with that kind of demand. But yeah, I mean, all power to him there. Yep. Totally. So then two more things to wrap up history and facts on election day, November 3rd, 2020, a huge moment for the country, but also for DoorDash and Uber and the whole gig economy.

Prop 22 passes in California. This was super controversial. We said we would get back to gig labor here. We won't go into all the ins and outs here, but like basically the TLDR is California has a really crazy legislative and legal system where. citizens actually vote directly on propositions that impact the laws instead of a Republican representative type system and Uber and DoorDash, as well as the other gay economy companies.

had put forward this Prop 22 to basically permanently create space and classify their labor as contractors and gig economy workers, this idea of a third type of work. You have pure contractors, For 1099, you have pure W-2 employees. And California and other states have been trying to classify gig workers as make companies classify them as W-2 employees.

And Prop 22 says, no, they are contractors. They will be paid as 1099s, but it's this third class of business. And it basically opens the way for the company's sustainable. economics on their labor supply uh so that was a huge win for the companies regardless of what you think politically whether this is good for gig workers or not, it happened. It removed an existential threat to the business. So literally 10 days later, on November 13th, 2020, DoorDash releases their S1 and files to go public.

As we wrap up history and facts here, should we talk about some of the interesting nuggets revealed about their... Absolutely. All right. So one thing that I sort of found interesting was trying to put into context the size of their business. And I think that... This was useful for me because we talk about all these different companies and numbers. Once you get to a certain level of big number, there's like big number syndrome that takes over where you're like, I don't even understand.

like what what kind of how many billions are normal you know like you get into this weird headspace yeah so There was $8 billion in gross order volume in 2019, as we've talked about, which basically means $8 billion of food were paid for, including taxes. And of course, DoorDash kept, I think it was 880 million of that as revenue. So that's an effective take rate of like 11%. When you think about it of like, you know, all their cohorts,

have different take rates. They started at different take rates. There's different incentives applied to each one. So it's kind of this like 11 to 15% or 10 to 15% floating thing that starts high and then goes down over time as you receive less incentives but anyway in terms of what the incentives that the consumers are getting but the take rate for DoorDash gets higher over time as they're paying out the incentives, right? Sorry, yes, I said that backwards.

So then, of course, they had monumental growth. You can sort of back into, depending on how their Q4 goes, that their run rate right now is something like a 22 to 25 billion dollar gross order volume. on an annualized basis. So for 2020, it would seem like they'll probably come in around $25 billion in gross order volume. Now, how big is $25 billion?

To contextualize this, at the smallish order values of food delivery as a category, compared to say travel which we will cover tomorrow on the airbnb episode it's actually kind of hard to stack all those purchases on top of each other to get to a truly huge gross business And those who have done that successfully are in the e-commerce vertical. So DoorDash has $25 billion-ish a year that moves through their platform. Amazon last year had $335 billion.

And when you look at Alibaba in China, they had close to a trillion dollars of gross volume through their platform. And even Pinduoduo, which we covered to start this season, had $150 billion in GMV or gross volume. Man, talk about big numbers syndrome. That's 6x DoorDash's gross order volume. And even crazier to put Pinduoduo's growth and scale into context is that they started two years after DoorDash did.

But China is like a whole different, you know, comparing any numbers to US-based. Which, by the way, total aside, because we've talked about Meituan here, and now we're talking about Pin Duo Duo. Like, I mean, China's so different. We need to do more episodes. We need to do Meituan, but like... It's just crazy. Tencent owns over 20% of both PinDuo and Meituan. So you want to index Take a look at Tencent.

Yeah. Another few interesting things that I thought were noteworthy from the S1 were the existence of different products that I did not know that DoorDash had. Most notably, so there's DoorDash for Work, which is kind of competing in that market of office delivery that we talked about. We talked about DashPass.

There's these two things that I didn't know about DoorDash Storefront and DoorDash Drive that are worth understanding. Because basically, the way you can think about DoorDash is they are... the ones who are aggregating all of the customer demand and then they are putting massive amounts of pressure on the sort of back end of the supply chain, the person delivering it to you and the restaurant.

because they sort of hold the customer hostage. Like they say, I've got this customer, I can send him wherever I want. Therefore, I get to have outsized economics in this transaction. For some restaurants, that's a bummer. For other restaurants, they say, I got my own customers who love me. Sure, your delivery network's interesting, and maybe your little checkout page is interesting. I'm going to operate my own business, thank you very much, and I'm going to pay you.

sort of piecemeal for these things. And if I can't get it from you, DoorDash, I'm getting it from other people. And so, you know, we had Nick Kakonas on the LP show to talk about talk and we had this fun episode we did with him called Arming the Restaurateur Rebels. That was a really fun dive into basically like if you wanted to not use DoorDash and you felt like you had a strong brand and customer relationships and a big email list, whatever, how do you do that yourself?

Of course, DoorDash then realizes, okay, we got to compete. If people are unbundling us, we have to be able to offer our services piecemeal in order to compete with those who are building their own restaurant stack. Storefront is an interesting version where they basically say look you don't want to build your own complicated ordering website.

So it's a white label ordering solution. They launched it in July. I don't think they want to be in this business, but they kind of have to be. Otherwise, they're just going to lose those customers. So this is directly competing with Talk. Talk and what's the other big online? OrderMark. OrderMark federates it out to all the others. But there's a handful of players. Toast.

that are letting you stand up your own checkout page. Most of those don't offer the delivery, because as we talked about, that's a very difficult tech problem to solve and operational problem. They partnered with DoorDash, I assume with the Drive product. to do the logistics and delivery. Right, so it's interesting. The storefront ends up being $2 an order. There's some SaaS fee that you pay monthly along with that, but basically it's $2 out of every order.

go to DoorDash just for operating the little website that you drive your own customers to. I think, now is that covering the payment fees though? Might be. I think it probably is. Might be, okay. And then the second product, that's probably the more interesting one, David, the one you're referencing is DoorDash Drive.

which is the white label logistics service where restaurants can have food delivered from orders that they generate through their own own and operated channels like the telephone. Maybe they use DoorDash Storefront or a competitor or they make their own website. that's seven dollars per order and one dollar for every mile after the first and i was like oh doordash drive that's interesting i wonder like if any like does anyone use that

I have gotten Chipotle delivered from my Chipotle app many, many, many times and have never realized that that is actually DoorDash on the back end. A Dasher walks into Chipotle, picks it up, brings it to my house. That is a really interesting business to be in. You get to command, obviously, less of the economics because you don't control the customer relationship, if you're the DoorDash in this case that we're talking about.

but it lets them leverage this asset that they've built for customers who say like hey, I do have my own customer relationships. I still want to pay you to use this driver-based asset that you've created and all the technology to power the whole thing. And it lets them address basically a larger market than they would otherwise be able to address with the pure DoorDash marketplace. Yeah, the analogy I've heard here, and I think it's apt, is DoorDash is both the Amazon and the Shopify.

in this space. The Amazon in that they operate a marketplace that consumers go to, the DoorDash app. and they'll generate the demand and they'll send you marketplace orders, fulfill it with their logistics just like Amazon does, and they'll take a cut of the transaction for doing that. And they're also the Shopify where like, hey, you got your own demand, just like you're saying, Ben. That's cool. Do that. We'll give you the tools to service your demand and you'll pay us for the tools.

