Acquired - DoorDash

0:00Well first of all, uh, is there like some rule that the graphics that you put in your S1 have to be just like painfully a little resolution? Welcome to season seven, episode seven 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.

0:35And 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 Xu and his co-founders were launching Palo AltoDelivery.com, which we all know today as DoorDash.

1:03On 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 $2.5 billion 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.

1:31a 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 history. You know, 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 Dordash actually be the one to do it? All of this and more coming up on acquired. Then you're a little, your hooks and inches are getting so good. Do we even need to do history and facts? I feel like you, you know, 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. All right. Well, lots to do. Let's get to it.

2:23As 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 and Now, frankly, this is like the set of people who have most influence the direction of the show and kind of the set of topics that we want to tackle. So thanks to all of you 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 acquire.fm slash LP and all listeners get a seven day free trial. All right, listeners. Now is a great time to talk about a new partner of ours here on acquired LaGora.

3:16the agentic operating system that is redefining how the world's best legal teams work. Yup, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. LaGora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry? So the founders did exactly what great founders do, operate with obsessive customer focus.

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3:58drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Lugora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work, and this means that the pie can grow even as each individual task takes less time.

4:18And they recently launched LaGora agent offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required. And LaGora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early LaGora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora now has over a hundred thousand lawyers on the platform from 1200 legal teams in 50 countries. And crazily they went from one million to a hundred million in ARR in about 18 months. Truly insane numbers. And that is the real test.

5:10Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in house at a company, you can learn more at logora.com 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. We've 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. It's been you alluded to on the Stanford campus in the fall of 2012. I remember it very vividly and well because I was there.

6:08I was starting at GSB that very fall. But unbeknownst to me, right across the, kind of made the two main quads, right across the way in the class was called Startup Garage. And this is kind of a legendary class at GSB's Cotot, which 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 like 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

7:06GSB business school students were Evan Moore and Tony Xu. 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 worked 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 good mix of business school students, computer science undergrad. Yep, the dream team.

7:42Yeah. And interestingly, I mean, this is a fairly common thing at universities for an entrepreneurship program to like go start a company class. And it's always the dream, if you're the instructor or professor that one of them actually goes on to become this big successful company, but the vast, vast, vast majority 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. They're 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 the...

8:31summer of 2012, it was about 30 employees, much, much different. And 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.

9:00What else can we build if we know that this is a fake opportunity the internet is coming to all these businesses and like most of these places don't even have 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 selling things at craft fairs and food trucks that could only ever be cash businesses were now brought online. Like they were sort of trackable GDP of these categories of now digitally enabled businesses.

9:30Yep, and we'll get into this more as we go through at 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. It had been at Moderna as an associate before that. And every time we looked at a company, a startup that was going to sell the smaller local businesses, help them with Yadio. It 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

10:04within 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 re-acquire someone else. Like notoriously the worst customer segment as a venture capitalist to be investing in. Yeah, if Tony had gone and pitched this on San Hill Road at the time, he definitely would have gotten a lot of rejections.

10:31But as we said, like 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...

10:48The 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 and a half years old.

11:08and, uh, had cellular connectivity. And they're like, huh, well, you know, squares taking payments, uh, they're using iPads. They're, these store owners are buying iPads. They have them there. What if we...

11:22had an app also on the iPad that when customers came in the front door, the iPad would be there and it would ask, how do you hear about us? And they could see, you know, all these little numbers. 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'd actually maybe built an MVP of this app. And then like, these business owners could now track their customers away. They came from, they could market to them more effectively.

11:46Yeah, 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 Guayan macaroon shop in downtown Palo Alto. I never frequented that, but it was probably too expensive for the broke students at the time, serving the VCs in Palo Alto, not the students in 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, I do have a problem.

12:22that you guys might want to think about. And they as they write on their medium account when they launched 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.

12:47She'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...

13:04Other businesses have the same problems. They go out and interview more restaurants and food businesses and they hear the same thing. All these restaurants is like, you know, the pizza guys are doing delivery, but like nobody else is, you know, the Thai place isn't doing delivery. Most importantly, Orange Hummus is not doing delivery. Most importantly. And 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 take out food was another category where you'd go and you'd pick it up and like maybe there'd be a Chinese restaurant or a Thai restaurant that would have figured out delivery on their own. But like if you are ordering delivery food, it was pizza. Yeah, that was it was dominoes. It was Papa Jones. It was pizza. And that's kind of the crazy thing too.

13:55They figured it out. And nobody had made the leap yet in the US at least to, hey, people like getting pizza delivery delivered to their house, they might. also like other food getting delivered to their house too and you gotta think like pizza has to lend itself better to like a more regular type of delivery than other sorts of food that with more complex menus and stuff I'm sure we'll get into that but like it's interesting to just think about like why 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, it's good, but I think there's a very specific answer about why DoorDash made it work, which we'll get into in a sec, but it's a good question. I mean, in New York, it was happening with seamless and then grab hub, which merge was seamless. And, you know, when I lived in New York, yeah, you could use seamless to get any food you want to deliver it, but it didn't really happen anywhere else in the country. So, okay, so they throw up this MVP.

14:50They buy the domain name Palo AltoDelivery.com. They take PDF menus of a bunch of the top restaurants in Palo Alto. They had some really good ones. They had orange. They had pochies, the pizza place. I guess pochies probably didn't deliver. Pochies are really good pizza in the Bay Area. Life kitchen was great. 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.

15:17A phone number. 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 a design garage. They'll, they put this up and literally within an hour.

15:40They 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 on set 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 drop it off and they like Tony talks about this he actually gets out his phone and they interview them they want to know like how to hear about us What's going on? Why do you order this? And it turns out it was this guy named Bruce Barcat, who lives on Bainbridge Island in Seattle. And he works for for leafly, the marijuana company. He had written a book called Weed the People about legalizing marijuana. And he was a visiting

16:27author at Stanford and he was stag I don't know if it was on Stanford out there stuff that over on Alpine road which is kind of behind the the dish if you know if you know the Stanford campus and Over there there's not like like you're pretty far from University of there's no food over there And so he's 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 Yeah, pretty pretty great use case so 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 you're having people over, big party get a big big orange, and Palo Alto delivery will come and come and make it happen for you. And like you remember it being called Palo Alto delivery? Well, I remember, I think by the time...

17:20I 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 in YC and they had changed the name to DoorDash, but everybody knew that this one's happening. People, like, my classmates, you go to a party and the food was there from hell out to delivery, so they had hacked it all together. This was total, like, Find a problem, solve the problem, you know, not design focus, you know, 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, be a Google voice. One of them would pick up.

17:57They 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 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 for the real. Well, that sounds like a tax and accounting nightmare.

18:19Are 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. 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 to find my friends on iPhones to track.

18:44the deliveries. So they could like route people and be like, okay, this career 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.

19:05The iPhone is already ubiquitous era. 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. 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 startups.

19:34Exactly, 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, notorious of GrubHub had merged with CMOS, we'll get into their model in a minute. They acquired lots and lots of local delivery companies.

19:54And 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. So he showed up, but he had the second nicest car in the GSB garage behind the guy who had started a Zinga clone in college, but didn't raise money and just kept all the cash flow.

20:14I feel like there's a lesson in there somewhere, but there's many lessons there. Yeah. We'll unpack that on an LP show. So anyway, back with a psychologist. Yeah. Back to why now with Palo to delivery and mobile in these tools, like it's actually, this find my friends thing was really important because unlike Uber, where 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 door dash it's like the 3d chess version of ride sharing 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 like consumers need to be able to place the order easily and efficiently like find mobile helps with that you've got the

21:12dashers, right, what they end up being called, the curators. They need to be tracked just like ride share 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 got to know where the restaurants are. You got to know the status of the food. You got to 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 smart phones again restaurants most still today most restaurants don't have wifi right it's such a good point and like to flash back to a previous era of uh business that's working really well now but failed previously you look at Instacart you look at web van like aside from there just weren't enough people on the internet yet there definitely weren't people doing this on mobile phones yet um and they they're the frankly the technology

22:06Stack wasn't sophisticated enough in that Web 1.0 era to facilitate all this real timeliness 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 dash or in 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.

