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DoorDash S-1
- 29athrowaway 6y agoI stopped using DoorDash when they had an outage, and when I tried to contact customer support I got an e-mail saying that a person would get back to me in 48 hours and they never did. Then I read about the Doordash tip controversy and that made my decision final.
- darkwizard42 6y agoDefinitely impressive to see the losses getting narrowed so heavily. Assuming they function like ridesharing and much of the cost is variable (labor), then they are a lot closer to profitability than some of the other comments here seem to think. This balance sheet looks remarkably better than ridesharing ones. I am cautiously optimistic about their ability to be a sustainable business.
- uptown 6y agoUnder Risk Factors Summary: "We have a history of net losses, we anticipate increasing expenses in the future, and we may not be able to maintain or increase profitability in the future;" "We have identified a material weakness in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations;"
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- blueline 6y agothe first part feels standard to me. can anyone clue me in on whether that second part is as batshit crazy as it sounds?
- lemonspot 6y agoI have only read a handful of these in my life, but the material weakness does sound strange, but the rest of it just sounds crazier and crazier
- ycombonator 6y agoThat probably means they are cooking the books for the pre IPO investors and don't want to go jail after public listing.
- derivagral 6y agoSeems nuts, but sections like this can be a bit "out there" occasionally since risks not covered can technically be grounds for an eventual lawsuit. I wouldn't take this as an expectation, but if you do decide to allocate $ towards them I would definitely pay attention to the notes in every 10k/10q. But you should be doing that anyway, imo. Relatively recent guidance on that section: https://corpgov.law.harvard.edu/2020/09/11/sec-changes-rules-affecting-risk-factors-litigation-and-disclosures-by-us-public-companies/ https://corpgov.law.harvard.edu/2020/09/11/sec-changes-rules...
- capableweb 6y ago> may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations This part makes it sound (especially the "fail to meet our [...] reporting obligations" part) like they should get their shit together before going public, and even if they didn't plan on going public, fix that right away. Imagine if any other small company approached the government and said "Hey, we might be breaking the law, we're not fully sure. That's alright with you?". They would get the IRS after them so quickly, how come DoorDash can be open about maybe breaking the law? Bigger companies seem to constantly be above the law.
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- dannyw 6y agoIn today's world, every medium to large company in the world breaks at least a law a day. It's simply literally impossible for a single human to comprehend all the laws and regulation: the internal revenue code itself contains 3.4 million worlds. This is just CYA.
- loceng 6y agoIsn't that their point though - they know it will hurt the earnings they present, and they don't want to hurt their IPO?
- sithlord 6y agoFormer auditor here: The first one is standard. Second one is also a standard statement, but not standard to actually see. Honestly I don't know that I have ever seen that statement out in the wild. It's like something you study about in school - but rarely see. It could mean anything, with regards to discrepancies found in the financials. The main thing is that, what was found is material - and when you are talking about numbers this big - the discrepancy must have been significant.
- toomuchtodo 6y agoWould you say this is CYA by finance when forced to go public by those with a controlling interest in the company? Because it definitely has that CYA vibe.
- thenewwazoo 6y agoOne doesn’t admit to a material misstatement if it is at all possible. It is a HUGE deal because it admits that someone fucked up and the error wasn’t caught until the audit.
- okprod 6y agoAuditors typically work with a firm to iron out any issues so as to avoid material statements. The fact DoorDash and the auditor weren't able to resolve this issue/these coming issues and resorting to writing it up definitely is a big deal. But business-wise, yea losses forever isn't what you want to see.
- Dragonai 6y agoThis thread has been really informative, thank you for your comment in particular! This tidbit is fascinating.
- sithlord 6y agoIt is also possible that there is nothing wrong with the financials, but there is wrong with the controls over the financials. IE, can the entire finance department sign off on checks? Or something along those lines. But with the above example, say anyone can process process orders without any oversight (ie no sign off by 2 VPs or something like that) What is potentially stopping some AP clerk from setting up a fake company, and then paying them for services every month? These are also the types of things that controls over financial reporting could mean.
- Kiro 6y agoThe first part is very standard language. In general, the risk section needs to cover every possible risk so no-one can sue you. The likelihood doesn't matter.
