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Can'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 incredi

by ruddct 6y ago

Can'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 ago
That'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 ago
    Is 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.
    - Judgmentality 6y ago
      That doesn't in any way explain how culture leads to profits. The strongest argument you're making is "better culture means better performance" but that's incredibly hand-wavy in this context, and performance isn't even tied to profits in any way in your example. It might be why you'd want to work there, but it's not a reason to invest there.
    - golergka 6y ago
      Was it Ocaml and Jane street?
      - mhh__ 6y ago
        https://www.youtube.com/watch?v=1rMq-4rWgis https://www.youtube.com/watch?v=1rMq-4rWgis
cactus2093 6y ago
The data from this filing doesn't seem to back this sensationalized sentiment up at all. In the first 3 quarters of 2020, Doordash has $131 million loss on $1.9 billion revenue, and they spend $610 million on sales & marketing alone. So if they cut their sales & marketing budget 21% without doing anything else they'd be breaking even. This seems like a healthy business that is using available VC money to grow faster rather than an inherently a money-losing business model.
- karpierz 6y ago
  Are the subsidies a part of "sales & marketing"? I remember the Uber IPO doing some thing similar, as the subsidies were "promotions".
  - JAlexoid 6y ago
    Subsidies and promotions generally fall under marketing. generally in business management practices, not necessarily in financial reporting.
    - xmprt 6y ago
      We're talking about financial reporting right now so the statement in your comment is pretty misleading.
  - rockinghigh 6y ago
    There are two ways to lower price. Via a promotion, it falls under "Sales & Marketing". If you just show a lower price without any indication of sale/promotions/coupon, it does not.
- PretzelFisch 6y ago
  The question is, does the decrease in marketing spend increase or decrease the los.
  - everythingswan 6y ago
ramijames 6y ago
That is wonderfully brutal. Beautiful.
- aerosmile 6y ago
  Except that it's entirely wrong and cost a lot of people a shot at building their own DoorDash before someone else did it. DoorDash will still face many regulatory challenges, but none of the points made in that parent statement are reflected in the S-1. This type of statements and the type of people behind them are the only reason why startups are successful. On paper, two people in a garage have no chance against a multi-billion dollar conglomerate. Except that in many of those companies, there's a dude walking around and sharing those wonderfully brutal views. Let's get very specific - why didn't Amazon launch food delivery? Clearly, they are keeping an eye on the space and are trying to make Instacart's life as difficult as possible. There's a very good chance that there's someone at Amazon who at some point said a bunch of rubbish about this idea and slowed down their expansion into this space, which is now going to be extremely expensive. But it will certainly come, and that dude will have cost his employer billions of dollars. The same way that we drag people over the coals when their startups fail and burn millions of dollars, I think we should do the same with the people who cost their employers the same amount of money.
  - pointcloud 6y ago
    Amazon actually launched restaurant delivery 5 years ago, and shut it down last year.
    - aerosmile 6y ago
      I didn't know that, thanks for sharing. A quick Google search reveals that in that same year Amazon led a $575 round in Deliveroo. Seems like I picked the wrong example, and in this case Amazon correctly identified the opportunity but failed in the execution. Makes me just realize how much credit the DoorDash team really deserves.
      - 6y ago
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hakfoo 6y ago
I never saw how you could make a defensible monopoly though. As a consumer, my cost for using ten different delivery providers is nil. If there's a constant trickle of new entrants always giving away the store to attract me to sign up, I'd be stupid not to use them all. As a restaurant or driver, they'd have to offer some very expensive incentives to make me say "DoorDash only, no UberEats/etc." I feel like there was a large bet made on autonomous vehicles being ready before the music stops. Once you no longer have to hire human drivers, the "big ball of capital" model works better-- buy a million robovans and you can provide a service level or geographic scale no new entrant can match without a similar up-front spend..
- nrmitchi 6y ago
  IIRC (from what I've heard from friends/acquaintances, so I can't guarantee this) the way that (at least some) have enforced "X only, no UberEats/etc." is by putting it in their contract and saying "we control 75% of the ordering traffic in your market. If you want on our app, it has to be exclusive".
epicureanideal 6y ago
Ssh, don’t tell the VCs. They’re subsidizing my pizza.