22:33or 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.

22:46You're heating food. There's a very narrow window where you can get there too early or too late and that be okay. Just in the kitchen, let alone then having it sit out for a while, then having 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.

23:11I was talking about this with some friends in dude research for this episode who are former Uber employees. And the thing is Uber and Lyft and ridesharing, right? You know, kind of onically everybody found like, hey, once you get the wait times down to five, maybe 10 minutes, 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.

23:40but it also needs to be high quality and still good. If it's fast, but it's only halfway cooked, I'm never going to use your service again. The far more forgiving side is it took too long, and the food can stay warmish under a heat lamp for a while, but I think everybody knows when they've gotten food that's been sitting under a heat lamp for too long. Yep, totally. They're hacking these pieces together. This is cool. From the beginning, The business model was basically already there and they haven't they haven't changed it much since under the hood a lot has changed but so initially it was a flat six dollar delivery charge to the consumer for getting your food delivered and obviously that is changed since then in terms of how it's calculated but

24:29Jenny and I ordered Chinese food last night from Mama G's here in San Francisco, great Chinese place. They're on dash pass. We paid a $7 tip to the dasher and got our food, like 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 in these incremental orders. Will you pay us a cut of the revenue so that we can make this work? The $6, $7, you know, delivery fee.

24:59that'll go to paying the careers. And 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 talked 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's 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 grab hub seamless and and what door dash 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 grab hub started actually having fulfillment like drivers as a part of the thing and not just a you know dumb pipes that you order through

25:57Yep, so, okay, we rerun back. Grubhub, I think Grubhub was started maybe like early 2000s. Seamless Bradstown 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...

26:21You 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 Tium were doing in the early days. But then they'd stop at that. They'd just say like, hey, Ben wants...

26:39Ben wants to pad tie, go ahead, go for it. So then the restaurant, by the way, was 2013. So then the restaurant, the owner's was on them to have a driver that could actually get the order to you. To have a career, a driver, and do the fulfillment. Yeah, and in many ways. That's true. Courier, yeah. New York is probably a bike messenger type person. Exactly. So this is why this caught on so well in New York.

27:02And 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 in Grubhub when public was a well-regarded internet stock because this was a super capital-late model. They just take care of it. Yeah, but notably they're a very profitable business. Yeah, very profitable. They acquire customers and they did all sorts of...

27:30interesting 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 and then call it a day and so this worked super super well Now what Tony and Dord hash is doing is obviously very different and the downside of the grab hub model is that most restaurants don't want to aren't equipped or are 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 career. Okay, you're going to hire one, maybe two careers. You're going to use those heavily during the rush hours for eating or whatever your type of food is that you're preparing, whether that's breakfast, lunch or dinner, probably lunch or dinner. 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

28:26A 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 you know business activity was consumer marketing and retention you keep the people you are the mechanism by which 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

29:07It 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 and the Papa Johns. 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 crap up and seamless. We're building Domino's. We're building FedEx and we're just taking it to...

29:27Every 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. Like, well, hey.

29:54These are world class operations and so you learn a lot and realize like hey, this is a complex business that we're gonna have to build and delivery times are super important. Density is super important. You like to make this work. But these aren't tech businesses. So like Tony talks about Domino's being run on, you know.

30:12paper. And not with find my friends and not with smart phone technologies and mobile ordering systems and mobile app logistics at the endpoints. And so he's like, oh, okay, this is really interesting. And so then he then he talks about like is basically during this period that there were three questions.

30:37that 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 like a resounding yes. Like everybody in Palo Alto of 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 dominoes and FedEx than they would like our 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?

31:32You'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 there are variable expenses, it's not the business doesn't have to worry about paying people during the hours when 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 and their employees or if they were 1099s.

31:59But Uber really clearly already started to pave the way for this whole. 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, would the restaurants be happy to pay us for these incremental orders that we're generating for them? And again, 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 2pm and 5.30? Like, 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.

32:51You're going back to the original macaron shop, Chloe at Chantal Macaroons. That's not a meal. But I suspect what happened was just that the food, the meal delivery became so big and 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...

33:17on-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.

33:44Yeah, 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. And 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

34:40five, six, seven dollars to get somebody to drive across the city and deliver food for you. And we also give it back to restaurants that allow us to grow the market more, 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.

35:03They get in and say, okay, we're gonna go do this for real now. They ditched 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.

35:33Oh, Penera 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 Penera 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 Penera.

35:58Just to wrap this full circle, they actually went it alone and they basically run their own single client door dash and are sort of the black sheep that created their own version of a full end and 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.

36:28There is this other, I guess, category of restaurants that have done this historically, which is the kind of lunch catering, office catering, sandwich type shops of which Panera is obviously consumer-facing, but I think about like specialty ease, right? I think they're in a bunch of cities. You know, 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 Dordash 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 raise a $2.4 million seed round in the fall of 2013, which was good. Great seed round, but nothing.

37:20Crazy here like we're dead at the same time. There were companies coming out. Oh, I see you're raising five six seven million dollar seed rounds already. This is you know the go-go days And it's led by interestingly Keith Roboi who had just joined Kosla now Keith before that of course PayPal Mafia member and now partner at Founders Fund He had been the COO of Square while Tony was there over the summer, so I'm sure they got to know Tony from I guess it was only 30 people so they had to I'm sure they knew each other So that was that was and would have also Explained why he probably was more likely to get this than other VCs at the time right saw the sort of like onlineification of of independent merchants and Particularly around food. Yep, so

38:13He leads the CRV, S.V. Angel and Pair also come in in the seed. And to this question of 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.

38:31FedEx. We are a logistics company more so than a food company. We help small businesses grow, we give under employed 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. 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, you know, meal delivery, you've already heard of this, grubhub exists, but like, this is actually a logistics network, and this is something different. Yep. Okay, I want you to name those, all those investment firms, again, they participated in this, this initial round. So was co-sla. C-R-B. Yep. S-B angel and pair. None of those appear in the S-1.

39:26Those are all below 5% shareholders, and as we will talk about later, this company underwent a tremendous amount of delusion in order to scale the way that they did. Oh yeah, we are still in act one of this story here. All right, listeners. Now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would not, and you're done.

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41:30They raised this, they raised this seed 2.4 million and they realized, okay, we're gonna change the name of the door to ask, we're gonna 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, city, like natural use case for food delivery, like it was for a 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 and 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

42:29Brilliant. It's been talked about elsewhere, but going to the suburbs versus the cities. There was no competition like it was Domino's or Dordash. Yeah, 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.

42:49because 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 dashers 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

43:36It 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 did that one of our dashes 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 gotta park, you gotta get out. You gotta go get the order and if you're getting the order at the restaurant and there's a queue, you gotta wait in the queue and then get the order and then you gotta go drive and then you gotta 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, your couriers are on bicycles and as we'll talk about later, DoorDash did.

44:27really embrace different forms of vehicles for dense cities. But in the early days, even basically in San Francisco, you're going to bike around and do this. You need cars and motorcycles. Yeah, this operate at the lowest level of detail thing is really...

44:41I think one of the things that makes this company special, I think 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, 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.

45:31amazingly well. So by, they did, 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. So that we the people out there on Palo Alto delivery. Um, uh, literally one in six people.

45:52on 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 of millions of people that live there have used Dordash. They just ran the table on the market very, very quickly. So on the back of this in May, 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 Lynn, former Zepo COO and

46:36It's off to the races here, so they say, okay, when you use this money, we're going to expand out to other markets. Later that summer in June, they go to L.A., they run the same playbook in the suburbs there, and then they go to Boston next, which is interesting. I assume also in the suburbs, but they also go into the urban core in Boston with cyclists. And Boston's a great city for this, because it's flat.