- avree 6y agoWouldn't be a HN S-1 without someone posting the first quote you did, a quote that is present in literally every tech company's S-1 filings.
- rrss 6y ago"literally every tech company" is a significant overstatement. There are a lot of tech companies that were profitable at time of IPO and that did not include the first statement. Just because it has become standard operating procedure for tech companies to go public with a business model of "lose money on every sale, but make up for it in volume" (with a hope that they can sustain predatory pricing long enough to dominate the market) doesn't mean it's ever less interesting. It's a fairly recent phenomenon and IMO will never get old to comment about every time there's a notable IPO.
- goat_whisperer 6y agoRecovering CPA/auditor here. If you're curious to what the second bullet point means... When a CPA firm audits a public company, they're basically performing two parallel audits -- an audit of the books and records (i.e. are the numbers accurate/truthful?) and an audit of the internal controls over financial reporting (i.e are there procedures/controls to find correct errors/fraud?) This second audit is required because of Enron, basically. Anyway, when the auditors find a big error, they will usually tell the Company how to fix it, so the books and records are fairly stated. However, since this error usually results from a deficiency in controls (i.e. you had nothing to catch this error), it is noted on the audit report on the internal controls. A 'material weakness' is the worst kind of deficiency in internal controls. It basically means that an enormous error could occur (enormous in the sense that it would effect an investor's decision about buying or selling the stock) and the Company wouldn't be able to catch it/fix it or even know that it happens In the S-1 they state: "The material weakness that we and our independent registered public accounting firm identified occurred because (i) we had inadequate processes and controls to ensure an appropriate level of precision related to our revenue to cash reconciliation process, and (ii) we did not have sufficient resources with the adequate technical skills to meet the emerging needs of our financial reporting requirements" So it basically means their accounting team was completely overwhelmed/inexperienced. My experience with software companies is that accounting is a total shitshow, so not surprising. The surprising thing is that this weakness must be so pervasive, they can't predict with any confidence whether they will remediate it and be able to have sufficient controls over their numbers. So it sounds like they're probably trying to completely overhaul their accounting function while they try to go public. As a potential investor, wouldn't give me a huge deal of confidence in the accuracy of their financials. Pity the poor souls trying to fix this... "To address this material weakness, we are hiring additional accounting, engineering, and business intelligence personnel and are implementing process level and management review controls to identify and address emerging risks. While we are undertaking efforts to remediate this material weakness, we cannot predict the success of such efforts or the outcome of our assessment of the remediation efforts at this time. We can give no assurance that our efforts will remediate this deficiency in internal control over financial reporting or that additional material weaknesses in our internal control over financial reporting will not be identified in the future."
- bytematic 6y agoThese are in almost every S1. "in the event of the end-of-the-world we may have issues generating revenue"
- xoxoy 6y agoI pretty much only get delivery if I have some sort of promo code emailed to me. Otherwise I can’t really justify spending $25 to get a burrito delivered. Amazing that people have normalized paying for the insane number of fees plus tip to get one thing delivered.
- bluedino 6y agoIt's often justified by, "I can keep working for another hour if I don't leave to get food."
- jermeh 6y agoAnd even more often "I can keep drinking another beer if I don't have to leave to get food."
- aczerepinski 6y agoI can verify this justification exists.
- jen20 6y agoI may or may not be able to verify that sometimes both justifications exist in parallel.
- colinmhayes 6y agoHow long does it take to go to a restaurant and pick up the food yourself? 10 minutes each way at most + 5 minute wait seems the maximum reasonable estimate to me
- aliljet 6y agoPrecisely. I can't stomach the extremely high price of this service.
- Spivak 6y ago
- raesene9 6y agoThe food delivery market at the moment feels a bit like the daily deals market from 10-12 years ago (with Groupon and Living Social). Sure there's a market there, but is it really big enough to sustain multiple large IPO'd start-ups...
- koolba 6y agoThere's always a market for VC subsidized consumer services. What's in dispute is whether there's a market for these services when they reflect their true unsubsidized costs. If food (or grocery) delivery companies cannot turn a profit during a pandemic, there's no way they're going to turn a profit when the majority of people return to in person dining or pickup. Groceries and restaurants have terrible margins already. There's just not enough pie to give a meaningful slice to middle men facilitating payment and delivery.
