DoorDash Valuation Nearly Triples to $4B in Six Months
bloomberg.com
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Sometimes, I do enjoy walking into a coffee shop and ordering like a human.
The one time I was next in line, there were probably 3 or more orders, and like 5 or more people behind me in line, plus the person in front of me was ordering the whole menu.
It behooves you for the restaurateurs you enjoy patroning to have healthy financials and not be squeezed, otherwise they can’t continue as a business.
But this considers only the cost of ingredients. So you'd rather sell a bottle of wine for $15 (that cost $5) than sell a meal for $15 (whose ingredients cost $5).
On your final point, I suspect that delivery via Doordash or similar can take margin that a restaurant's own delivery service (via phoning in) would have made, and that Doordash has inserted itself as an intermediary (with a margin) where none was present before. The pie might be bigger but I'm not sure whether Doordash is capturing less than or more than 100% of the increase.
When you talk about 'beverage margins' or 'food margins', you must be talking about 'gross margin', i.e. [selling price, less direct costs of good sold] / [selling price]
When you talk about 'restaurant margins' and mention 2-6%, you must be talking about net profit margin (i.e. profit as a percentage of revenue).
It seems like you're comparing gross margin on beverages, with net margin for a restaurant overall. Not apples to apples.
The markup on food (based on ingredients only) and wine is similar (3x). It costs virtually nothing to store wine or to prepare it for sale. But the process to take ingredients and make a meal takes a lot of labour and machines.
Oh brother. The high gross margins on beverages positively contribute to the net margins. The point is that most restaurants aren't crushing it, margins are thin, and a middle-man taking a cut doesn't help.
on
Yes, I agree with you. See my other comment:
Well, except the cost of the space. Oh, and the refrigeration. Oh, and employing a sommelier (if it's a higher end restaurant).
Other than that, virtually nothing.
What is the cost of space and refrigeration for that time? 15 cents? 25 cents?
It's virtually nothing compared with the labour and machine costs of storing and turning ingredients into a meal.
And I'm genuinely curious (DoorDash isn't in my city) what proportion of restaurants that use DoorDash also have one or more sommeliers on site.
Customers are opting to go where the food is cheaper, and the drinks are more expensive. That's why it is that way.
Restaurants would love to have higher margins on food.
The restaurants chose to diverge from the underlying pricing, knowing that there was a risk that people would catch on, or the underlying economics would change.
I'd note that some have given up on it because it stopped working. McDonnalds just charges $1 for any drink, because the customers came to understand it was overpriced, and learned to work around their pricing shenanigans.
Nobody is fooled by the prices of things, they see it. And a minority wouldn't change pricing schemes.
We look at the food list, then the drink list and that's that.
I can meet everyone on Tinder, and experience my friends/the town on Facebook just the same! </SARCASM>
My friends and I seem to go out a lot less. It's more fun to 'tailgate' at home with takeout and a nice TV. Going out to the bars is a lot less appealing than hitting up the liquor store. It's so much more fun to get wine drunk and order random stuff on Amazon than it ever was to go to the mall. Going to the nice grocery stores and cooking for each other has pretty much replaced fine dining. We used to hit up the barcade pretty frequently but retropi has got us covered. A lot of spontaneous hangouts take place on Discord where we're not even playing games. Why would we want to go to a movie theater and pay like $28/person when I can make boatloads of fresh popcorn, grab some bulk candy, and make extra plump weenies with our nice TV and surround sound? Video game nights have replaced things like bowling.
It's not that we're being less social, it's just that stuff at home-ish is a lot more worthwhile than the typical canned activities. Plus, doing something in the same room as other groups od strangers wasn't really being all that social anyway.
Now, we can't afford the time/money to socialize, and if you get to a particular position in life (usually after University), you're stuck in a rut.
That said, smaller restaurants in India don't depend as much on beverage revenue to start with - and most places don't serve alcohol.
Also - my father who owns a small resto hates pretty much every delivery service. They refuse to do anything beyond "We can't help you, it's policy", anytime an issue happens. For instance, you can order food with cash on delivery here. The delivery guy is supposed to pay the restaurant before he picks the food up. On one occasion, the delivery guy said that he did not have cash and would pay up once the end customer paid up. At some point, the end customer refused the delivery, so this guy came back, quietly left the parcel on a table and disappeared. The platform of course was of no help.
https://www.ft.com/content/d23c44fe-4b0b-11e7-919a-1e14ce4af...
https://timesofindia.indiatimes.com/companies/swiggy-expands...
Edit: See Erwin's comment for better phrasing.
1. DoorDash has started gouging customers with exorbitant fees - restaurant tip, service charge, delivery fee, driver tip etc. I stopped using service after that. Remaining customers could the true "target demographics" for DoorDash, who might be price insensitive or really busy in their lives, thus improving DoorDash's financials.