47:02Oh, yeah. So you do that this is any west coast city you're going to world world to hurt. Yeah, exactly, exactly. And this is before ebikes 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 AltoDelary.com launching, led by Kleiner Perkins at a $600 million valuation. John Doar 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 Doar, but like Google,

48:01Amazon 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 8% of the company like less than 10% of the company in that series be and got freaking John do or John do or to do the deal so like The way 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 the evaluation with less than 10% solution. This was not common back in those days. Yes, seed rounds were happening at expensive prices already, but this hadn't trickled down.

48:53they're trickled up to the series A and series B part to the market yet. 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 US. They're in every suburb. It's crazy. I think there's something, some stat that it's either 85 or 95% of the US 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 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 alive in Palo Alto and Boston doesn't mean that someone in Tallahassee is heard of you Exactly, so it was actually in

49:50July of 2015, shortly after the series beat that they signed their first partnership with Yum Brands to do Taco Bell in the markets that they're ending in later. Yum also owns KFC, they had KFC later. This was another Yum Brands. Yeah, great company. It was part of Pepsi. It spun out of Pepsi. It was Pepsi's restaurant brands, Taco Bell and KFC that spun out. Now it's an independently traded public company.

50:19And I don't remember if it's, if there's, uh, if it was, 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, uh, highway restops. I think pizza hut is now independent. I'm not 100% sure on that though. Yeah. That's actually, when acquired drifts into conglomerate land and out of tech, that'll be a fun one to cover. Oh, yeah. Uh, but that's a good point that they start, you know, again, like the theme here is these guys figure out.

50:46what 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, so it's like, hey, you've never heard of us, but do you want Taco Bell and KFC delivered? Like, especially if you live in the suburbs. I mean, lots of people want that, but it's an appealing value proposition even before they sign any local restaurants. Exactly. Exactly.

51:14After this round, and with this going on, this big national partnership, they started 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. I remember one year early on, they had like, Like puppy hugs. There's something like that. They had like cars there. Yeah with puppies in 2015. They did Uber health. So you could get a flu shot. That was a nurse that got Uber to your office. In fact, you mentioned the ice cream thing. I remember from that promotion. I actually still have the t-shirt that I got when when I got my Uber bait my Uber delivered ice cream cone. So yes, they were that must have been a marketing stunt. Totally was as was Uber puppies, but the you know

52:14They definitely were experimenting a lot with like, well, what else could take an Uber to your house or your office besides a person? Yeah, 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 launch eats in 2015. But this is how hard what it is that DoorDash was doing.

52:43Uber 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. Listen to me. 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 in heaters in the back of Uber drivers and have the 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 who did operations for Uber at this time was telling me about.

53:21the 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.

53:34to 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 routes. Yeah. And of course, a munchery 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.

54:02I think it was, they first had fresh. But fresh, I think, was more groceries and like drugstore type things. Interesting. If I have 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, they, they get there in 2016. They, 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 look looking back on this now with a 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 of startups along with Airbnb, everybody says, you know.

54:58the one of the two canonical at this time, the two canonical next generation, you know, internet companies being built in Silicon Valley. And 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.

55:23Interesting. Meanwhile, DoorDash has raised all this money. They're growing quickly. People consumers at least love the surface. They're entering all these markets. They raised the $40 million series. But their plan is to spend the money. They're going to blow it 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 the dashers. So then, this is another moment of acquired history. In November 2015, another blow against the perception of businesses like DoorDash, SquareCuz 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 got to just like, we don't do this often, but we nailed that.

56:17I just feel so good about that episode even today. I mean, there's a little bit in our sort of older style so that, you know, it's not as enjoyable to listen to. I don't think there's 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 cash. And Bitcoin. Yeah. Well, yeah, I mean, to get metaphor moment, we were texting.

56:59yesterday about about the stored out of Dash episode and the Airbnb episode we're going to do tomorrow. And Ben, I think you had such a good point about us. It 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 a company that other people don't and don't realize yet. And that was the case with Square.

57:28What 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 priced $9 a share for 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 stopping popping up all over the valley and like tech crunch and the like of a dead unicorns. And this is going to be their reckoning and the bubble has popped. And the impact on that from employees, there was that

58:26price, that share price was under the last two rounds. Yeah, so anybody got stock options in the last like two and a half years before they went public or completely underwater and worthless unless you held them all the way through, you know, the start recovering people did. But yeah, ratchets too, which those private rounds had been at high valuations, but had terms in there that if the company were to go public at a lower share price, they would get those investors would get trued up to the new lower share price. So it was just a blood bath. And I think one of the things that the public markets really penalized square for was this question of like, Hey, this, 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.

59:20at lower margins than, say, Visa or MasterCard or MX. This seems bad. You're selling dollars for 90 cents. We're going to put you in the penalty box. And of course, now, Tonya.

59:34worked 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 like 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 given away free value here. Right. That's infinite customer demand when you're selling dollars for dimes. I don't doubt you can grow fast. So meanwhile, well, the other thing that happens here is the first big lawsuit hit store dash. They had been delivering in and out in California without in and out permission. They didn't have a deal with in and out, but they were

1:00:23The non-partner restaurants. So in and out sued them in November 2015. And then there would be many other lawsuits along the way with DoorDash. So you've got Uber and Square that are like creating these really bad public narratives for DoorDash for their prospects. And you've got lawsuits hitting meanwhile through all of this.

1:00:50DoorDash is investing capital day for days. They're growing super fast, clearly consumers like this. It's a coin and Alfred say to the team, think you're going great, you're going to need to raise another round. We're in, we're in for, you know, our pirata. We're even in for more than our pirata 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.

1:01:19But we want somebody else to come in and price it. And the last round had been that 600 million, 600 million, a year before. Okay, so Sequoia's like, we're not going to lead, but. We're not going to lead, but we're, you know, our money's good. And I got to imagine this is going to be, this was a huge lesson for Sequoia as well. This is before the Global Growth Fund. You know, it was later after this that they just said, like, we're not going to mess around with anybody else. We'll lead their rounds, but they said, we're not going to lead.

1:01:47and Tony goes out to fundraise and it is just like a so log. 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 Moderna talking with all my other VC friends. Tony didn't come pitch us at Moderna. We were only did early stage at the time and wouldn't let this round anyway. But everybody was like, man, DoorDash came to see us.

1:02:15Uniteconomics are terrible. It doesn't make sense. I can't believe Sequoia is putting their money in here. So what was it that Sequoia saw then, if people believe that Uniteconomics 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.

1:02:45because the only time frame to disclose is like the last 18 years. Yeah. But but for whatever reason, you know, whether it was blind faith or actually based on the numbers, knowing Alfred and Sequoia, I think it's probably based on the numbers, they did really believe in the company. So the net of it is Tony's out there fundraising for like six months. He doesn't you can't find a lead. Nobody wants to invest in the company. So ultimately, in March of 2016, even though Sequoia said they didn't want to lead, they do lead the round. They lead a 127 million dollar 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.

1:03:41And it happens at a 700 million post money valuation. So 127 and a 7 post 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.

1:04:11just to complete, uh, says so much about him that he persevered through all of this. Uh, right. And in, in the whole team that stuck with, because at that point, you know, your, your starting to see stars in your eyes, because the, all the internal numbers are going up, you know, 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 to leave it down a lot. Yeah. And we're just getting started here. We're only an act two. So Tony writes on the company's medium account announcing the round. It's easy. 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.

1:05:05We are growing fast while building a scalable business that is built to last. I mean, 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.

1:05:29blah, blah, blah. The facts 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 unfriendly 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, really 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.