- boringg 6y agoTurn a profit? No these companies are taking all revenues and deploying it back into the company to continue to grow operations. They will be loss taking companies until they get market share and then Extract profits once they have market share or die trying.
- ttul 6y agoIt will be a battle to the death until there is some consolidation to empower a price increase.
- nipponese 6y agoInteresting comment but some prelim research can help us understand if it has legs: Look up the S-1 from those companies and compare the numbers.
- oramit 6y agoYeah, I had the same feeling. None of this feels sustainable and I get the sense that most of these companies are rushing to IPO as soon as they can to unload their terrible businesses on the public. Groupon failed because they were selling full priced items at a discount. This was meant to be a marketing thing for small businesses but in practice you just ended up with cheapskates who never intended to be repeat customers. The only thing I can say in the delivery companies defense is they have normalized large markups on delivery. People are paying more for delivery than they were before(the apps do a good job of obfuscating how much more). Clearly there was an arbitrage opportunity but there are so many companies fighting over the same tiny margin while losing tons of money. This can't end well.
- mchusma 6y agoBetter than I thought! Looks like huge growth under covid, and marginally profitable for first time.
- dchuk 6y agoBecause of covid, my wife and I have been using DoorDash probably twice a week. As others have mentioned, if you have a chase sapphire reserve card, they give you like $60 in credit this year and next, and free dash pass, so it makes it actually decently economical to use. Obviously if you do the math, this is just another VC Ponzi scheme with no real path to profit, but as a consumer who already had that credit card, might as well ride the wave and use some rich LPs subsidies to pay for the delivery of my cheeseburgers I suppose.
- goatherders 6y agoVery well said.
- thesuitonym 6y agoI see this sentiment a lot and I don't understand it. Why would you involve yet another human in your food purchase? I've never been a huge fan of delivery services like this anyway, but even if I had ever considered them before, now just seems like it's not the time to do so.
- JoeAltmaier 6y agoWell, going to the takeout place can expose you to more human beings. At least with delivery, you get just one person and a brief contact. And of course this plague is not carried in food.
- jimz 6y agoAnd it's a real balancing act but having caught COVID and almost died at the age of 33 I'm simply not going to take any chances when since we have no solid proof that my antibodies are going to ensure from now until I am next in line for the vaccine. Having worked in NYC in the immigration law system a ton of my ex-colleagues caught it and some of my supervisors passed away from it right away and as much as I'd like to think of myself as a rationale person who evaluates th evidence, personal experiences are powerful and scary and it's hard to convey how unexpectedly agonizing a "mild" case felt to me. This isn't the difference between mild and spicy wings, it's less-spicy and qhost-pepper wings. And so them (and postmates, and instacart, and shipt, and local booze deliveries) have been extremely important because it reducecs the attack vector. Call me paranoid, but I can at least hae some control over the groceries sent to me, and for example. It's simply a tradeoff I'm willing to make. At once point, I couldn't even even properly update my will even though I'm a lawyer because I wanted to be prepared but not even my friends from school who are in the field were willing to come to my house, with the quarantine complicating things. since it was felt tha the 14 day window was arbitrary and I didn't get full blown symptoms until day 8-9.Under these cirucmstances every precaution, in my personal view, as long as it's a precaution that isn't conjured out of thin air and backed by some level of indication of efficacy that skews towards minimizing potential vectors of re-infection. It's not failsafe - my then-girlfriend, was asympomatic, gave mteh rvirus, and there wasn't any way in those days to even know or sure what do to, but as Don Draper said in Mad Men: "Limit your exposure".
- algotading2020 6y agoAwesome
- kumarski 6y agoAny chance you use alpaca.markets? You planning for some algo-trades on doordash? ;P
- deleted 6y ago[deleted]
- randrews543 6y agoDo we know what their Net versus Gross Revenue Retention looks like?
- jeffbee 6y agoPretty tacky to buy your own labor laws for $200m and then try to cash out your shares.