Yep. And they actually encourage their customers, if it's like a Chipotle, to do a list. They say, look, you have your customers. Like, you have an app. You should do that. We should only extract seven-ish dollars of value from you if you've got your own customers. If you've got our, you know, you probably want access to our customers, too. You should also list them. Yeah, why stop there?

Just like lots of D2C brands sell on Amazon and sell direct. Exactly. It's the omni-tranal strategy for food. All somehow paying DoorDash along the way. Well, and I think that's like... To my mind, that's what I find. So we'll get into more nuggets from the S1, but that's what I find so impressive about the company, right? It's like they... have gone through this slog.

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The last point I want to make on that is a great point that was done in the S1 Club, and the S1 Club is an awesome substack. that friends of the show put together that you should check out. And you can click the link in the show notes to see that too in our sources. An excellent analysis that basically shows it costs about $6 for DoorDash to acquire a customer.

And assuming that they stick around for five years, and frankly, we don't know how long they're going to stick around, but that seems like a reasonable enough estimate just because the company is so young. that DoorDash can earn about $60 in pure profit from them over those five years. So that's a 10 to 1 CAC to LTV ratio. And it takes about 16 months for them to recover that $6.

And it sounds like a little bit of money, but when you think about, you know, you're ordering all this food, DoorDash is only keeping a small percentage of that, call it 11 to 15%.

For most people, you're not ordering every night, you know, from DoorDash, you're ordering a few times a month or a year. And in addition, they're doing a lot of incentive-based, like little... subsidies that are trying to get you to get your order so the longer someone sticks around the more um the more they're going to generate and a lot of that profit is actually back weighted for doordash

Yeah, and I think the other important point here, too, that, you know, as Bill Gurley has written about in the past, a lot about how Just looking at CAC and LTV and payback mass a lot of... complexity and important things about the business.

You got to think about what the levers are that DoorDash is pulling here. They certainly could do things to generate more profits out of every order that they're getting from customers through raising prices. And that would make those numbers go up and that would make payback happen. Faster. But because if you think about what did we say there? Their contribution profit margin is based on gross order value right now, 2%.

2.4%. 2.4%. You did that analysis that shows on the average order value of a $30 order, including tip, after allocating all the variable costs and all the sales and marketing costs and promotions, DoorDash has contribution margins at about 80 cents.

So that's how you, to understand why it takes 16 months to earn back that $6. So now, so think about that, right? You're going to earn $50 in contribution margin profit over five years. That means consumers are spending 25x that in terms of the dollars they're spending on the platform. that's huge amount of economic activity you're generating, right? And so by keeping those margins lower, this is the whole thing about flying close to the ground. Bezos says, your margin is my opportunity.

you're generating more value for consumers and for the restaurants and the dashers and the platform, presumably too, by keeping that lower. Other people won't be able to match that. You get more density. You grow over time. The flywheel. spins here so like you know yeah 50 bucks to you but what's that uh $2,500 in spend that the customers are doing over over five years and yeah you know can that grow as you add new categories

I think it could. You better hope if you're a buyer of this stock that it can grow as they add new categories. I mean, David, this is the best illustration yet of the whole point we've been trying to make on this episode, which is In order to try and be profitable and grow without massive investor influxes of cash, so in order to be a cash flow positive company,

who is profitable and growing in this category, you have to fly so freaking close to the wire, if it can be done at all. And the best possible illustration is, for one order, one $30.36 order, they get to keep 80 cents. And boy, are they working hard to get that 80 cents. So they have to believe that they're providing tons of value all around the ecosystem and betting that there's going to be a crap ton of those transactions.

in order for you to believe that this business can eventually spit off a lot of cash. Indeed. Wow. I think that brings us to our analysis section. Should we talk about the price? Yes. Just to contextualize who currently owns this company before it's going to IPO. SoftBank, the Vision Fund, owns about 22%. Sequoia, 18%. I think that's very evident by the story told of how we sort of got there. Greenview, who we didn't really talk about, owns 9%. That's GIC. That's Singapore.

Oh, I didn't realize. Okay, so I guess we did talk about that. I think GIC stands for Greenview Investment Capital or something like that. Got it. Tony owns 5%. Co-founders Andy and Stanley each own 4.7%. So once upon a time, these guys own the entire company along with a fourth co-founder. And here they are, three of them representing under 15%.

That's a story of dilution if I've ever seen one. Kleiner Perkins owns about 2.1%. That was reported, and I don't think that's necessarily in the S1, but... I think the number of shares, because John Doerr's still on the board, so the number of shares... Ah, right, so that's how that was all disclosed. So, okay, that's who owns this company coming into today. I sent David an article last night just to take a trip down memory lane. I should look up the date on this. I think it was November 13th.

from the Wall Street Journal, food delivery company expected to fetch valuation of over $25 billion in December market debut. That sounds high, man. I think the biggest number we might have mentioned was $13 billion. They did raise around an evaluation of $16 billion. So my gosh, that would be awesome if they could fetch a $25 billion valuation. That's a great markup for investors.

Share price for that would have been, I'm trying to remember. Gosh, it's hard to remember back that far when the price was so low. Yeah. What were some of the different ranges that then were given in the ensuing weeks? So when they filed the S1, like all companies, I think the range was blank.

And then the first range that they filed was 75 to 85 bucks a share. I think they upped that to 85 to 95 bucks a share. And then last night, Tuesday, December 8th, 2020, they priced the IPO for a fully diluted market cap of $39 billion. It's a lot higher than 16. Now, to be fair, they, so last year net revenue was 885 million. So just under a billion.

So far in the first nine months of 2020, they've done almost $2 billion, $1.9 billion in net revenue. So, you know, we're talking 20 times trailing nine months net revenue. So I don't know, you do some math. extrapolate that out to a year maybe you're at 15 times revenue still high still high so uh david and i have not refreshed our browsers yet but uh as of

You know, we started this episode. It had not. It had priced and sold it at $102, but price discovery was still happening for Market Open. David, let's pop open the stock and see where it's trading now. Holy crap! I don't have it yet. Hang on. I'll tell you the price that it opened up this morning. It opened trading at $182 a share, which is a market cap of around, what, like...

70-ish billion. Wow. David, where are we now? As I look at the ticker, we're at 177 and 77 cents. Alright, so it dropped a little since the open. Yeah. But that is up 75%. And we didn't have time to really research this, but maybe you did, Ben.

you know, Goldman is leading this IPO and they had some hybrid system. Like, you know, everybody's like, ah, you know, traditional IPOs. You give off the pop, you leave money on the table. Gurley's been crusading against this for years. He got SPACs and whatnot on DPOs. Like, oh, we got this new system. We're not going to leave money on the table. I don't know about this new system.