1:06:14Capital coming in and it was private equity firms like it was TPG was doing this. You saw a 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 finish 2016 with 28 markets that they're in, broader markets, so their individual cities and towns within the broad geographic market. They only add six that year, even though what it 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

1:07:05really 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 are three words where Tony talks about the economic climate it is worth remembering that there was a macroeconomic stock market hiccup in i think you won 2016 i'm trying to remember exactly when that hiccup was but there there was all this like narrative around like the longest bull run in history and the S&P's in an all-time high and like, techs of bubble. And like, there was a moment where like, you know, 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 know, you go back and you look at

1:07:59Stocktakers are 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 soft bank yet, but TBD I'm sure that was I'm sure one of the existing investors at least was Sequoia stepping up to

1:08:50keep this company alive. 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, 18% or something like that, and you're seeing in the narrative here how they built that position over time, especially having conviction when others didn't. Yes, 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. So then meanwhile, just one more quick comparison. Uber and its private lifetime raised something like $8 billion. And we're like, they IPO'd in 2018. So by 2017, they already raised the majority of that. So this is like, you know, DoorDash is a company that's raised in the low hundreds of millions at this point. And their biggest competitor is a

1:09:47better part of $8 billion funded, you know, juggernaut. And that also has this other business, other synergistic business to finance what they're doing. Theoretically synergistic business, we'll get into it. 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 around. I mean, it looks like the death 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. Yes. We're now in March 2018 and door to dashes, fortunes change.

1:10:45The big deal. This one wasn't quite in the back of a taxi cab like Adam Newman's was, but you know, I don't think this one doesn't have quite the same story to it around like Masa telling Adam that the crazy man beats the smart man or whatever it is in the in the fight. But kind of the same approach. Well, it's it's funny. It's the same. You know, I love that. So the quote is, you know, Masa, Masa Sishan, of course, of Softbank and the Vision Fund.

1:11:11which is what we're talking about here. When they invest in WeWork, there's the story of, you know, back of the Hubert, I think, or Taxi with Adam Newman. And so this crazy man beats the smart man. And obviously that went horribly wrong. In this case, actually, I want to make the argument and the markets are proving South Bank right here today.

1:11:31This was the smart not the crazy bet. Yeah, I mean, soft bank 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'm going to guess the answer is door dash was desperate for cash. And soft bank was already a big investor in Uber at this point.

1:11:54Yes, I believe this is 2018. I'm pretty sure at this point. Yes, there are already the largest investor in Uber. I think at this point. Yep. 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 do we say? Like a little over 200 million.

1:12:21Previously 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 where they just being cowboys? Maybe maybe and they had some dumb luck here, but I don't think so They did suddenly do plenty of nutty stuff, but There's, you know, a member's soft bank is basically investing, and they're investing globally, but most of their dollars are going into two markets at this point. The US and North America and China. And they are not investors in a company, in this company in China, in Meituan, which had, at this point, merged with Yanping. It was Meituan, Duanping. But they were active investors in the Chinese ecosystem, and I think maybe in one of the competitors.

1:13:13And Maituan is food delivery? Well, Maituan has a very interesting story of its own that we need to tell one day on acquired. But at this point, Maituan 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.

1:13:37And in theory, the same thing here with food delivery was, yeah, you might have competition. Yeah, you might have bad unit economics that you 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 eat out a 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 Maytwan. So now Maytwan, 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.

1:14:24went through a whole long, you know, crazy history. But by this point, they had pivoted into food delivery, merged with their base competitor, Dion 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, Maituan, which we'll get into later, is much more also than food delivery.

1:14:53Now, at the Series A investor in May-Ton, Sequoia capital China. So they knew what was going on here, too. That's so good. So good. Okay, so SoftBin comes in. They do this big round. There's a catch, though, as they're, as we're going to go up. And what's the valuation on the 500 million they're putting in? Yeah, you'd think, you know, oh man, $500 million rounds. Like, gotta be like a $5 billion valuation. Nope. 1.4 billion dollar post-money valuation.

1:15:22So DoorDash is now a company. Yeah, 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 dollar valuation. The actual share price is still lower than the Series B. The Cliner led at a 600 post back in the day.

1:15:50because 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.

1:16:16Okay, so Softbank now owns a ton of this company. And still today at IPO, the lawyer to shareholder. Well, I bet. Yep. I mean, that one's hard to dilute that down. Now, other existing investors did come in for Perrata as well. It seems to quite others in this round. But yeah, but this changes the game. And this is a new, I mean, they're back in it. It's a new breath. Not only are they back in it.

1:16:45I mean, this deal as costly, literally costly as it was to the company and its existing shareholders creates a whole new life, an 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...

1:17:11investors and prospective public market investors breathing down their neck about profitability, path to profitability. Postmates, which we haven't talked about. 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. You're three years without raising. Three years without raising money. Gonna be pretty hard to keep taking.

1:17:40to keep winning share here. DoorDash has all this money. They say we're going big. They go all in. They literally five X. So multiply by five, the number of markets that they're during this year in 2018. By the end of 2018, they are operating in over 3,000 towns and cities in America.

1:18:07wider 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.

1:18:35And 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 their attention starts to work, and it starts to play out like things have in China with Maituan, and they build loyalty on the platform. So before the year is even out.

1:19:00in August of 2018, they raised another $250 million from Co2 and DST at a $4 billion valuation. So we're now six months. Yeah, there's six months after, less than six months after that, highly dilutive soft bank ground. Now they raise a quarter billion at what is that five percent, less than five percent dilution? Incredible. Got the leverage back. Got the leverage back.

1:19:30Then 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 a caviar for $400 million from Square. That adds even more restaurant supply and order diner demand to the platform so they consolidate there.

1:19:59they raise even more money at increasing valuations by the end of 2019. They are at, I think they raised 600 million at a 12.6 billion dollar evaluation. So now we're 10x, the price of the soft bank round already with it in a little over a year. And so what, what, what, what tipped there? Cause they went from like on the ropes to, I mean, being a darling.

1:20:28Obviously, having $500 million to spend can give you the opportunity to do a lot of growth quickly, which we saw in the new markets. But what was changing around the company that would change people's opinions on why they're willing to bet on this thing and so heavily? The two hypotheses I would have are one simply watching Maituan in China and that they are making it work. They are becoming a dominant number one player.

1:20:55in the public markets at this point in time and their stock is performing exceedingly well. I think they are now at or over a hundred billion dollar market cap as we record today. And then two, all the other players have suddenly either shot themselves in the photo, 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, you know, that's in the past. But early 2017 was no no cakewalk for them either. So they've had many self-inflicted wins. Yeah, multiple years now of self-inflicted wins. Postmates can't raise money. Meanwhile, door dashes out there.

1:21:46spending money, they're the only player doing it. I think that's the the window finally opened, I think, to realize or attempt to realize this dream, you know, the matuan dream of becoming number one player in a highly competitive market. Right. And then, you know, I think 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.

1:22:29And as we've seen, I mean, I think it's even become a question of do they need to roll up anymore or are they just gonna take so much share? It doesn't matter. Yeah. So by the end of 2019, they finish with 800. This is the first year. I guess the second year, we have full financials for them in the S1. 885 million in net revenue up over three X.

1:22:57you're 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.

1:23:27the 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 yeah before we get into that the other thing that happens in 2019 which like we've told hopefully it's come across them so we're so excited and You know, a lot of Tory of just this journey that Dordash 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 for this may just sound very familiar to lots of you.

1:24:19I 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 were doing, what the hell they were doing. It is like just absolutely predatory and wrong and honestly 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 door dash days, as a consumer on the platform, your daughter, 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 tip that you assume when you're tipping your career,

1:25:17that money is going to the courier like it would in a restaurant when you tip the waiter and it goes to the wait staff and the cooks 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 Dordash and Dordash 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 their fee splits. Right basically what they were doing is they were only paying the tip out to the driver if the 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. Yeah. So for anybody who wants to listen to like

1:26:08the company's response to this. It kind of like 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? You know, it just goes to illustrate what a freaking tight margin business this is and what a, what a, you know, tight rope they're walking to make this thing profitable. Yeah. That's it.