by ruddct 6y ago

bytematic 6y ago

That'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 ago
  Is 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.
  - Judgmentality 6y ago
    That doesn't in any way explain how culture leads to profits. The strongest argument you're making is "better culture means better performance" but that's incredibly hand-wavy in this context, and performance isn't even tied to profits in any way in your example. It might be why you'd want to work there, but it's not a reason to invest there.
  - golergka 6y ago
    Was it Ocaml and Jane street?
    - mhh__ 6y ago
      https://www.youtube.com/watch?v=1rMq-4rWgis https://www.youtube.com/watch?v=1rMq-4rWgis

cactus2093 6y ago

The data from this filing doesn't seem to back this sensationalized sentiment up at all. In the first 3 quarters of 2020, Doordash has $131 million loss on $1.9 billion revenue, and they spend $610 million on sales & marketing alone. So if they cut their sales & marketing budget 21% without doing anything else they'd be breaking even. This seems like a healthy business that is using available VC money to grow faster rather than an inherently a money-losing business model.

karpierz 6y ago
Are the subsidies a part of "sales & marketing"? I remember the Uber IPO doing some thing similar, as the subsidies were "promotions".
- JAlexoid 6y ago
  Subsidies and promotions generally fall under marketing. generally in business management practices, not necessarily in financial reporting.
  - xmprt 6y ago
    We're talking about financial reporting right now so the statement in your comment is pretty misleading.
- rockinghigh 6y ago
  There are two ways to lower price. Via a promotion, it falls under "Sales & Marketing". If you just show a lower price without any indication of sale/promotions/coupon, it does not.
PretzelFisch 6y ago
The question is, does the decrease in marketing spend increase or decrease the los.
- everythingswan 6y ago

ramijames 6y ago

That is wonderfully brutal. Beautiful.

aerosmile 6y ago
Except that it's entirely wrong and cost a lot of people a shot at building their own DoorDash before someone else did it. DoorDash will still face many regulatory challenges, but none of the points made in that parent statement are reflected in the S-1. This type of statements and the type of people behind them are the only reason why startups are successful. On paper, two people in a garage have no chance against a multi-billion dollar conglomerate. Except that in many of those companies, there's a dude walking around and sharing those wonderfully brutal views. Let's get very specific - why didn't Amazon launch food delivery? Clearly, they are keeping an eye on the space and are trying to make Instacart's life as difficult as possible. There's a very good chance that there's someone at Amazon who at some point said a bunch of rubbish about this idea and slowed down their expansion into this space, which is now going to be extremely expensive. But it will certainly come, and that dude will have cost his employer billions of dollars. The same way that we drag people over the coals when their startups fail and burn millions of dollars, I think we should do the same with the people who cost their employers the same amount of money.
- pointcloud 6y ago
  Amazon actually launched restaurant delivery 5 years ago, and shut it down last year.
  - aerosmile 6y ago
    I didn't know that, thanks for sharing. A quick Google search reveals that in that same year Amazon led a $575 round in Deliveroo. Seems like I picked the wrong example, and in this case Amazon correctly identified the opportunity but failed in the execution. Makes me just realize how much credit the DoorDash team really deserves.
    - 6y ago

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hakfoo 6y ago

I never saw how you could make a defensible monopoly though. As a consumer, my cost for using ten different delivery providers is nil. If there's a constant trickle of new entrants always giving away the store to attract me to sign up, I'd be stupid not to use them all. As a restaurant or driver, they'd have to offer some very expensive incentives to make me say "DoorDash only, no UberEats/etc." I feel like there was a large bet made on autonomous vehicles being ready before the music stops. Once you no longer have to hire human drivers, the "big ball of capital" model works better-- buy a million robovans and you can provide a service level or geographic scale no new entrant can match without a similar up-front spend..

nrmitchi 6y ago
IIRC (from what I've heard from friends/acquaintances, so I can't guarantee this) the way that (at least some) have enforced "X only, no UberEats/etc." is by putting it in their contract and saying "we control 75% of the ordering traffic in your market. If you want on our app, it has to be exclusive".

epicureanideal 6y ago

Ssh, don’t tell the VCs. They’re subsidizing my pizza.