2. Softbank betting big and investing lavishly on gig economy companies (see: Uber, Didi, Grub, now DoorDash etc)
This seems to be the case for PostMates, too. I recall being sceptical when they originally were acquiring customers with free (or $1-$3 flat fee) delivery promotions, but I figured it could be worth it even for double that amount.
However, when I next looked, they had quietly [1] implemented fees that are a (high) percentage of total bill in addition to a higher flat delivery fee, that was a dealbreaker.
Distance-based pricing would have been OK, but not percentage of the order on top of a flat fee.
[1] A generous interpretation. Personally, I found it sneaky.
DoorDash, I should pay closer attention to. My wife usually orders, and she’s way too price insensitive for my taste at times. I at least insisted on one of the zero delivery fee restaurants last night, but don’t know what that actually means.
I find that practice to be paricularly objectionable, since it would be more honest to bundle it with the delivery fee, if the point were something like UI brevity. Instead, it feels deceptive, as if to imply that money they have to pay to the restaurant because the restaurant has to pay it the state is in some way related to their operating costs.
I could probably accept a variable fee of less than 3% under the assumption that their payment costs are higher than the restaurant due to card-not-present. I could even accept variable-by-my-location (i.e. distance-based) delivery pricing. However, both of these would need to be clear and up front. Seeing an inflated total only at checkout make me feel cheated, and I cancel the transaction.
In my suburban setting, a restaurant far enough away is maybe $3 in incremental driving costs plus 30 minutes of my time. In a dense, urban setting, presumably everything is much closer [1]. The time savings could be worth it, but the benefits of going myself are a much higher incentive to make sure my order is correct and a much lower latency (i.e. higher freshness).
[1] And places like Manhattan have had delivery services, sometimes done by individual establishments themselves, for ages.
Do you have evidence that they're lying about that (which might be outright fraud and thereby a risky move)?
Or are you saying something different, that if a customer tips $0, DoorDash has to pay $7 (or DoorDash pays $4 to make up for a $3 tip, etc), but if a customer tips $7 or more, DoorDash has to pay $0?
https://doordashdriver.blogspot.com/2018/01/what-exactly-is-... https://news.ycombinator.com/item?id=17789958
If I were to use DoorDash, this would actually give me an incentive to tip $0 via the app, since, otherwise, $6 of my fees+tips would be going to the company instead of the Dasher. I'd rather tip in cash (which I do have on hand at home, though I'd expect not everyone does, especially their target market).
Personally, I'd much rather have a delivery fee that translated to fair pay for the delivery personnel, instead of using tipping as an unreliable replacement for for/minimum wage. (At the risk of going off on a tangent, I'm OK with tipping for exceptional service/circumstances or for where there might be an extended/recurring service interaction, but I just don't expect that to be the case with "gig" delivery like this, unlike with traditional pizza delivery).
A 30% charge appeared on my bill that wasn't explained anywhere in the app or on their website.
They canceled an item off of my order because the menu was inaccurate, and tried to refund me in delivery credit.
The unicorn is a silly designation, but it also isn’t. There are exceptions of course as it is not zero risk.
In other words, if it's a small startup, do it as a founder.
Otherwise, stick to BigCo and Unicorns.
aren’t the founders common stockholders ?
Edit: Above can be disregarded, see below replies, I misremembered my options paperwork.
And to be clear wrt my original comment, I think DoorDash is an excellent business, and I have no reason to believe that the valuation isn't fully justified, I'm just speaking more generally about the funding environment of companies doing large rounds at high valuations, and if a macro trend pushes startup valuations in the other direction.
Let's compare that to unicorns. I own some shares in a unicorn that has been worth over $1B for nearly 3 years. In that time myself and all the other shareholders have had exactly 0 opportunities to sell the stock. I'm not saying the valuation is made up, but I certainly wouldn't say anything is de-risked. Taking a lot of money in investment just means the outcome is expected to be bigger and bigger. It doesn't mean less risk and it doesn't mean more liquidity.
If you want upside, there is just going to be so much more potential if you join a really early company. If you want to de-risk, join a big company.
I am not saying that Amazon is a bad company, or working there is a bad idea. Just that reversion to the mean is a powerful force.
That is the problem with looking at private company valuations and trying to decide if they are good investments or not. You don't know how the story is going to end for the common shareholders and what the overall return is going to look like. I'm not saying the upside wont be there, it very will could be, but the level of risk is still much much higher than the big public tech companies.
How long that continues is anyone's guess but I can see them gaining just as much if we don't have a recession between then.