- qeternity 6y agoOr, ya know, people just disagree with you. Being in the minority doesn't mean the other side cheated.
- ninja3925 6y agoI don't understand why people say Uber "bought" a law. Is every prop sponsored by a corporation a "purchase"? This type of speech undermines our collective trust in democracy and should not be OK.
- bepvte 6y agoCorporate lobbying and the wealthy's influence in politics damages democracy far more then this rhetoric ever could.
- natchy 6y ago> This type of speech ... should not be OK I think there are perfectly good reasons to distrust democracy. especially in the information age.
- snypher 6y agoUber and friends spend over $200 million to pass this law. Yes, this is a purchase, or more like a theft. Yes, I would even go so far as to say every prop sponsored by a corporation is a purchase. Do you have the ability to spend $200m on a law to help your company? Would it be ok if you did?
- advrs 6y agoThis is a very idealistic view of the Prop 22 debate, and I encourage you take a more material analysis to this issue if you want to understand it. It was a cheap way for VC-backed companies to "buy" a legal method to skirt existing labor laws and regulations. This is the antithesis of democracy.
- ninja3925 6y agoGood operation for the founders. They have 42M stocks + 35M options which should yield $3-4B. 3 newly minted billionaires.
- bepvte 6y agoThe VC world and the economy of online startups are almost like a planned economy. The extremely wealthy allocate money for these expensive yet unprofitable online services, like uber, doordash, and UpWork, almost like socialist central planners. So many of these modern businesses would not exist without the safety net of the extremely wealthy. Also, how is DoorDash still unprofitable, despite taking 30% commissions from restaurants, and 25% commissions from delivery costs, during a pandemic which has many people locked inside??? It's like the Quibi excuse but somehow worse.
- ruddct 6y agoCan't help but think of this article[0], which summarizes the food delivery market pretty nicely. "You have insanely large pools of capital creating an incredibly inefficient money-losing business model. It's used to subsidize an untenable customer expectation. You leverage a broken workforce to minimize your genuine labor expenses. The companies unload their capital cannons on customer acquisition, while this week’s Uber-Grubhub news reminds us, the only viable endgame is a promise of monopoly concentration and increased prices. But is that even viable?" [0] https://themargins.substack.com/p/doordash-and-pizza-arbitrage https://themargins.substack.com/p/doordash-and-pizza-arbitra...
- bytematic 6y agoThat's what I've always thought as well, but the financials look to be pretty good here. The CEO states their main differentiator is their culture so I wonder what the actual landscape looks like
- Judgmentality 6y ago> The CEO states their main differentiator is their culture so I wonder what the actual landscape looks like That's an alarm bell if I ever heard of it in an industry famous for losing money. "We can't really tell you why we'll make money and nobody else will, other than that our culture is better!"
- mhh__ 6y agoIs it? Obviously the hard numbers take precedence but I wouldn't necessarily hang up the phone. There was a talk at [Guess the programming language]-conf last year, where a director at a pretty big investment fund was talking about how their choice to use said language (as opposed to being another C++/Python shop) has very much effected their approach to finding solutions to problems for the better. It's probably impossible to measure, but the confidence to do things differently company-wide could set you in good stead asymptotically. Even if culture just means not being Uber e.g. no "a very, very strange year at [CompanyName]" blog posts or similar.
- tsjq 6y agolooks like founders / VCs exiting . btw , how is Uber stock doing these days ?
- ryanjadhav 6y agoBetter than IPO price, market cap is 82B+ today.
- msoad 6y agoEverything is doing better than when Uber IPO'ed. Asset prices are to the roof!
- raziel2701 6y agoThe whole market makes no sense right now. Question is when does the bubble pop? Corporate debt is the risk, but the Fed seems intent on extending easy credit to keep the thing going. We might see negative rates soon as we further zombify the economy where insolvent companies somehow continue to exist thanks to bailouts and hoard capital that could have been better allocated.
- tsjq 6y agois the Fed's easy-credit helping the common-man to get easier & lower-cost loans for business / home-buying , or is it helping only the shiny-suited investment bankers who trade bonds & shares & commodities in front of their multi-screen-monitor bloomberg-terminals ?