1:26:36There'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. Like 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 makes it wrong. Still, but now they fixed it. And now.

1:27:03The 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. Yeah, DoorDash had their Zoom moment. Yeah, they basically had their Zoom moment in the private markets.

1:27:29So, when the pandemic hits in March, in the US at least, DoorDash grows over 20% that month, which was already coming off an $8 billion plus base, which is pretty incredible. Right. For context, a company growing 20% in a month is like way...

1:27:55It's like what a really good seed stage company with product market fit can do. And this is a company that did eight billion dollars 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 to with the pandemic, but nowhere near the degree that DoorDash grows. So they're share taking of the market just.

1:28:23accelerates 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 over the year and three quarters between the beginning of 2019 and when the IPO S1 was followed 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 hypothesis, I think it's two things. I think it's one being willing to spend on

1:29:21customer acquisition, you know, Justin San Francisco, at least I noticed, especially at the start of the pandemic, way more billboards for door to ash than anything else than any of the other. I don't think I saw, I like I've ever seen a need to sort of postmates billboard. I'm sure they exist somewhere. To though, it is, I think also related to this being willing to fly low to the ground that door to ash 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...

1:30:15the tip to the carrier to deliver it. Whereas on other fees and the service fee, you know, but like, it's all reasonable. And there's a delivery fee. There's a, 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. Yep. And then there's I think door dash just has the service fee. Well, if you're ordering with dash pass.

1:30:40Ah, so that's yes, that's the important distinction is that the deliver one of the fees drops to zero and one of them gets shaved by like three. Yeah, delivery. Yeah, drafts to zero. Well, the other thing that we can talk about is they do a deal with chase and sapphire. So wait, but before I looked it up because I hate just like throwing out wrong numbers on this show. So.

1:31:03In 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 the definitive 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.

1:31:28And then looked at the bill and been like, this is crazy. How am I paying $70 for two dishes from a tire restaurant just from all the markups that they were doing on the food? Yeah, I think that's really fair.

1:31:43I think it's totally fair. I will say it feels nicer as a dash pass member. The prices do somehow feel more reasonable at the end of the day. Like the prices go down just enough for you're like, okay, it's meaningfully cheaper to order than Uber compared to Uber Eats. And we should explain what dash pass is. You pay $10 a month. It's basically Amazon Prime, so they knock off your, some amount of the fees and it makes sense for you for ordering a lot of door dash.

1:32:11some 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. Yes, so they've got five million customers on dash pass. So if you actually, if everyone paid for that, it would be a $600 million revenue business on its own, just dash pass. Now obviously there's some internal accounting there because they are losing the fees that they they would be making if you weren't on dash pass, but much like Amazon Prime, I'm sure they make up for it in the amount that you are now loyal to and condition to have a habit of using DoorDash instead of competitors or frankly just making food on your own. I think the way the way Amazon Prime famously works is originally they were like, well, if we can just break even.

1:33:07then 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 invested in the Amazon ecosystem. People can correct me if I'm wrong on that, but that's my impression of despite the price, 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 does it $129 a year? Crazy.

1:33:34And 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.

1:33:49Interestingly enough, I do think it worked, at least for me personally, wildly anecdotal. This is not data. It did make me a more loyal door dash customer to the point where I think maybe three times I compared my exact same cart and door dash versus Uber Eats and it was like 5, 8, 10 bucks cheaper on DoorDash. So I was like, great. I'll keep it. And I don't check anymore. In the same way that I don't price check Amazon anymore. 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 is a fascinating credit card. It's a $550 annual fee of which you can get some meaningful amount. $300 bucks or something back in travel credit. But then

1:34:34you 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, you know, as a value of $100 a year, now they're crediting back your peloton, some amount of your peloton membership. Yes. 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 What is it 5% but then it has the 50% kicker so it's amazing card if you like have a particular lifestyle where you eat out and you travel. Frankly, I think famously, a wildly successful program, they ran out of aluminum. They were printing on 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.

1:35:38Then 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 five million people that are currently using dash pass are via this Chase Sapphire Reserve program and how many of them are actually paying. And to contextualize that five million number, how many people are currently door dash customers, David?

1:36:08Do you have that off 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, you know, reduced fee program. Yeah. So the net of all that, you know, in Q1 of which it's only marching Q1 that is the pandemic month for the company. They because they're so US based. Like they almost know international penetration and Canada and Australia, but very small in each. Right. So it wasn't till March that they would have seen anything to March. Yeah. They reach overall for the whole company, positive contribution margin in Q one and to define contribution margin for a second. Why this is so important. Contribution margin.

1:36:55is so you've got your revenue, what was it, $885 million 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.

1:37:24for 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. Yep. At this point in Q1, it flips. So they're now contribution margin positive. Now they're not.

1:37:43either 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 headquarters, their rent. We'll see if they keep that. All that they're paying. 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 in the rest of the year. Accelerate in growth or get more contribution margin positive.

1:38:39Well, the answer is both definitely growth and contribution margin. So in the last quarter, Q3 and its September 30, 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 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%. I'm sorry, Q2. And then Q3 was positive 24%. So like having

1:39:3625-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 them there. Yep. Totally. So then two more things.

1:40:04to wrap up history in 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...

1:40:30Basically, the TLDR is California has a really crazy legislative and legal system where citizens actually vote directly on propositions that in fact the law is 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 gay economy workers. This idea of a third type of work you have pure contractors who are 1099, you have pure W2 employees. And California and other states had been trying to classify gig workers as make companies classify them as W2 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 companies sustainable economics on there.

1:41:26labor supply. 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, Dordash releases their S1 and files to go public. Yep.

1:41:49As we wrap up history in fact here, should we talk about some of the interesting nuggets revealed about there? 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.

1:42:16Like what what kind of how many billions are normal? You know like you get into this weird headspace. Yeah, so There was eight billion dollars in gross order volume in 2019 as we've talked about which basically means eight billion dollars of food were paid for including taxes and Of course door dash kept it think it was eight hundred and eighty 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, about a lot of what the incentives that the consumers are getting, but the take rate for DoorDash gets higher over time as they're paying incentives, right? Sorry. Yes. I said that backwards.

1:43:12Then 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 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.

1:43:33how big is $25 billion? To contextualize this at the small-ish 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, you know, DoorDash has $25 billion a year that moves through their platform.

1:44:03Amazon last year had $335 billion, and when you look at Alibaba and China, they had close to a trillion dollars of gross volume through their platform. And even Pinduo Duo, which we covered to start this season, had a 150 billion in GMV or gross volume. So talk about big numbers syndrome. That's 6x, DoorDash's gross order volume. And even crazier to put Pinduo Duo's growth and scale into context is that they started two years after DoorDash did, but China is like a whole different capital, you know, comparing any numbers to US-based. Which by the way, total of six. We've talked about Maytwan here. Now we're talking about Pinduoduo. Like, I mean, China's so different. We need to do more episodes. We need to do Maytwan, but like, it's just crazy. Tencent owns over 20% of both Pinduoduo and Maytwan. So you want to index this. Take a look at Tencent. Yeah.

1:45:01Another 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 the 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 the customer demand and then they are putting massive amounts of pressure on the sort of backend 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 wherever I want therefore I get to have outsized economics in this transaction and for some restaurants that's a bummer for other restaurants they say

1:45:59I got my own customers who love me sure you're delivering networks interesting and maybe you're a little check out pages interesting I don't I'm gonna operate my own business. Thank you very much, and I'm gonna pay you sort of piecemeal for these things and if I can't get it from you Dordash, I'm getting it from other people and so, you know, we had Nicconis on the LP show to talk about talk and we had this fun episode we did with him called arming the restaurant to our rebels and You know, 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? So of course, DoorDash then realizes, okay, well, 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. And so 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.