I'd be really interested in to learn more about which "unicorn" you hold stock in and whether you're interested in selling some (as you seem to imply). I've been thinking a while about buying this type of thing (or even setting up a fund to do it). I think there is a lot of value to be had in providing liquidity to employees of these types of companies. There are a few reasons this isn't done much today, but I'm 95% sure they can be overcome. My email is in my profile if you're interested.
but yes, there is ESO Fund and other companies which you can basically become a debtor to in the event that you become liquid. you get cash and also get to potentially share in the upside.
I've seen liquidity events at smaller companies. VC offered to buy back shares from employees, at roughly 1/4th of what they would be worth if the company could IPO overnight.
Point being. You will NEVER be able to sell your shares unless a company is public.
I know some friends who've been able to buy houses in places like London simply because of their Amazon shares
Sure, but that doesn't mean it has a viable business.
> and economics proven
Says who? Uber still doesn't have positive unit economics and its valued at $60B+
> solid comp, crazy upside.
Base comp? Sure. Options (upside), no. Liquidation preferences wipe these out if the company doesn't meet it's valuation in a liquidity event.
One thing that is (almost) for sure - it looks good on your resume.
For example in the UK a company of that size is Balfour Beatty, an enormous construction and services company established in 1909
OOPS sounds like they have tangible hardware and operating costs.
tech companies get to that point, but they can offer services with very little overhead for a very long time until they scale to the point that they have to build their own hardware infrastructure to support them. and then they also resell/rent out that hardware infrastructure to smaller tech companies and everyone else.
What, exactly, is "proven" about this model? It's food delivery. Smells like late stage bull market to me.
This isn't unique to DoorDash, but it's what comes to mind when a pre-exit company's valuation is being marketed in public. It's meant in part to entice eager recruits, but they don't realize that money is never meant for them.
One can make the case this can be made to work in dense cities say 1m or more with a density over X people/p. sq. ft. like in Europe/Asia. But I don't think there are many US cities with this kind of density to support.
Even denser cities are likely to have even more (cheaper) competition.
Or is the argument that these companies get very high nominal valuations but the terms on the rounds they raise include punitive preferences?
Even if the company falls apart and sells for $100M you still get your money back. If it declines to $200M you get all of that before anyone else.
In reality terms vary substantially. In this case, Doordash had just raised and didn’t need to raise again. Depending on how desperate investors were to get in, they might have gotten clean terms.
Those liquidation preferences mean that investors will pay more for their equity % than they would have without them which inflates the valuation estimates used by the above formula. The basic idea is that not all % equity is the worth the same amount, but it is assumed to when a valuation number is reported.
If a company has 5 classes of shares (common, A, B, C, D), then it's reasonable to value the company's equity by estimating the value of 1 share of each class, multiplying by the number of shares issued, and summing up these products.
The more common method used by PR folks and journalists is:
[Price at which class D shares were last bought] * [Total number of outstanding common, A, B, C and D shares]
This is incorrect if the rights attached to the different classes are different enough that the values of the shares are different. And that's the usual case.
1. Normal investment of $Y at valuation X implies that you, the investor, think that the company is worth more than X. If it exits for more, you'll get more, less you'll get less. But investing $Y at valuation X with a 2x liquidation preference means that you think the company is worth merely Y. The valuation basically doesn't matter any more. If I invest $10 at a $100 valuation and the company exits at a $500 valuation, I get a $40 profit. If it exits at a $50 valuation, I've lost $5. The valuation I invest at makes a big difference for my profitability. But consider the same scenario with a 2x liquidation preference - in the happy case, I get the same profit. In the sad case, I've still doubled my money.
2. Investors in startups are not perfectly rational investors. If I own an existing stake in a company, I would fight tooth and nail to prevent any new money coming in from having a liquidation preference over me. But in truth, if the company can raise money at a $2 billion valuation normally, or a $4 billion valuation with a preference, a fund can report double the gains to the people who actually put money in it. So they stay quiet, show off the impressive paper returns of their current investment fund, and go on raising the next one. This effect is doubly pernicious when the later investors are also earlier investors - they can basically juice their own balance sheet. On paper, the existing stake is worth more because of the inflated valuation, and the new stake is a heads-I-win-tails-you-lose.
And at the lowest preference are all the employees. Founders take money off the table in the inflated new rounds, so while they technically have a lower preference they've still cashed out significantly.
So 1x is standard, and nothing crazy like what you're implying.
Unless we're to believe the app is detecting multiple users surreptitiously and has an opinion on them, group orders / a phone being passed around seems irrelevant, but also not within my personal experience.
(Zip: 94086, and I love Indian leftovers from Ulavacharu, usually individual orders)
Some of the fancier places will easily be over $25 of food so if you order for two, $50 is not difficult to reach.
Out of curiosity had you ordered from DoorDash multiple times before you attempted that group order?
"The operation couldn't be completed. (JSONMapper.MappingError error 2.)"
Displaying an error like that to the end user does not inspire confidence.