- deeeeplearning 6y agoSo can we all admit now that we're clearly in a massive tech bubble? I don't think I've seen an IPO lately for a tech company thats profitable or has any real path to profitability. For any VCs out there, I have a half baked AI for Dogs app I coded in 20 minutes so please wire me $50M, it'll cost you less than what you wasted so far in 2020, thanks.
- natchy 6y ago> IPO lately for a tech company thats profitable or has any real path to profitability snowflake?
- asadlionpk 6y agoCloudflare?
- yosho 6y agoAre you always this cynical? There are plenty of good tech companies that have IPO'd recently: Snowflake, Unity, Corsair to name a few. I'm sure all three of those will do well in the coming years. Not everything is a bubble, these companies have some impressive growth numbers.
- jletienne 6y agodatadog?
- deleted 6y ago[deleted]
- abrowne2 6y agoHopefully if this goes well they can cleanup their app. As a regular user, one of the main problems is the order tab. It loads very slowly. The location of the dasher updates infrequently but instantly if I hard close the app. Otherwise, their product is effective and pretty nice with Dash pass.
- peterthehacker 6y agoSince COVID I’ve used DoorDash more than ever. I got the dash pass with my cc and have been ordering a couple times a week. That is until I finally cancelled over some recurring bad experiences: 1. The food is wrong often. Whether it’s the dasher’s fault or the app’s or the restaurant’s who knows, but it happens too frequently. Granted DD gives an automatic refund in credits but our meal is ruined at that point and no one wants to wait another hour to roll the dice on a DD order. 2. All the good restaurants are leaving DoorDash. Maybe this is more so a trend in my town but at the beginning of COVID there were lots of great restaurants on it and now there’s just chains like Chipotle and McDonalds. Apparently it’s not just DD that loses money on these orders. Now I will just call the restaurant directly and pick it up myself. Much better quality control, timing, cost and selection.
- TheKarateKid 6y agoTo make matters worse when #1 happens, DoorDash apparently uses temporary disposable numbers for their drivers which get TERMINATED as soon as the driver marks your order as "delivered." I once couldn't get a hold of my driver after opening the bag and seeing 1/2 my order was missing. Number was disconnected, and couldn't text it either. #2 is because apparently DoorDash and Uber Eats takes 30-40% commission on the order! How are they even able to get away with this robbery, especially in an industry that already has low margins (apparently).
- tessla 6y ago> The food is wrong often. Whether it’s the dasher’s fault or the app’s or the restaurant’s who knows, but it happens too frequently. The dasher doesn't actually order or make your food, they just pick it up and drive it to you... AFAIK the restaurant has an app aka "the tablet" which they receive orders on that they can press a "ready in 15 minutes" button on when the order is ready.
- peterthehacker 6y agoThanks for clarifying that. It makes sense. I figured that it was rarely the driver’s fault.
- kevindong 6y agoIn the age of deeply unprofitable (as in, they lose more money than they grossed in revenue) tech companies going public, DoorDash actually seems pretty okay. In the 9 months ended 2020-09-30, DoorDash had a net loss of $149 million on $1,916 million in revenue (see page 93). Which implies if they can raise their revenue by ~7.78% while keeping costs steady, they can break even. Given their rate of revenue/cost increases (in the same timeframe as above compared to the 9 months ended 2019-09-30, revenue grew 326% while costs grew 192%), they could very plausibly do so within the next year.
- nipponese 6y agoHats off to you for actually reading the S-1 and not just coming to this thread to drop an opinion about the industry or VCs.
- kmonsen 6y agoIn a pandemic where people can’t eat out.
- raziel2701 6y agoYeah there's no better time to go public than now for doordash. The pandemic has boosted their revenue and I suspect it will never reach these all time highs (which is still not enough for them to make profit). So go public and let retail investors hold the bag.
- ghaff 6y agoYeah, the numbers are not terrible given other companies in a similar vein. However, as you say, we're in circumstances where a lot of people want prepared food but don't want to go out and pick it up. Or, at least, can mentally justify spending money they wouldn't normally spend given the current circumstances.