1:46:56ordering 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 are just going to lose those customers. So this is directly competing with talk. Talk and what's the other big online order mark? Yeah, yeah, order mark federates it out to all the others. All right, all the others. But there's a handful of toast.

1:47:18Yes, they're letting you stand up your own, you know, checkout page. Most of those don't offer the delivery because as we talked about, that's a very difficult tech problem solve the operational problem. They partnered with DoorDash when I assume with the drive product.

1:47:31to do the logistics and delivery. Right. So it's interesting. The storefront ends up being two bucks in order. There's a, you know, some SaaS fee that you pay monthly along with that, but basically it's two bucks out of every order. Go to DoorDash just for operating the little website that you drive your own customers to. I think is now is that covering the payment fees though? Might be. I think it probably is.

1:47:54Might be, okay. And then the second product, that's probably the more interesting one, David, the one you're referencing is DoorDashDrive, 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 $7 per order and $1 for every mile after the first. And I was like, oh, DoorDashDrive, that's interesting. I wonder, like, does anyone use that?

1:48:23I 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. Amazon in that they operate marketplace that consumers go to.

1:49:20the door dash app, and they'll generate the demand, and they'll send you marketplace orders, fulfill it with their logistics, just like, you know, 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.

1:49:44Yep, and they actually encourage their customers, if it's like a Chipotle to do a list, they say, look, you have your customers, you have an app, you should do that. We should only extract $7 a 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 on the list. Yeah, we'll stop there. Just like lots of DDC brands sell on Amazon and sell direct. Exactly. It's the Omni-Tranel strategy for food.

1:50:11Yep. I'll all somehow paying DoorDash along the way. Well, and I think that's like, to find my, 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 and built up this thing that everybody thought was impossible. And the thing being a local delivery logistics network that can operate contribution margin positive. Yep.

1:50:40And once you have that, then you can start doing all of these other things. Yep. All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team, and deploying them is no longer the hard part. Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making.

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1:52:26So if you're trying to turn AI Ambition into real business outcomes and make it work safely, securely at scale, go check out ServiceNow.com slash acquired and tell them that Ben and David sent you. 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 sub stack 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.

1:52:51excellent analysis that basically shows it costs about $6 for a door dash 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's so young.

1:53:08that DoorDash can earn about $60 in pure profit from them over those five years. So that's a, you know, 10 to 1, um, cact 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 ordering a few times a month or a year.

1:53:37In 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 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 Garley's written about in the past, a lot about how just looking at cat and LTV and payback mass a lot of...

1:54:04complexity 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%.

1:54:32Two point four percent. Two point four percent. Right, so that shows like 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, door dashes, contribution margins 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, as your margin is my opportunity, you're generating more value for consumers and for the restaurants and the dashers in 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.

1:55:30spins here. So like, you know, yeah, $50 bucks to you, but what's that $2500 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 good.

1:55:46You 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 at 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 influx 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.

1:56:13If it can be done at all and the best possible illustration is for one order, $130.36 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. Well.

1:56:41I 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 their green view who we didn't really talk about. We're on the 9%. That's a GIC. That's Singapore. Oh, I didn't realize. Okay, so we did talk about that. GIC stands for a green view. That's been capitalized something like that.

1:57:11Got it. Tony owns 5% co-founders and 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 delusion if I've ever seen one. Clinder 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 Doris is still on the board. So the number of shares is actually disclosed.

1:57:40So 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. So that's how I've been.

1:58:05I mean, I think the biggest number we might have mentioned was 13 billion. They did raise around at a valuation 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. Yeah, share price for that would have been, I'm trying to remember. Gosh, I get it's hard to remember back that price was so low, yeah.

1:58:27What 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 Then the first range that they filed was 75 to 85 bucks a share I think they up that to 85 to 95 bucks a share and then last night Tuesday December 8th 2020 they priced the IPO woo for a fully diluted market cap of 39 billion dollars a lot higher than 16 Now, to be fair, the, 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, hi, we're talking 20 times, trailing nine months net revenue, so I do some math, which extrapolate that out to a year, maybe you're at 15 times revenue, still high.

1:59:21Still high. So, David and I have not refreshed our browsers yet, but 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 from market open. David, let's, let's pop open the stock and see where it's trading now. Holy crap. I mean, I don't have it yet. Hang on. I have, I'll tell you the price that it opened this morning.

1:59:52It opened trading at $182 a share, which is a market cap of around what, like 70ish billion? Wow. David, where are we now? As I look at the ticker, we're at 177 and 77 cents. All right, so it dropped a little since the open. Yep.

2:00:14But that is up 75% tape one pop. And we didn't have time to really research this, but maybe you did bend. But, you know, Goldman is leaving this IPO and they had some hybrid system and they're like, you know, everybody's like, oh, you know, traditional IPOs, you give off the pop, you leave money on the table, girl, he's been crusading against this for years, he gets back so well, not on our DPO's. Like, oh, we got this new system, not gonna leave money on the table. I don't know about this new system.

2:00:38This, I mean, this is one of the most egregious offenders of leaving money on the table. Like, 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. All right, here's the thing though. Like, I think it's been...

2:01:02proven it over the last five plus years that people have been talking about this that you can't beat him. 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 out. That's right that we got to do it. We can't beat him. We're going to join. So all our friends at Goldman if you're listening. Yes. We need to get. Just carve a client. Yeah. We need our occasions.

2:01:29Wow. David, I honestly, I cannot believe this. Like, if you would have told me a month ago that DoorDash was gonna be a $65.70 billion company. Up 71.5% ish from a $39 billion market cap. Say we're talking a $70 billion ish market cap, right? Somewhere in that neighborhood. Wow.

2:01:52This is going to be, it's kind of a volatile first day, too, because it's, you know, 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.

2:02:12Wow, man. So okay, all right. So we've got another hourish 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?

2:02:35and 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.

2:03:05the way here, and I at least mostly subscribe to it, is they have just like Meituan seems to have done in China. They have accomplished 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 birth to run both to keep growing in the sector that they're in right now with food delivery to add other.

2:03:41products and services into it and become the dominant, you know, Maytwan 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. Maytwan 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.

2:04:06of what it's like to use me to one in China and like 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, like 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 bookcase 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

2:05:05I think it's a yes and on the real bookcase. Yes. It has to be a yes and, right? I think it's everything you just said. But it's also this, you know, what Maytwan has become in China, which is an Antoni.

2:05:20talks about this and they talk about it in the S1, and 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. It's the example of restaurant reservations. Well, what if it's, you know, 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 dash pass 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

2:06:123, 4, 5, 6, 10 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, smarts name the company door dash and not like door food dash. And it's also smart to introduce dash pass 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.

2:06:39discounts and special relationships with merchants that aren't necessarily being delivered to your house, but you're just transacting through the app. Yeah. 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 that fully fully utilized optimization. It's kind of like a factory floor, like All those machines are really expensive, so you better run them at the most perfect harmonious capacities so that you can be profitable on that high amount of fixed costs. The way to think about that in this sense is there's a lot of different ways in which they can optimize, but the biggest one is once you've acquired a customer, can you get the most amount of profitable transactions out of them over time?

2:07:35performance marketing angle to this company. Similar to a restaurant. Once you onboard a restaurant, can you keep them for a long time? Can you be profitable on them? It's all about getting to not only the scale but the internal data that the company has, so they know exactly how to price every component, what customers go at worth going after, what restaurants 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. Yeah, 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

2:08:32doing 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 costs. It's a fixed set of variable costs in the network. And how much leverage can you get out of that? Yeah.

2:09:00Okay, 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 cases. This is the best it's ever gonna be for this business. And after this, there's gonna 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. Of course all there most recent cohorts are looking great right now because of the pandemic. I personally think the way it will play out is that all the new customers they did acquire.