This is one of the most egregious offenders of leaving money on the table. This is probably close to a $3 billion wealth transfer from... employees and investors of this company to the people who bought the IPO last night. The investment bank's clients. Yeah. Here's the thing, though. I think it's been... proven over the last five plus years that people have been talking about this, that you can't beat them. You can't stop this from happening. So I think what we need to do is we need to

find a way for the acquired community to get allocations and IVs that we gotta join. We can't beat them, we're gonna join. So all our friends at Goldman, if you're listening, we need to get a car as a client. We need allocations.

wow david i honestly i cannot believe this i like if you would have told me a month ago that doordash was going to be a 65 70 billion dollar company up 71 and a half percent ish from a 39 billion dollar market cap or say we're talking a 70 billion ish market cap right now somewhere in that neighborhood Wow! It's kind of a volatile first day, too, because it's...

If it opened at 182, it's now down to one. Let's see, the high point on the day was 187. The low point so far has been 173. So there's still a good amount of price discovery happening in the public markets right now. Yeah.

Wow. We've got another hour-ish to trade here. So, okay, over the course of the next several sections, all these analysis sections, I think the question that we have to keep in the back of our minds is, What is the things you have to believe about their future growth and about their future profitability in order to, in some way, justify the value of this company right now?

And I can't think of any better way to do that than heading into our narrative section where we, for folks who are new to the show, this section, we try and paint the media narratives over the last few months for the bull case and the bear case of, why you should be excited about this company or why you should run from it at all costs. And the market has certainly spoken. But David, what was the sort of biggest bull narrative surrounding the company? So, yeah, I mean, the bull narrative.

I think we've told a lot of it along the way here, and I at least mostly subscribe to it, is They have, just like Meituan seems to have done in China, they have accomplish the dream. or in the process of accomplishing the dream and taking a market like this, a highly competitive local network effect market, and tipped it in their favor. such that there's no viable competition. They have a wide berth to run, but to keep growing.

in the sector that they're in right now with food delivery to add other products and services into it and become the dominant you know meituan as we'll get into now is It's not really just food delivery anymore. That's a small part of what they do. They are a super app, just like Tencent and WeChat is the super digital app. Meituan in China is the super physical app. Friend of the show, Rita Yang over at GGV.

has a really great YouTube walkthrough that we'll link to in our sources of what it's like to use Meituan in China. You want to book a massage? You book a massage. You want to order food? You order food. You want to order flowers? You order flowers. You want to make a restaurant reservation? Great. You order your food from restaurants, you also make restaurant reservations in the app.

And you're opening it all the time and it's how you interact with your physical world and local businesses around you. I think that's probably the bull case to me. Yeah, it's boiled down to they are... the last mile near real-time logistics company. Like they're the local on-demand FedEx. to get anything to you. And then you just have to let your mind wander on what are all the things that you could want at your door in a moment's notice.

And really, that starts to shift your mindset to like, oh, so they're actually a competitor of Amazon Prime now, less so a food delivery company. Well, I think what's interesting is I think it's a yes and on the real bull case. Yes. It has to be. It has to be a yes and, right? I think it's everything you just said. But it's also this, you know, what Meituan has become in China, which is, and Tony. talks about this and they talk about it in the S1 and I think this is part of what DashPass is.

It is your way that you interact with all local businesses in your area, whether that's bringing stuff to you or you going to them or even other interactions. So the example of restaurant reservations. Well, what if it's... You can make restaurant reservations, but you also get special offers at the restaurant. You can book things. You can book special experiences. And because you're a DashPass member, you might get some discounts on that.

Well, and then just like Amazon has made a big business, a big high margin business in advertising on Amazon. Well, right. Once you have that traffic, there's lots of ways to. Not hard to believe you could have. sponsored listings for food delivery or for other things within the app. And if I, as a consumer, I'm opening this three, four, five, six, ten times a week to interact with things, and I'm getting all this stuff put in front of me.

That's pretty interesting. Right. Yeah, smart to name the company DoorDash and not like DoorFoodDash. And it's also smart to introduce DashPass in sort of a... like even pulling the door away from it you know because then dash pass you could you could imagine applying that brand to you get special discounts and special relationships with merchants that aren't necessarily being delivered to your house, but you're just transacting through the app.

Yep. And I think, so look, this is the Super Bowl case. Lots of questions about whether this can happen, when, how. There is another way to paint the bowl case too, which is basically like that. this company is an optimization machine and they will run at fully utilized optimization. It's kind of like a factory floor. All those machines are really expensive so you better run them at the most perfect harmonious capacity so that you can be profitable on that high amount of fixed costs.

And the way to think about that in this sense is like there's a lot of different ways in which they can optimize. But like the biggest one is Once you've acquired a customer, can you get the most amount of profitable transactions out of them over time? And obviously like big performance marketing angle to this company.

uh similar to like a a restaurant once you onboard a restaurant can you keep them for a long time can you be profitable on them it's it's all about like Getting to not only the scale, but the sort of internal data that the company has so they know exactly how to price every component, what customer is worth going after, what restaurant's worth going after, what...

product at what time. In a lot of ways, it's basically a bet on data and data science being able to be the way that you can do this thing profitably. not to mention even just the fixed costs, so to speak, although they're variable costs, but it's a fixed set of variable costs of having the dashers operating, right? Like you have capital in the system all day, every day.

with the dashers that are operating on the platform, right? And so, like, how do you leverage the fact that they're getting paid to be doing the fulfillment on the platform? How do you get more leverage out of that? Meaning... make them do more deliveries more efficiently during the time that they're working for you. It's almost like the gig economy. It's a third way to think about costs. It's not

It's variable, but it's not totally variable. It's a fixed set of variable costs in the network. And how much leverage can you get out of that? Yeah. Okay, so then that goes to the bear case, which is actually one of them is pandemic related, which is The most simple way to look at the pandemic-related bear case is this is the best it's ever going to be for this business. And after this, there's going to be way less demand than there previously was.

The other, I think a little bit more nuanced way to look at it is the data that they're getting right now may not inform consumer behavior in the future. And so it will be hard to trust the guardrails for this cohort. Yeah, of course all their most recent cohorts are looking great right now because of the pandemic. Right. You know, I personally think the way it will play out is that all the new customers they did acquire

have pseudo-permanently change their behavior. I think once you make a behavior shift, and I just know this from myself, DoorDash has won me over as a customer. And I don't think I will sort of change behavior after this, but they're certainly not going to acquire customers with the ease that they did during the pandemic. So that's sort of my like. metered bear case on on the i would say also to even on that

One thing, we don't get delivery often. I've done it the last couple of nights in research for this episode. But what we do do often is take out. And I think this is one of the things That's really smart that DoorDash has invested in is making that a feature on the platform too. Yeah, it's way more, I vastly prefer and probably the restaurant vastly prefers me to place my takeout order to walk over and pick up from my local Thai place.

via an app rather than calling them and tying up the phone lines and DoorDash has found a way to enable that and get paid for it. Yep. Yep, I think that pretty well. Anyway, the biggest bear case I think you can make is that they're not going to be able to make the leap out of this restaurant category. And this is going to continue to be a razor thin, highly competitive business.

And they're just never going to be able to sort of take all the investment that they've made and actually get to benefit from an immensely cash flow positive output on the other side. Yep, that makes sense to me. I guess maybe there is one more legitimate argument you could make on the bear case, especially at this valuation, which is this TAM is maybe not as big as you think. And, like, obviously it's big.

