DoorDash began as a solution for merchants turning down delivery orders, creating a new logistics market beyond the 20,000 restaurants already offering delivery to serve the other 980,000 US restaurants.
Customer obsession guided major decisions, including the strategic focus on suburban markets rather than competing in dense urban areas where most competitors concentrated.
Despite multiple near-death experiences, including fundraising challenges and a down round, DoorDash emerged as the market leader with 60%+ share by focusing on superior retention and customer frequency.
During COVID-19, DoorDash made counterintuitive decisions like cutting commissions by 50% ($100M cost) and running ads for competitors, prioritizing long-term mission over short-term financials.
Xu believes in becoming an expert through hands-on work—all DoorDash employees, including himself, still do deliveries annually to maintain connection with the physical marketplace.
DoorDash's Origin Story: Finding the Right Problem to Solve
Tony Xu and co-founders initially created multiple "projects" before committing to DoorDash, using two criteria: enjoying working together and genuinely liking the project.
The idea originated from shadowing a macaroon store owner who showed them a booklet of delivery orders she had turned down.
Their customer research approach was immersive: "Can we follow you around for a day?" rather than just asking survey questions.
DoorDash started as "Palo Alto Delivery" with a simple website launched in 45 minutes featuring 8 PDF menus and a Google Voice number.
All four founders personally handled deliveries in the early days, with Xu describing his summer plans to classmates as "delivering hummus from my Honda" rather than taking exotic vacations.
Early Validation and Market Testing During Y Combinator
DoorDash entered Y Combinator in 2013, using it as an accountability mechanism to continue the project.
They focused on three critical validation questions: would consumers pay for delivery, would restaurants pay them, and would there be enough available drivers?
Early customers were primarily families with young children, with mothers making most food decisions; these customers provided invaluable feedback and kept returning without promotions.
A key experiment revealed that Dashers and Uber X drivers self-selected differently—only 1 out of 40 would switch platforms even for 25% higher pay.
This showed DoorDash was creating a distinct driver workforce (now 7 million strong with nearly 60% women) compared to ridesharing services.
Surviving Near-Death Experiences and Fundraising Challenges
Despite positive metrics at Demo Day, DoorDash struggled to raise capital and nearly went out of business weeks after Y Combinator.
A catastrophic service failure occurred after a Stanford football game when they couldn't handle the order surge; they refunded all customers (40% of their bank account) and personally delivered apology cookies at 5 AM.
This crisis became foundational to the company value: "customer obsessed not competitor focused."
DoorDash experienced three consecutive difficult fundraising years (2016-2018) despite strong business metrics and growth.
The Series C was a down round, creating tension between visibly improving business metrics and investors' hesitation due to competitive concerns.
Strategic Differentiation: Choosing Suburbs Over Urban Centers
While competitors focused on dense urban markets, DoorDash deliberately targeted suburban areas with less competition.
This counterintuitive strategy was driven by customer needs—suburban residents had fewer restaurant options within walking distance compared to city dwellers.
The suburbs also offered superior unit economics: larger order sizes from families, easier parking, more single-family homes for simpler delivery, and higher revenue.
This approach positioned DoorDash to create a entirely new market segment while avoiding direct competition in crowded urban battlegrounds.
By 2019, this strategy helped DoorDash surpass both Uber Eats and GrubHub to become the market leader.
Navigating COVID-19 with Long-Term Vision
During COVID-19, DoorDash operated in crisis mode—"seven days a week, 10 AM to 2 AM, all hands on deck."
They prioritized three things: safety (contactless delivery in 4-5 days), liquidity for merchants and dashers, and community support (partnerships with hospitals).
Made controversial decisions like cutting merchant commissions by half ($100M cost) and running TV ads promoting all delivery services including competitors.
These choices aligned with their long-term mission: "to grow and empower every physical business and grow the GDP of every city."
This period reinforced their purpose—Xu noted that crisis brings clarity: "when you have that kind of clarity, it makes it a lot easier to make those decisions."
Leadership Philosophy and Future Vision
Xu advocates learning by doing—"there's no better way to be the expert than just to do the work."
All DoorDash employees, including Xu himself, still perform deliveries annually to stay connected to the core experience.
Xu remains optimistic about opportunities in the physical world, noting that physical businesses still produce the majority of jobs and GDP.
He believes that while digital innovation is important, understanding the physical world (like "the last parking spot in a rainstorm") presents equally valuable opportunities.
DoorDash's ultimate mission transcends food delivery—it's about growing prosperity, abundance, jobs, and solving problems in local economies.