- Jeremy1026 6y agoYes, but humans are creatures of habit. Now that we are used to all of our food showing up to our house, I don't expect that many people, especially those that are past the 'lets go out with our friends 3 days a week' stage of their life will continue to order in more than they go out once restrictions lift around the country.
- wcchandler 6y agoMeanwhile, I live in a small town of 4,000 people. Closest “big town” is 5 miles away with 44,000 people. I have 0 options in DoorDash. :( I hope they use this capital to do more expansion. Grubhub at least provides me with the local VFW.
- shanemlk 6y agoI was building a point of sale and online ordering system for my friend's pizza restaurant. DoorDash drivers would come in for orders, and no one had ever signed up for it. Calling them on the phone to cancel it was a nightmare. I hope they fail.
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- freewilly1040 6y agoA popular Bay Area restaurant, with one location in both SF and Oakland, recently spun up a new "restaurant" that exists solely in Doordash. The first order I put in with them came back warmer and with better packaging. I was left wondering who actually prepared the food. The branding on the bag was like 50/50 Doordash and the restaurant (Burma Superstar).
- davidsawyer 6y agoYeah, I could see "ghost kitchens" or "cloud kitchens" like this becoming much more popular in the coming years. For restaurants that primarily focus on their dine-in location, their food often doesn't work very well for delivery, but a restaurant whose sole focus is delivery could ensure the best customer experience.
- malisper 6y agoITT: people claiming DoorDash has no path to profitability - the numbers in the S-1 tell a different story. On page 112, there's a chart of how much profit they make per order based on how long the user has been on the platform. In the first year, the value is negative because DoorDash spends money on sales and marketing to acquire the customer. By the third year, DoorDash is making a consistent profit of 8% on each order placed. When you look at the numbers in aggregate, it appears they are massively unprofitable. When you look at the numbers by cohort, it's clear they are investing money in sales and marketing and based on their metrics, they will generate a significant return on their investment over the next few years. Over time, as a larger and larger percentage of their users become recurring users, their profit on each order will approach 8%.
- sfblah 6y agoI think the bigger question for this type of company is margins in the face of competition. The service they offer is totally undifferentiated from that which a competitor could fairly easily provide. Yes, it takes marketing dollars to sensitize consumers to the existence of delivery services. But, once someone knows about them, there may well be a race to the bottom on price. An 8% profit sounds great, but is it sustainable?
- malisper 6y agoThat's a different argument that what most people in the thread are making and in my opinion, a reasonable one.
- arcticbull 6y agoI suspect that the massively negative first year margins due to, what I assume is CAC, creates a moat. Very few companies are as "backed by Masayoshi Son," i.e. willing to set fire to the huge quantities of money necessary to establish a foothold. This is a network effect business in a lot of ways, and metros tend to be dominated by a particular food delivery provider.
- 6y ago
- annexrichmond 6y agoReally glad my local Thai restaurant handles their own delivery. I just call them and they already know my general order as it's on file with my phone number. I prefer going to direct as it's a better way to support them.
- gouggoug 6y agoFor some reason DoorDash decided to ban my account one day, I have no idea why. I found out while trying to order food. I ask their customer support chat, who told me they'd be in touch in 24 hours. 24 hours later I indeed got an email: "I've looked into your account and our system shows your account has been deactivated due to account activity that violates our Terms and Conditions of Use." I asked what ToS I violated, but never got an answer. Some research shows I'm not the only one in this situation. What a weird thing to do. I deleted the app.
- eplanit 6y agoI'd want to re-evaluate businesses like DoorDash in a few months from now, _after_ vaccine distribution is underway. I think this whole model might look very different then (i.e. as shaky as it did pre-Covid).
- cb1210 6y agoDoordash charged my card for an order I didn't place. I could easily show that I didn't place the order. They refunded my card, then immediately deactivated my account for violating their terms of service. I'm not sure how their screw up caused me to violate something other than I asked for my money back. At any rate, best of luck. If the only way to profit is to steal from people and hold restaurants hostage, karma will have it's day.
- 6gvONxR4sf7o 6y agoHow is it that pizza delivery has existed for so many decades viably, but integrated delivery companies (which I would have expected to be more efficient) are all losing so much money?
- h43k3r 6y agoPizza has really good margins