2:09:43have pseudo permanently changed their behavior. Like, I think once you make a behavior shift, and I just know this from myself, like, DoorDash has sort of 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 meter bear case on the pandemic. I would say also to even on that, you know, one thing, we don't get delivery often. I've done it the last couple nights in.

2:10:11research 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. Like, 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. Yeah.

2:10:41Yep, 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. I mean, I guess maybe there is one more legitimate argument you can 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 billionish of off-premise restaurant

2:11:32Food, annually, U.S. Yeah, that sounds right. Okay. Now, what percentage of that is actually addressable by DoorDash? So last year, they did eight billion in GMV out of that 600. But like, you know, a bunch of that is Domino's. 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 my 300 billion.

2:12:00the off-premise spend at restaurants and other food service in the United States. 300 billion. Okay. Yeah. So now you're like, wait a minute. So say even you get the whole market, $300 billion in gross order value. He said we have a 2.5% contribution margin. Let's say 10% revenue. Let's just even use revenue, a 10% revenue margin. So now you're talking about a $30 billion dollar revenue company. Yeah, that's great. That's super impressive, but 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.

2:12:48So yeah, the way they define their market just make sure I actually understand this well is they say Americans spend one and a half trillion dollars a year on food 600 billion of that has been on restaurants and then 300 billion is off-premise That's what I was thinking the 600 the 600 is also dining in right right so that you could imagine I don't know I don't know how the dining is addressable for them Man, so okay at this valuation not only do you have to not believe that bear case, you have to believe the bulk 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...

2:13:35Power 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?

2:14:00sustainably 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.

2:14:24It 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...

2:14:40defense ability 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.

2:15:07The biggest one right now is his economies of scale. 100%. I think it's actually the only legitimate one because I think it's pretty easy to hop for any net or 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 that I think Any defensibility that comes from a network effect is not really real. Yeah. Yeah. No, I was going to say that it's related to order times and density, but that's that's that's scale economies. So yeah, I think it's I think scale economies is the big one. I think and there's something to brand, but it's always hard to actually know

2:15:55how 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 to 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 the setup participants in the system that are you know

2:16:43gobbling 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 door to ash 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. And 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.

2:17:38I agree with all that. I don't think this is brand power in the Hamilton sense. Like I don't think this, this is, that is a consequence of economies of scale and then growing into network economies, which I think they, you know, 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...

2:18:01restaurants for now, but let's say suppliers, writ large, local businesses on the other end. Brand though, to me, for brand to be a power, it has to be like Tiffany's, you know, that's the canonical thing. We're 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 door to Ashley, no way if each gave it to be cheaper or for the same for like, yeah, yeah, you're absolutely right on that. Yep. So that's, that's pretty aspirational.

2:18:31Nice one Tony. We appreciate the good drive. Well, 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 in 2018. Would we be here today? And I think, you know, that that gave in the ride sharing market.

2:18:57lift a new breath where they were basically dead until Uber, you know, imploded, and are now quite formidable competitor. Well, 20, I don't know if I can come for a medal when like no one's ride share. They, 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 lift and Uber episodes, they were about to die. Uber was going to win.

2:19:24And then they haven't and now it's stabilized into more of a duopoly type structure. Yep. So what would have happened to DoorDash if Uber hadn't gone through their 2017 and 18 and as we know like 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 that we markets that we operate in rideshare and food delivery because we can use our supply of drivers across both of these products lift

2:20:22is a pure play ride sharing. They can't use their supply for food delivery. Door dashes, pure play, food delivery, they don't do ride sharing. Thus we should, you know, the thesis, 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.

2:20:49Interesting question is I do want to say like that that actually according to Tony is not true like that Well, right. Yeah, that 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 do is tell them to deliver food instead of people But like 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 ride share drivers are women, maybe largely because of the safety concern. So this has been this like, you know, common observation, this common belief here. Well, I think there's an even more important, so I totally agree. I think on 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,

2:21:43would 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.

2:22:09I 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.

2:22:35or have a car that doesn't meet the standards of Uber and Lyft and dirt that came along and said this is why I think bicycles were so brilliant in the early days in Boston and then that grew into ebikes then that grew into scooters of all different types but the powered motorcycle like scooters and so 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 sells that problem is like, oh, well, that person can lease a car from us. But if you're a person who, or lease a car from one of our partners, I actually think this gets to the fact that

2:23:26The way that people plug into door dash 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's...

2:23:46True 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. Yeah, 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 jug or not. Yeah. And raise money from Uber's largest shareholder. Still so crazy to be that that happened. It did. All right. Playbook. Playbook. Let's do it. Oh, man.

2:24:37So many things, so many things we've already talked about, but like 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.

2:24:49cash flooding into 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. But 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, maybe people can take that next leap and believe that you have pricing powers, then actually you can make more money per order of time when you're a monopoly, but

2:25:36I think this is the, you know, this is like 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 mode 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.

2:26:05So to me, that's like, that's the biggest playbook theme here. Is there, they're running the playbook that is. The winner take all. Capture a winner take all market, but we're, we're in the middle of the story. We're not at the end of it yet. Yeah. Yeah. I think that's, 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 1718. It was there's no pot of gold at all. This is all a mirage Now the question is

2:26:59Well, 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 that acquired and 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.

2:27:19different markets are different, right? Like, and if you're going to go after a market like this, you stand no shot unless you raise a lot of money. Like, you're going to get torched. But that's not the case in other markets. Sort of. If you, it depends if you want to compete nationally or globally or not. Like, I don't know. Door dash is probably going to win if you're trying to operate just in one city. Um, 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 door dashes done better at than Uber but like if you're Uber Eats like really what are the cross geography network effects between your Uber Eats business basically nothing like you get to reuse the same technology on the back end great customers know of your brand great but like compared to Airbnb which has an unbelievable cross geography network effect. Probably the best ever right.

2:28:15I only live in one place and if word gets around pretty quick that all the restaurants are on one app, so 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 capital. You're never going to build an Epic Games-type size company if you don't take the GoBake approach any capital-intensive market like this. Yes, great point. I guess it really comes down to capital-intensity.

2:28:45Like, 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. Yep. 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 Dordash.

2:29:07exquisitely well is their value of operating at the lowest level of detail and I think it's it's one of those things that like people say it's like oh yeah like you know like people talk about the Amazon leadership principles the leadership principle is 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 and the 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?

2:30:04in 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 were 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 were like, can we get dedicated dash or parking spots? Great. That only happens when you can't do that when you're sitting in an office riding code.

2:30:32Right, and only paying attention to averages. I think another great embodiment of this is, I think it's Michael Block is how he pronounces 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 looked around.

2:30:50realized 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.

2:31:03and one of the very interesting things that they zeroed in on his 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.

2:31:32tail number, but then 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 like 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 Dordash was kind of realizing actually that that might be a waste of resources. Yeah. Yeah. 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. Yeah. All right.

2:32:25Last 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 compared to the value that the company creates? So, 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 component. And the second is you know, how does the value created for the world, not just for shareholders, compared 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. And any more in consumers probably wouldn't buy. I mean, it's effectively a 40% markup on your food in order to pay a door to action and to pay the dasher. And like,

2:33:20The 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 anymore. So that's anymore from consumers. Any more on the restaurant side, and the restaurant's probably couldn't keep their doors open. I think DoorDash does a lot of research on figuring out how much of the 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.

2:34:03The knock on this whole freaking business is like this business model. 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, you know, actual dollars to go to go around here. So that's sort of how I would describe. I think companies doing a bang up job of capturing value.

2:34:29How does the value created for the world compare to value destroyed for the world? I mean, 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 there, this seems to be a much friendlier company to dashers than ride sharing tends to be to to drivers, but 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 a door dash, you're probably also incurring depreciation, but potentially way less. Right. And a lot of them are leases, sort of like built into the cost of the lease, but yeah.