But how big is it? Now, in the S1, they talk about, what is it? I want to say something like 600 billion-ish. You have off-premise restaurant food annually in the U.S. Yeah, that sounds right. Okay. Now, what percentage of that is actually addressable by DoorDash? So last year, they did $8 billion in GMV out of that. 600 but like you know a bunch of that is dominoes a bunch of that is catering businesses which obviously doordash is getting into that but like

they're not going to be able to address all of that. By the way, it's only $300 billion. 2019's off-premise spend at restaurants and other food service in the United States. 300 billion. Okay. Yeah, so now you're like, wait a So say even you get the whole market, $300 billion in gross order value. We said we have a 2.5% contribution margin, let's say. 10% revenue. Let's just even use revenue. 10% revenue margin. So now you're talking about a $30 billion net revenue company.

um yeah that's great that's super impressive but like that's not amazon Right, and that's if you address 100% of it. Even Amazon only addresses, what is it, 50% of e-com, but e-com is only 20-ish percent of commerce. The way they define their market, just to make sure I actually understand this well, is that they say Americans spend $1.5 trillion a year on food, $600 billion of that has been on restaurants, and then $300 billion is off-premise.

Ah, that's what I was thinking, the 600. The 600 is also tining in. Right, right. So you could imagine... I don't know. I don't know how that dine-in is addressable for them. Man, so, okay, at this valuation, not only do you have to not believe the bear case, you have to believe the bull case, that they are going to... expand outside of just the off-premise food delivery market. Yep. Absolutely.

Well, this is a really actually we decided to do power on this episode as well in a section where we normally trade it off with narratives but I think it's actually very appropriate to do both of them. So this comes from friend of the show, Hamilton Helmer's book, Seven Powers. And power is defined as what enables the business to achieve persistent differential returns. Or put another way, how do you be profitable and more profitable than your closest competitor and do so?

sustainably over a long period of time. And the options for this are counter-positioning, scale economies, switching costs, network economies, process power, branding, and cornered resource. And David, I'm curious where you come down on what power do they actually have here? Well, it's interesting before we get to us.

It seems pretty clear to me that Tony and the team at DoorDash are probably also Hamilton Helmer fans, because if you read the S1, they have this handy little... flywheel diagram, three-noted flywheel, and then they also talk about what they view as their defensibility, and they list local network effects, economies of scale, and increasing brand affinity. So three of the seven. Got to imagine that Hamilton, as he has,

So many, as his work has influenced so many people here in Silicon Valley, has also influenced them. So that's what they think. Network effects, economies of scale, scale economies and brand. And we can talk about how they think about them. To me, the biggest one right now is economies of scale. 100%.

I think it's actually the only legitimate one because I think it's pretty easy to hop for any participant in the ecosystem. It's very easy to multi-home and it's very easy to choose the next best competitor. Like, it's easy to order food, it's easy to deliver food, and it's easy to, as a restaurant, also list on Uber Eats, no problem at all. So I think any defensibility that comes from a network effect is not really real.

Yeah, no, I was going to say that it's related to order, times, and density, but that's scale economies. So yeah, I think scale economies is the big one. And there's something to brand, but it's always hard to actually know. how much to sort of chalk up to brand. I mean, one thing is really true and rings really, really true to me, which is like the whole end game is

aggregating the consumer attention. And this is the Ben Thompson aggregation theory concept applied to food, where if you're the way that people think to order food, like you're the destination site, they're the front door to someone's purchase, you're going to get superior economics on that transaction.

And I think like, as you think about the far, especially if you start introducing an advertising business model into this too. Absolutely. And I think about, as you think about the far future of like, what is the, how does the world of restaurants reorganize? given you now have this participant in the system or this set of participants in the system that are, you know, gobbling up all the consumer attention and the default way to order food.

As the default shifts from that real world to online, whether it's DoorDash or you're using Prime now to have stuff delivered, they're going to start eating or they already are eating the profit of that local business or store. And for the vast majority of local businesses without a differentiated offering other than store location, which is how most businesses used to differentiate.

DoorDash will totally eat them and they'll actually eat their back end too in the same way that Prime now has a warehouse like DoorDash will eventually have warehouses for the most commonly purchased things and be able to capture some more of that margin. So then only the restaurants who deliver unique product or a unique experience will actually be in a good position as the world continues to reorganize. Like it's the same thing Amazon did to e-commerce. is going to happen in food. Yeah.

I agree with all that. I don't think this is brand power in the Hamilton sense. That is a consequence of economies of scale and then growing into network economies. which I think they maybe have a little bit of now, but I do think as what you're saying happens, that'll grow more of a network effect as they have all the consumers and all the restaurants for now, but let's say suppliers writ large, local businesses on the other end.

brand though to me brand like for brand to be a power it has to be like tiffany's you know that's the canonical thing where like i'm willing to pay more for this exact same commoditized thing simply because of the brand name on it and there's no way that that applies to DoorDash like no way if Eats gave it to be cheaper or for the same front like yeah yeah you're absolutely right on that yeah So that's pretty aspirational. Nice one, Tony. We appreciate that. Good try.

Wow. uh listeners for what would have happened otherwise our sort of section where we in a traditional acquired episode would talk about What would happen if this transaction didn't happen? We thought it'd be fun on this episode to dive into what would have happened if Uber hadn't imploded during their 27 and 2018. Would we be here today? And I think.

That gave, in the ride-sharing market, lift a new breath where they were basically dead until Uber imploded and are now a quite formidable competitor. I don't know if I can call them formidable when no one's ride-sharing. they exist and there's not like a it doesn't seem like they're about like in 2017 it seemed like they were about to die and indeed as we've talked about on the Lyft and Uber episodes they were about to die. Uber was gonna win.

And then they have it and now it's stabilized into more of a duopoly type structure. So what would have happened to DoorDash if Uber hadn't gone through their 2017 and 2018? And as we know, 2016 wasn't looking so good for DoorDash. Early 2017, they could have died. So how much of Uber fumbling had to do with DoorDash having a breath?

Well, this is I think this is really one of the most interesting questions on this episode because part of the narrative around this whole space and Uber's role in it particularly that we haven't yet talked about on this episode is what Uber would say, which is we have a structural advantage. in both of the main core products, markets that we operate in, rideshare and food delivery, because we can use our supply of drivers across both of these products.

Lyft is a pure play ride sharing. They can't use their supply for food delivery. DoorDash is pure play food delivery. They don't do ride sharing. Thus, We should, you know, the narrative that they and lots of other people have believed over time is we should be able to win both markets. because we will have better, essentially 2x the scale economy that any pure play player could have. That has not played out.

interesting question is i do want to say like that that actually according to tony is not true

Like that. Well, right. Yeah. Dashers are actually different than rideshare drivers. So like that all sounds great. And until I was doing the research, I was like, how did Uber now win here? They already had all the drivers. Like all they had to do was tell them to deliver food instead of people. But according to Tony, at least, The average dasher is in their mid-20s, and the average rideshare driver is in their early 40s.

And women are willing to be dashers. There's 40% of dashers are female, whereas only 15% of rideshare drivers are women, largely because of the safety concern. So this has been this like... you know, common observation, common belief. Well, I think there's an even more important, so I totally agree.

