Maybe somebody can explain what the business model is here.
It sounds like the founders get to play big shot for a couple years while they bleed their VCs.
They ensure that the food is edible by working with restaurants that customers already dine-in at. Sure, they can't guarantee that the food is edible, but no delivery service can guarantee anything about the product that they are delivering. They have to rely on the reputation of the sender.
The problem is instead that this is too common of a business model. There doesn't appear to be anything particularly innovative about what DoorDash is doing, and they don't appear to be executing very well. It's not a fundamentally flawed business; it's just a uninspiring one that was probably overvalued.
Like deliveroo recently went live in Nottingham (May 2015) and they have only fairly good restaurants who did not previously do delivery on their books.
Just Eat and HH added a centralised online booking service to existing takeaways. Dilveroo and Doordash aim to deliver restaurant quality food, it's a new market segment.
Given the fact that the optimization is global they would have the advantage of doing global optimization over each restaurant doing it locally. Therefore they could charge less for deliveries while paying their workers the same.
Unfortunately, a google search of the founders tells us they haven't got the slightest clue how to do that. What the investors can hope is that this money will allow them to find people that can make the extra effort to rise the business above all of the similar ones.
But there's going to be a lot of M&A along the way and a lot of these companies seem to be building themselves as acquisition targets instead of independant businesses. Just like every tech giant has to have a music streaming service, a phone OS and an intelligent assistant, they'll pretty soon all have to have a food delivery and virtual laundry service too. So the downside is pretty derisked as long as you can stay as one of the top 3 or 4 candidates in your vertical and you don't burn too much cash before Daddy Warbucks takes you under their wing.
Plus, it was not a priori impossible that the company that wins the logistics-as-a-service space might come from food delivery instead of people delivery. Food complains a lot less, it's way more bursty and it benefits from economies of scale in way more attractive ways than people. As long as the food delivery startups remain valued at around the billion dollar mark, it's a 50:1 cheap bet that food might be a more attractive pivot point in the land grab than people.
They do operate on pretty tight margins though, and its a competitive space.
DoorDash marks up menu prices 15-25% or so, charges $5-6 for delivery, and an implied tip to the driver ensures they don't have to pay drivers much (the last point is speculation, but I suspect its true). A $25 pizza costs over $40 to get delivered from 5 miles away after all that. That is what is ultimately unsustainable about the business -- if they can't turn a profit with ~40% service fees, they are doomed.
What the secret? He subtly changes the resturant prices--the customers don't have a clue. When caught(one time), he claimed it was a mistake in the publication.
Workers/Drivers? There's a lot of desperate people in this sharing economy. (Some do sample the food though.)
Since I really can't stand the dude, I'll spill everything I know.
Lunch is a hard sell. I don't know why? Delivering dinner is where it's at. People eat a lot!
It's a good business for anyone. This guy started when he moved from the east coast to the west coast. On the east coast, they have had this service before computers. Just printed menus, and phones. Supposedly, it a common service in NY?
This guy is so successful, even without technology, he never bothered to revamp for Internet use. It's still just a 10 page booklet, with the scanned restaurant menus, with fluctualting prices. It all depends on his mood. Of course, restaurants always get the lowered, agreed upon price.
So, it's a good business model. I never thought people would pay so much for delivered food, but they do.
I did learn something from this guy, if you bend the rules, and work hard, you can make pretty much any business work.
The business model isn't as bad as you'd think. For newcomers in this space, the major issue (that could very well thwart any innovation) is fraudulent orders.
Seems dumb to do from a restaurant's prospective, as I'm sure they see all these products as "the delivery app". But they're different to me: I won't order from DoorDash because I can't be confident my food will be hot — they do multiple deliveries per run, as opposed to an exclusive run.
One area I have thought might work is if these food delivery services act as the seller and take responsibility for quality. You could have a DoorDash sell the food and outsource the production to the restaurants. The customer would not know where the meal came from and any quality issues would be on the DoorDash services plate (sorry for the pun).