2:35:24I think the bigger case to make that, you know, 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, you know, I would hate to live in a world where those businesses didn't thrive, and people only bought stuff through us, and we're not the merchants, our merchants are the merchant, and we're just the platform. I just don't think...

2:35:47That's where this business is really going. I think that's a wolf in sheep's clothing or fox in that 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...

2:36:13Now, in the short term, in that, yes, there's a lot of sentiment among restauranters, and often justifiably so, that DoorDash and other platforms take way too much of the order. It's eating into their cost. The restaurant's cost structures are not sustainable, profit margins with 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 a work and it's like incredibly additive to them. Being able to have this new delivery channel that honestly, they just they 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, you're probably 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

2:37:12businesses, as opposed to local restaurants. And my question is, how do they just not end up combining? Like, and how does DoorDash not build this themselves? I think they are. I think they're working on it internally. I think there are 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.

2:37:33So 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 and helps them and includes them in the economics and I think others are going to just be like no 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.

2:38:03Yeah, it's gonna be more important than ever for restaurants to create customer love Yeah, and not in a begging way not know 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 and and 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.

2:38:41Let'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 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 really rich CRM information about your customers, and then try and be creative in ways where you're not just a food experience. You have an online component, or you, I mean, a lot of this is pages from Canless's book. And Cacones and Talk, too. Totally. They've done it a linear and with Naxx, they've executed this playbook to a T.

2:39:19How do you do this stuff creatively, cleverly, digitally, cheaply, without being a fine-diny 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 someone who's trying to commoditize you. So anyway, I think the restaurants that do have the most differentiated offerings will be able to thrive independently.

2:39:44And 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. Yep, totally. Which I think, you know, then the question is for value creation, value caps here for DoorDash.

2:40:11Question is, was that going to happen anyway? Like, is DoorDash causing this? Or are they participating in it? They're also arming the Rebels. Like, it's complicated. It's complicated. Merely in an inevitability. Yeah. Like, in the same way that, like, was Facebook in an inevitability. Yeah. For the publishing world. Yeah. Because I get Tony, DoorDash, the team. These are amazing. They persevered. They had really great...

2:40:36Insights 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 single business at the same time like this was gonna happen because this is happening in China like this this moment was if it wasn't them would have been somebody else. Again, not to take away from anything that they've done, but the timing was right that why now of mobile enabling this for all three sides of the marketplace, it was gonna happen. Yep. All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

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2:42:09to get started. Grading. So 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 the acquiring to basically for Facebook to buy Instagram, you know, 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 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 to buy a share today versus if you're Sequoia. But I think actually what we should do is

2:43:01In 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 raised after this opportunity and Will will that eventually yield a very profitable business? Yeah

2:43:48Such 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.

2:44:10the end is not yet written. So we can't like 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. But 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 gotta think it's an A to make this decision. It's so high stakes that it reminds me, I hadn't noticed it didn't say, but it reminds me of in a very different way of Santi at Emergence and the Zoom investment. I mean, like this was a, for a...

2:44:56A lot of people and specifically for Sequoia and I have to imagine Alfred at Sequoia. This was a bit your career moment and for a lot of these people and you know it took a lot of conviction to do to stick with the company like they did and I think it's paid off so far. So I give it 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.

2:45:24like let's take out the notion of like have your shares appreciate it in value because like a freaking course like there's a hype train, you know, it's like, have you seen snowpiercer? I imagine the hype train for this is like the train from snowpiercer, go through. Oh, no. And so like the way that I've been thinking about this is basically like, what is the likelihood?

2:45:48That 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 spending ramp down R&D relative to their overall revenue in the future and like I Think the thesis a few years ago of we're gonna 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. Like, remember when Uber said they were gonna be Uber for everything? And everyone was like, oh my god, this is gonna be the most valuable company ever. 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 gonna deliver to besides food? And you're like, oh, groceries. But that market, like that adjacent kind of went away. Like Instacart kind of.

2:46:37That 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 deal. It's stuff from drug stores. 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?

2:47:07Huh, and 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.

2:47:36just 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, the hype trade, the snowpiercer hype trade. 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 May, Tuan.

2:48:02And 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 2000.

2:48:2016 I think it was Airbnb open with a dream of yeah with the in-b-trips the products that none of us ever used Yeah exactly experiences places reservations all this stuff 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 my time and I'm like oh wow That all lives on May 12th now. I think the issue was with Airbnb. 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.

2:49:13Just 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 in their fun. Yeah. 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 Yalls radar. Yep. I'm so excited we're doing this too. It's been a long time. So I've got a, I thought about all the like, you know, important area date 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.

2:50:03My 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. It might be on PlayStation and Xbox 2. It's made by the guys who made Bastion and Transistor if you ever played those games.

2:50:21indie game developer but just like super high quality really well done and 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 Hades and like all the other Olympian gods like help you escape and and then so you try and like do these escape runs and then you die like you never make it and so you got to be like over and over but they it's so well done so fun great time 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 my skills kind of like what Rahul was talking about in game design like you know you're building towards a sense of mastery like you have this account you're getting like yeah like whatever it is it's got that magic that I just feel like it's like worthwhile investment sweet love good game design

2:51:14I 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 gonna put all three out here. There are 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 TV shows that I've streamed this year. And I have a lot of 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. It's art. And there's

2:51:56two great pieces of art that I want to talk about in that 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.

2:52:17but it's fun sci-fi, fun social justice, amazingly well-produced and written. So it's highly recommended. The other, I'm sure many people who listen to this show have watched a succession. And David, I don't know if you've been a fan. I've not watched it, but I've heard. Many people told me about it before I got a chance to watch. It's basically, it's a fictionalization of effectively the Murdoch family and newscorp, different names, different characters, all that.

2:52:47Just 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 is an absolute delight I heard this is hilarious. It's so funny. It's so lighthearted. It's so unexpected It's in some ways it's actually a thinker movie well being lighthearted. It's like it's like a modern groundhog day, right? It's got elements of that. Yeah But I believe you're thinking in a different way than the other two, but it's also worth your time. So, 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, 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, we didn't want to make a huge deal because we didn't know him and where more arms length.

2:53:46Tony Shae passed away last week and we just wanted 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, you know, today in DoorDash and directly through Alfred Lin who was CEO of Zappos, Airbnb tomorrow, Tony had a huge impact on just the whole ecosystem.

2:54:14you know, tragic he passed away so young, but 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 that area north of the strip, like just really cool, staying at the container park and just seeing sort of that vision come to life. I know the city's much better for it.

2:54:43Yeah, such a good point, not just the Valley, but our whole industry and other things. Yeah, graduate of same high school as my wife Jenny, Branson, and 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.

2:55:09all of the, not only in the actual playbook section that we talked about, but sort of key themes from earlier on. If you wanted to run the DoorDash playbook, how would you go about doing it?

2:55:18And 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, you know, 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 allows you to type in your email. Well, we don't really 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, acquire.fm at gmail.com or in the Slack if you want to do those.

2:56:16We'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. Like actual, yes, it was the first time I had 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.

2:56:54ways 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 at 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. So that was part four in our VC fundamental series, more more good stuff like that to come. But if you want to be an LP seven day free trial acquired.fm slash LP, feel free. Yeah.

2:57:24And 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. Woo, woo. 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.

2:57:47acquired content and engaging more deeply with us and 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, acquiredFMATVL.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.

2:58:07Similarly for gifts, it's a little complicated to go through the matchinations of making sure to use someone else's email address. So if you want to give the LP shows a gift, 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 to, you can share it from your...

2:58:30favorite 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. You know, I just love the like, one-to-one-to-one-to-ones spread that we've had so far. So 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 for everyone. Yeah, that's a good say. Usually we say we'll see you next time. Today we'll say We'll see you tomorrow. See you tomorrow.