I think on the what would have happened otherwise I think it would have been interesting so I think Uber got lazy and relied on this idea and I think it would have been interesting if they weren't going through everything that they went through to see like would they have How well would they have done with...

maybe being less having their eye taken off the ball here. Because I totally agree with Tony on this one that the nature of the supply for food delivery... is quite different across many dimensions versus ride share. And in particular, so there's all the demographics that you mentioned. I think perhaps, especially in cities, the more important one is vehicle type. So if you're going to do rideshare in a city, you need to have a nice late model car or access to one. That immediately...

segments out a huge portion of your addressable gig labor economy, your gig labor force there. There are a whole lot more people who either don't have a car at all or have a car that doesn't meet the standards of Uber and Lyft. And DoorDash came along and said, this is why I think bicycles were so brilliant in the early days in Boston. And then that grew into e-bikes. Then that grew into...

scooters of all different types, both the powered, you know, motorcycle-like scooters and bird-like scooters. And I think that opened up. a lot more addressable supply for them that Uber was never going to be able to multi-home across their two products. It's a really great point. Yeah, it's a larger potential supply base than Uber has. And the way Uber solves that problem is like, oh, well, that person can lease a car from us. But if you're a person who...

or Lisa Carter from one of our partners. I actually think this gets to the fact that the way that people plug into DoorDash is pretty different than the way that people plug into ride sharing. I think... Uber would like to continue the narrative that it's largely the sharing economy, but I think the professionalization of supply is pretty clear at this point. The majority of Uber drivers, their full-time job is to drive Uber. I actually don't know if that...

true with DoorDash. I think it is much more like a younger crowd with a different job that is using this to make a little bit of money on the side in order to do something else. And like, it feels to me much more like an actual realization of the sharing economy as opposed to what Uber turned into. i would agree with that so yeah i actually don't know what would have happened otherwise is not clear it's not like we can crystal clear say like oh yeah

Uber shot themselves in the foot, they would have won here. Things would have been different. Well, certainly it became possible for DoorDash to raise money in a climate that would have been too hostile had Uber continued to be a juggernaut. Yep. And raise money from Uber's largest shareholder. Still so crazy to me that that happened. Indeed. All right. Playbook. Playbook. Let's do it. Oh man.

So many things we've already talked about, but the headline of this needs to be Winner take all markets do indeed have a pot of gold at the end. But so far, we have just seen cash flooding in to try and take it all, but that pot of gold has totally not materialized. Like in 2018, they lost $200 million. And then just like their growth, they tripled it to over $660 million loss in 2019. And of course, the losses are shrinking in the pandemic. They've only lost $150 million so far this year.

I mean, this is the classic modern embodiment of a venture capital business where capital floods in because the perception is that when you're at the biggest scale, then... Even if you stay small margin, all those little margins across all those little purchases add up. And maybe people can take that next leap and believe that you have pricing power so then actually you can make more money per order over time when you're a monopoly.

But I think this is the bear case on this whole ecosystem that we're in right now. The winner-take-all effects may not be as strong as people thought. And the lock-in and moat may not be as deep or wide or whatever you want to say as people thought. And it continues to take longer and longer and longer to be able to realize that end state where you actually can realize all the fruits of your labor, or not really labor, but actually capital that has gone in.

So to me, that's the biggest playbook theme here is they're running the playbook that is The winner-take-all. Capture a winner-take-all market. But we're in the middle of the story. We're not at the end of it yet. Yep. Yep. I think that's true. Although... I think coronavirus. was a huge accelerant to them vastly improved their chances and also

stepping on the gas and continue to run this playbook while their competitors pulled back, vastly improved their chances. So, you know, whereas the narrative has shifted on this, where in 2013, 2014, it was, run this playbook, there is the pot of gold. In 2016, 17, 18, it was, there's no pot of gold at all. This is all a mirage. Now, the question is, Well, there may be a pot of gold. Right. I think a related corollary playbook theme to that for me.

that we've seen across this season and acquired. Some of the other episodes we've done recently focusing on more bootstrap businesses and just businesses with different histories. I mean, even I would put Epic Games in this category too. Different markets are different, right? And if you're going to go after a market like this,

you stand no shot unless you raise a lot of money. You're going to get torched. But that's not the case in other markets. Sort of. It depends if you want to compete nationally or globally or not. I don't know. DoorDash is probably going to win if you're trying to operate just in one city and then they come in and compete against you in that city. But I actually don't think there are any meaningful cross-geography network effects other than the national chains.

which DoorDash has done better at than Uber. But if you're Uber Eats, really what are the cross-geography network effects between your Uber Eats business? Basically nothing. You get to reuse the same technology on the back end. Great. Customers know of your brand. Great. But compared to Airbnb, which has an unbelievable cross-geology network effect. probably the best ever right like i only live in one place and if Word gets around pretty quick that all the restaurants are on one app.

I don't think you need a national brand or an international brand in order to win. I think that's fair, but I think your upside is capped. You're never going to build an Epic Games type size company if you don't take the go big approach in a capital intensive market like this. Yes. Great point. Great point. I guess it really comes down to capital intensity.

Like if you're operating in a capital intensive market, good luck if you don't have capital. But as we've seen on this season, there are lots of other markets that are not capital intensive. Yeah. Okay, great. That's one for me. The other one I want to highlight again because I think it's very Amazonian. It's very apt and to me just sums up.

DoorDash exquisitely well is their value of operating at the lowest level of detail. And I think it's that's one of those things that like people say it's like oh yeah like you know like people talk about the amazon um leadership principles the leadership principles yeah exactly but i think understanding what that really means? Tony talks a lot about this in interviews, and he uses the example of the Cheesecake Factory in San Francisco, which is in Union Square.

Cheesecake Factory is on the sixth floor of a mall in Union Square. There's no dedicated parking out front. You need to take an elevator to get up there.

And they have a bunch of different serving stations. And you've got customers, even in San Francisco, who like to order from Cheesecake Factory. And they live, you know, a 20-minute car ride away in the city. So how are you gonna... get them the get them their cheesecake in a high quality timely manner well the only way you can do that is by doing things like he talks about like well okay we went to the mall and we're like can we get a dedicated elevator shaft for us

Great. We went to the restaurant and we were like, can you give us a dedicated serving station? Great. They went to the parking garage there and they're like, can we get dedicated Dasher parking spots? Great. That only happens when you can't do that when you're sitting in a... when you're sitting in an office writing code. Right, and only paying attention to averages.

I think another great embodiment of this is, I think it's Michael Block is how you pronounce his name on Twitter, talked about how, and he's an early employee, in food delivery, you can compete on four things, price, speed, selection, and quality. And they sort of like... looked around, realized that they weren't necessarily going to beat Uber on price.

or speed because they didn't have the density yet that was in cities. They didn't have the broadest selection yet. They did have high quality restaurants. And one of the very interesting things that they zeroed in on is speed. They're like, well, how fast do we need to be? And he says, our analysis showed that there was a limited marginal benefit to customer conversion or retention rates under 42 minute ETAs.

As long as deliveries were sub-42 minute, customers didn't really care how long they took. And it's just this like amazing light bulb that by diving into it, this flies in the face of what I said a moment ago, because this is an average number and not a... sort of like per customer, per location, per type of food, tail number. But the idea that like they can learn that

42 minutes is their food delivery equivalent of that sort of magic five-minute mark for Uber, where I don't care if an Uber is two minutes away or five minutes away. It's the same thing. I do care if it's five minutes away versus 15 minutes away. Those are very different things. And I think his point in his Twitter thread, which again, we'll link in the show notes, is that

You know, when they were competing against Uber, Uber was in a constant optimization race to get the food to you faster. And DoorDash was kind of realizing, actually, that might be a waste of resources. Yep, yep. So anyway, it's the Amazon leadership principle, dive deep, like being deeply analytical, which they need to be to be able to operate at the margins that they're operating at.

Alright, last section before grading is value creation and value capture. And this is a section that we started doing based on actually a lot of listener demand that has two parts. The first part is, how does the value that they are capturing compare to the value that the company creates?

you know is it like wikipedia where they capture a tiny little percentage and could be capturing way more or are they capturing plenty like google who makes a ton of money from the value that they create in the world so there's that that component and the second is How does the value created for the world, not just for shareholders, compare to any value destruction that they've done in the world? And I think let's address these in order. So on that first one...

They seem to be capturing basically the maximum amount that they possibly could. Anymore and consumers probably wouldn't buy. I mean, it's effectively a 40% markup on your food in order to pay DoorDash and then to pay the Dasher. The market actually feels relatively constrained to me of people who are willing to pay 40% more for their food to have that sort of convenience. So I don't think they could be extracting any more. So that's any more from consumers.

any more on the restaurant side and the restaurants probably couldn't keep their doors open. Like I think DoorDash does a lot of research on figuring out like how much of that drip do we need to give to restaurants so they'll continue to be our suppliers.

and not turn off the platform, either because they don't like us or because they just can't operate at all. So I think they're doing a reasonably good job of maximizing the value that they possibly can take. Well, then there's the dasher side, too. of are they earning enough on the platform. Right. And, you know, the knock on this whole freaking business is like, this business model is, is there actually enough dollars to go around?

as you start to get to more and more customers versus a smaller set of customers who are willing to pay a larger markup in order to have more actual dollars to go around here. So that's sort of how I would describe. I think companies are doing a bang-up job of capturing value. How does the value created for the world compare to value destroyed for the world?

I think there's a strong case to be made around exploitation of gig workers, not nearly as strong as like ride sharing. I actually think that this seems to be a much friendlier company to dashers. than ride sharing tends to be to drivers. I agree, and I think that the biggest reason for that, I think, is structural. We were talking about a minute ago in terms of vehicle types, the depreciation on ride-sharing on the vehicles.

is a huge hidden cost that the laborers bear. And of course, depending on what vehicle you're driving with, for DoorDash, you're probably also incurring depreciation, but potentially way less. Right, and a lot of them are leases, so it's sort of like built into the cost of the lease, but yeah. I think the bigger case to make that there's value destruction happening for the world is on the restaurant side.

As much as DoorDash wants to sell a story around we empower local businesses, and I would hate to live in a world where those businesses didn't thrive and people only bought stuff through us. We're not the merchant. Our merchants are the merchant and we're just the platform. I just don't think...

that's where this business is really going. I think that's a wolf in sheep's clothing or fox in the head of the house or whatever you want to say, especially now that they have the market cap that they do and they're publicly traded and they have the shareholders that they do. I just don't see a world where... what they're actually doing 10 years from now is empowering local businesses. Yeah, it's interesting.

It's funny. I think I would maybe push back on that a little bit in the now, in the short term. in that, yes, there's a lot of sentiment among restaurateurs, and often justifiably so, that DoorDash and other platforms take way too much of the order. Getting into their cost, their restaurant's cost structures are not sustainable. Profit margins when selling on these platforms, they can't.

make things work i think there probably is some truth to that on the other hand i think they're also plenty of businesses and restaurants that have figured out how to make it work and it's like incredibly additive to them um being able to have this new delivery channel that honestly they just they can't operate this network themselves as we've talked about in the whole episode. So I think that's today. I do think, though, in the future, the point you made is going to become more salient.

As cloud kitchens, ghost kitchens, other food-related businesses get built that are going to be more of scale businesses as opposed to local restaurants. And my question is, how do they just not end up combining? And how does DoorDash not build this themselves? I think they are. I think they're working on it internally. I think they're also a bunch of other...

startups out there, several that have come out of Uber, one that my brother-in-law works for, a virtual kitchen company. So I think those businesses are going to be more scale businesses.

and some of them are going to partner with local restaurants, like Virtual Kitchen Company partners with local brands. It helps them and includes them in the economics. And I think others are going to just be like, we're doing this ourselves, we're vertically integrated, and you're going to move more and more towards an Amazon type marketplace where you have big players that are large consolidated manufacturers and brands operating in the Amazon marketplace and the small guys get pushed out.

Yep. It's going to be more important than ever for restaurants to create customer love. Yeah. And not in a begging way, not in a like, please support us versus these bad guys and shop local, but more in like a delight way. Like I think if I was running a local restaurant right now, what I would try and do is like,

I should caveat all this with like, oh my gosh, I can only imagine how hard it must be to be a small business entrepreneur running a restaurant right now. But I think the most successful path forward for the future is look at something like DoorDash Drive and be like, Okay. Great. We're going to use them for the delivery network. Awesome. let's not list on DoorDash the marketplace. Try and aggressively start building my direct email list.

figure out how to do all sorts of segmentation on like, you know, who loves me the most, figure out referral programs, figure out basically how do you run your restaurant like a bootstrap web business where you have like really rich CRM information about your customers.

And then try and be creative in ways where you're not just a food experience. Like you have an online component or you, I mean, a lot of this is like pages from Canlis's book. And Kokonis and Talk too. Totally. What they've done at Alinea and with Next. You know, they've executed this playbook to a T. How do you do this stuff creatively, cleverly, digitally, cheaply, without being a fine dining experience?

And then use DoorDash for its component parts because it's great that it's built out, but you don't want your customers coming from there. And then you don't want that traffic at the whim of, of someone who's trying to commoditize you. Anyway, I think the restaurants that do have the most differentiated offerings will be able to thrive independently.

And otherwise, I think it's going to be, it actually looks a lot like the travel market where like once OTAs came into the picture, it was really hard for any airline to differentiate. And then they all ended up being a commodity, racing to the bottom, dropping their prices, seeing massive consolidation. Yeah, it feels like that's a playbook that's being run in restaurants right now. Yeah, totally. Which I think, you know, then the question is for...

Value creation, value capture here for DoorDash. The question is, was that going to happen anyway? Like, is DoorDash causing this? Or are they... participating in it. They're also arming the rebels. Merely an inevitability. In the same way that was Facebook an inevitability for the publishing world.

Because, again, Tony, DoorDash, the team, they're amazing. They persevered. They had really great insights that very few other people had at the moment. They persevered through incredibly hard times, and they have... against all odds built seemingly built actually like they're on the path to doing it they built a good sustainable business at the same time like

this was going to happen because this is happening in China. Like this moment was, if it wasn't them, it would have been somebody else. And again, not to take away from anything that they've done, but like the timing was right. That why now of like mobile enabling this. for all three sides of the marketplace. It was going to happen. Yep. Now is a great time to thank good friend of the show, ServiceNow.

We have talked to listeners about ServiceNow's amazing origin story and how they've been one of the best performing companies the last decade. But we've gotten some questions from listeners about what ServiceNow actually does. So today, we are going to answer that question. Well, to start, a phrase that has been used often here recently in the press is that ServiceNow is the quote-unquote AI operating system for the enterprise.

But to make that more concrete, ServiceNow started 22 years ago focused simply on automation. They turned physical paperwork into software workflows, initially for the IT department within enterprises. That was it. And over time, they built on this platform going to more powerful and complex tasks.

They were expanding from serving just IT to other departments like HR, finance, customer service, field operations, and more. And in the process, over the last two decades, ServiceNow has laid all the tedious groundwork necessary to connect every corner of the enterprise and enable automation to happen.

So when AI arrived, well, AI kind of just by definition is massively sophisticated task automation. And who had already built the platform and the connective tissue within enterprises to enable that automation? ServiceNow. So to answer the question, what does ServiceNow do today? We mean it when they say they connect and power every department.

IT and HR use it to manage people, devices, software licenses across the company. Customer service uses ServiceNow for things like detecting payment failures and routing to the right team or process internally to solve it. Or the supply chain org uses it for capacity planning, integrating with data and plans from other departments to ensure that everybody's on the same page. No more swivel chairing between apps to enter the same data multiple times in different places.

And just recently, ServiceNow launched AI agents so that anyone working in any job can spin up an AI agent to handle the tedious stuff freeing up humans for bigger picture work. ServiceNow was named to Fortune's World's Most Admired Companies list last year and Fast Company's Best Workplace for Innovators last year, and it's because of this vision.

If you want to take advantage of the scale and speed of ServiceNow in every corner of your business, go to servicenow.com slash acquired and just tell them that Ben and David sent you. Thanks, ServiceNow. Uh, grading. So. Yeah. For the new influx of folks joining for the show, when a company buys another company, what we do is we grade how good of a use of the capital of the acquirer's company

was for Facebook to buy Instagram. In hindsight, how good of a use of capital was that? On this episode, the way that we're going to do that is... collectively how good of a use of capital was it for the company like all these people's human capital and for the investors in the monetary capital to to go after this business opportunity

in this way over the last five years. And everyone bought it at a different share price. So I think it's a little bit of a, it's very different to say how good of a use of it was it to buy a share today versus if you're a Sequoia. But I think actually...

What we should do is, in some ways, that's true. In other ways, everyone's all on the same boat now. And it's unlikely that there's any path other than really big success long-term or... kind of going out of business or doing some kind of merger combination because at some point

the market cap is going to reflect the actual long-term cash flows of the business. And that might be a long time from now. So I don't want to talk about like, gosh, if you had gotten in early, what your shares would be worth today? Like, it's just not actually interesting to think about the...

the sort of market value of the shares right now. What I think is interesting is to say, should all of these people and all of this capital have raced after this opportunity and will that eventually yield a very profitable business? Yeah, such a good way to frame it. I'm so glad you had this idea to do it this way on this episode. Yeah, I think my answer is it was a...

Not in the very beginning, not in the seed A or B, but in that period after the B, it was a very contrarian move to keep doing this. The end is not yet written, so we can't say for sure because they've had a couple contribution margin positive quarters. during the greatest tailwind to their business that they could ever experience. Bye. Given that and given now the reward along the way in this IPO and the $70 billion market cap journey outcome, temporary outcome here.

gosh, I got to think it's an A to make this decision. Like it's so high stakes though. It reminds me, I had in the notes and didn't say, but it reminds me of in a very different way of Santi at Emergence and the Zoom investment. I feel like this was a... A lot of people, and specifically for Sequoia, and I have to imagine Alfred at Sequoia, this was a bet your career moment.

for a lot of these people. And it took a lot of conviction to stick with the company like they did. And I think it's paid off so far. So I give it an A. I get an A. I see what you're saying, but I guess what I'm saying is we should totally abstract any notion of so far. Like, let's take out the notion of like... have your shares appreciated in value. Because, like, yeah, freaking of course. Like, there's a hype train, you know.

that's like have you seen snowpiercer i imagine the hype train for this is like the train from snowpiercer i could go through oh no and uh so like the the way that i've been thinking about this is basically like what is the likelihood that they'll actually be able to be very profitable on each customer or get a whole bunch of customers that are contribution margin positive and they can sort of ramp down marketing spend and ramp down R&D relative to their overall revenue in the future.

I think the thesis a few years ago of we're going to be your local real-time FedEx I think it sounds better than it has been true in practice based on the way the market has evolved. Remember when Uber said they were going to be Uber for everything and everyone was like, oh my God, this is going to be the most valuable company on earth. I think it sounds better.

because it sounds better than it is because once you start actually getting into it you're like okay what are they going to deliver besides food and you're like oh groceries but that market like that adjacency kind of went away like instacart kind of That lane is no longer open for them. For Uber, the adjacency of food was interesting, and there's other adjacencies that are interesting. I don't think...

DoorDash has as rich of an adjacency landscape available to it. Because when pressed, they're like, oh, you know, flower delivery. You're like, that's what you're going to list in the first two or three. Yeah, that's not a big market. drug stores like we're already listing stuff from cbs and you're like so you're going to compete head to head with amazon on prime now okay huh yeah and i i think like I think the market that they're actually in here is food delivery.

And I think based on their cohort data and their return on marketing spend and their CAC to LTV ratio, like this is going to be a really good food delivery business when they can finally ramp down the marketing spend. But I don't think it's bigger than that. So for me, it's like a B opportunity for everyone to have chased after this, just because I think it's like a big market, but not an Amazon market. I totally hear you. I think...

Well, I don't know. I think I'm probably maybe a little caught up in the story and the hype train, the Snowpiercer hype train. But I do think I come back to like, as I was thinking this morning in a couple hours before we started recording. I went back to Meituan. and looking at what that business is, I do think there's an opportunity to be more and be more in a way, well, tomorrow on the Airbnb episode, we're going to talk about trips and the... honestly kind of zany.

16, I think it was, Airbnb Open. The favorite dream of Airbnb trips, the products that none of us ever used. Yeah, exactly. Experiences, places, reservations, all this. I think that could be that, like, that's just, like, nobody wants that. It's just a bad product idea, one. More likely though, when I look at Maitwan and I'm like, oh wow. That all lives on Meituan now. I think the issue was

with Airbnb, like you didn't interact with Airbnb every day. You interacted with Airbnb very infrequently for a travel use case. With DoorDash, if you're opening it multiple times a week and interacting with it. I don't know. It is still a stretch. It's not what they're doing today. But I think there's a good chance that they can... add more. Just in the same way that Amazon was the book company when they started. Very fair. Well, this will certainly be a fun one to watch evolve. Indeed.

I know we've gone longer than any other acquired episode in history, but I do think we should do carve-outs. I think we haven't done them in a while, and they're fine. I'm curious, David, what do you got on the docket? Oh, and if you're new to the show, carve-outs are basically where we throw in, like... Things we're watching, things we're paying attention to, things we're reading that have nothing to do with the show, but we think are interesting to put on y'all's radar.

I'm so excited we're doing this too. It's been a long time. I thought about all the important erudite stuff I could put in here. I was like, you know what? It's mid-December. We're heading into the holidays. It's been a rough year. My carve-out that I've been getting a lot of fun and joy out of is the game Hades on the Switch. I think it's on PC, Switch, might be on PlayStation and Xbox too.

It's made by the guys who made Bastion and Transistor, if you ever played those games. So, like, indie game developer but just like super high quality really well done and uh this game is so much fun you play you're the son of hades the god of the underworld and you're trying to escape

uh hades and like all the other olympian olympian gods like help you escape and and then so you try to like do these escape runs and then you die like you never make it and so you go through like over and over but it's so well done so fun great times suck but you feel like you're progressing you get that sense of accomplishment like I didn't just like throw you know hours down the drain like I actually built

you know, uh, my skill. It's kind of like what, um, Rahul was talking about in game design. Like, you know, uh, you're building towards a sense of mastery. Like you have this Akata you're getting like, yeah, like whatever it is, it's got that magic that I just feel like. It's a worthwhile investment. Sweet. Love good game design. Alright, I have to get a Switch and then I have to get that game and check it out.

I have three because I was making my list and I was like, you know what? I'm just going to put all three out here. They're all three things you can watch while you're... looking for some things to stream while you're staying safe this holiday season. The first two I think are the best.

written acted directed uh tv shows that i've i've streamed this year and like i have a lot of like kind of like trashier tv i like to watch always sunny the league like a lot of that stuff but like It is always jarring when you watch something that is just tremendous. And there's two great pieces of art that I want to talk about in the movie.

So if you haven't seen Watchmen on HBO, the series, whether or not you were a big fan of the graphic novel or the movie, it is exceptional. And I think it grapples with social justice issues. in a really unique and interesting way that was a little ahead of its time since it was sort of before this summer. But it's fun sci-fi, fun social justice, amazingly well produced and written. So I highly recommend it. The other, I'm sure many people who listen to this show have watched is Succession.

And David, I don't know if you've been a fan. I've not. I've not watched it. Many people told me about it before I got a chance to watch. It's basically a fictionalization of effectively the Murdoch family and News Corp different names different characters all that but just unbelievably well written and acted and it's like

It's so easy to get super sucked in, and you can't stop thinking about it. So highly recommend both of those. Then for a movie, on Hulu, you should go watch Palm Springs. It is an absolute delight. It's an Andy Sandberg film. I heard this is hilarious. so funny. It's so lighthearted. It's so unexpected. In some ways, it's actually a thinker movie while being lighthearted. It's like a modern Groundhog Day, right? It's got elements of that, yeah. But I...

It'll leave you thinking in a different way than the other two, but it's also worth your time. So, you know, if you're like me and you're looking for great stuff to get into on these streaming services, all three of those are awesome. Well, you know, before we wrap here, David, I know you've got a little tribute that you want to do. Yeah. One other thing we wanted to say, you know, we didn't want to make a huge deal because we didn't know him and, you know, we're more arm's length.

Tony Hsieh passed away last week and we just want to take a moment and just reflect on how tragic that was, but also say, you know, just Thank you to everything, the impact that he had on... the whole tech Silicon Valley ecosystem. the companies that we're covering today in DoorDash and directly through Alfred Lynn, who was the COO of Zappos. Airbnb tomorrow, Tony had a huge impact on just the whole ecosystem and, you know, tragic he passed away.

so young but um Thank you to everything he did do during his life to really push the Valley forward. And other communities too. I mean, I remember when I was really involved in the Startup Weekend community, Tony hosted a bunch of us at the Downtown Project in downtown LA and like what he was doing to revitalize.

Um, that area north of the strip, like it was just really cool staying at the container park and just seeing sort of that, that vision come to life. I know the city is much better for it. Yeah. That's a good point. Not just the Valley, but our whole industry and other things. I'm a graduate of the same high school as my wife Jenny Pranson in Marin. Well, now I know a security question of yours.

Well, for folks who don't know, as we wind down the show here, we have started codifying, codifying? I think it's codifying the playbook from each episode. So pulling out all of the... Not only in the actual playbook section that we talk about, but sort of key themes from earlier on. If you wanted to run the DoorDash playbook, how would you go about doing it? And we've been pulling those from each episode in some written bullet points.

And we started emailing those to folks after we post each episode. So if you want sort of a digestible, consumable way to share or help you sort of understand the points we're making in each episode. you can sign up to receive those playbooks at acquired.fm. Anywhere that it allows you to type in your email, we only have one email we send, so you'll get that one. And if you join the Acquired community Slack at acquired.fm slash Slack, you'll be automatically... signed up for that as well.

We're going to do those on an ongoing basis. It's totally open to any of you if you want to tackle that for a previous episode because we think it'd be cool to host more of those on our website too. We've had some great ones that community members have done. Yep. Thanks to the folks that have already done that. If you want to, just shoot us a note, acquiredfm at gmail.com or in the Slack if you want to do those.

We've talked about the LP show a bunch, but I did want to highlight our most recent one we just did with two of David and my LPs from our current and past funds from Foundry Group. Actual LPs. Yeah, so it was the first time having LPs on the LP show. Investors in venture funds. And it was like, amazing to get to kind of like talk about all the things that we talk about more in private with them the ways that they sort of

help guide, especially for me at PSL Ventures, like how to think about our portfolio construction and the ways that we work with the portfolio and how do you manage your time across all those and when you're sizing the types of investments you want to make. How much do you save for reserves? How much do you do up front? So just really good to dive into a lot of nitty gritty in a super structured way, in a way that we can share more than just the private conversations we have.

um that was part four in our vc fundamentals series more uh more good stuff like that to come but if you want to be an lp seven day free trial acquire.fm slash lp feel free yeah and also two things for the holidays that are important on that front one

LP subscriptions make great gifts for the acquired fans in your life. And two, on an even more important note, we've said before, but it's been a while, we never want financial hardship of... any type to be a barrier to someone accessing more acquired content and engaging more deeply with us. getting access to all the stuff we do on the LP show. So if that is the case for you, for whatever reason, just shoot us an email, hit us up on Slack, acquiredfm.gfl.com or join the Slack and DM one of us.

And we will make sure that we take care of you and you get access to an LP subscription, even if you can't afford it. Yep. Similarly for GIFs, it's a little complicated to go through the machinations of making sure to use someone else's email address. So if you want to give the LP show as a GIF, just shoot us a note and we will send over instructions.

and with that if you are not already subscribed and you like what you hear you totally should subscribe and if you like this episode and you have a friend that you think would like it too you can share it from your favorite social media hilltop or with them one-on-one directly we always i think that's probably the best way is for any one person to tell a friend personally like this was great you should listen to it too i think you'll like it for x reason

I just love the one-to-one-to-one-to-one spread that we've had so far. Feel free to share it. Feel free to sign up for playbooks. And yeah, with that, everyone, we'll see you next time. Actually, tomorrow. Yeah, I was going to say, usually we say we'll see you next time. Today, we'll say we'll see you tomorrow. See you tomorrow.