DoorDash CEO: Customer Obsession, Surviving Startup Death & Creating A New Market

There's no better way to be the expert

than just to do the work. You might be

surprised at how quickly you get to

become the expert. We're here to build a

company that will grow and empower every

physical business and grow the GDP of

every city if we are successful in doing

so. That's not going to happen in 1

year, 2 years, 5 years, 10 years. That

hopefully can be a forever or an eternal

mission. There are moments whether it's

the start of the company or a crisis

situation like co 19 where it becomes

very clear why you're doing what you're

doing or should be very clear to you why

you're doing what you're doing and when

you have that kind of clarity it makes

it a lot easier to make those

[Music]

decisions. Welcome back to another

episode of how to build the future.

Today's guest, Tony Shu, who created

Door Dash, which now has

mid60% of all food delivery in the

United States. Tony, welcome. Thank you.

You actually mentioned you had, you

know, two or three other ideas, you

know, how did you arrive on this

particular one and what disqualified the

other ones? There were two important

things. One was that uh if we decided

that we enjoyed working together, we're

going to keep going. And two um was

whether or not we actually liked the

idea of the project enough to to keep

going and and we we called it a project

I think for the entire first year of the

company's life even after legally

incorporating. So, one of the projects

for example, that we worked on that met

one of the criteria but didn't meet the

other was a tablet app that would sit at

the counter, so at at the point of sale

register, and would ask customers while

they were paying for whatever items they

were purchasing um where they had heard

about this retailer or this restaurant.

And it was just a very simple um you

know survey and reporting app that

basically uh helped uh merchants figure

out the effectiveness of their marketing

spend. We loved working together. We

didn't love working on that particular

project and that uh turned out to be

something that we we canled when it came

to Door Dash. Um, the initial

idea really came when we visited a

macaroon store owner. Our question that

we tended to ask business owners was

can we follow you um around for a day?

So, we'll go and pack boxes with you, do

your accounting with you, make salads

with you, and what undercover? Well, we

wanted to actually feel what it was like

their lived experience versus just

asking a bunch of survey questions.

Sometimes it's very very hard for any

customer to tell you exactly what is

inside their brain when you ask them

what problems they have. And so we

wanted to feel and and and and maybe

trying to figure it out ourselves. And

it was toward the end of the time we

spent with the store manager that she

had showed us a booklet of orders she

had turned down. All of them were

delivery orders. That was the comment

and thread. And it just made no sense to

us. We said, "You're a oneperson shop.

this is a big deal. This is a thick

booklet of orders that um probably is

very meaningful to you. We don't

understand why you're not pursuing it.

And so we really just unraveled that

thread. As we kept, you know, studying

this problem, we just found more and

more interesting threads of where it

would go. Um, yes, certainly we could

have done delivery just for this

macaroon store owner, but then you can

imagine you could do it for all

bakeries, all types of restaurants, all

types of retailers. And we started, you

know, hearing the need um from so many

different merchants that we we knew

there was something there. What we

didn't know was whether or not consumers

cared and whether or not there could be

a driver workforce that we could partner

with. And so those turned out to be the

key things we worked on at YC. And you

also met your co-founders um uh

partially through Stanford, was it?

Yeah, the GSP was was an interesting

you know, time for me. I mean, I um it

it I I I applied on the recommendation

of uh one of my mentors at um at eBay at

the time who was the CEO, John Dano at

the time. And um he thought that it

would be great for my personal

development. So that was really that was

kind of the thesis. Um and and so I

didn't go into Stanford, in other words

trying to think about starting a company

or or even looking for co-founders. That

was very fertuitous. Um meeting Andy

Stanley and Evan. Um Evan turned out to

be a a roommate and and and that was

just purely from a social circumstance.

Andy and Stanley were roommates at the

undergrad. We happened to meet. We

worked on different projects together.

It wasn't intended to necessarily over

time become a company or anything like

this, but that's really how we got

started. At what point did you decide to

apply to YC? While we were in school. So

we we we actually the first two weeks of

the summer batch of 2013 uh were the

last couple weeks of our time at

Stanford. So we had a few weeks of

overlap or a couple weeks of overlap. I

remember very specifically my classmates

or some of our classmates, you know

planning their exotic vacations to

Europe or other um interesting areas for

for the summer. And when they asked me

what I would be doing, I said I'd be

delivering hummus for my Honda. It was a

very different type of uh answer. But

yeah, you know, we had a lot of fun. I

mean, the the the the earliest days all

four of us did all the deliveries. It

was called Palo Alto Delivery

previously. Yeah. Yeah. A super scalable

name, but a name we were able to get for

less than $10. Yeah. We shipped um

powtodely.com under an hour. I don't

remember exactly but maybe 4550 minutes

because all it was was a static uh HTML

page with eight PDF menus and these were

menus of restaurants in Powalto that we

frequented often as students. It had a

Google voice number you can call. That's

how you would place the orders. There

were no other way in which you can

order. Once you call that number, it

would ring the cell phones of all four

of our our all four of the founders um

cell phones and whoever picked up first

would be the one to take care of that

order. Amazing. What was it like to

interview at YC get in and then I know

Paul Bukite did a lot of work with you

actually

creat was was our um group partner and I

think he took a personal affinity to us

because he really wanted us to exist

where he lived. Yeah. and we we hadn't

yet we only operated in Palo Alto at the

time um not yet where where he lived

which was a neighboring city. YC was

intense. You know, for us, the reason

why we did YC was we really wanted to

keep going on this project. And to us

YC was a bit of an accountability

mechanism. One of the biggest things we

learned, you know, from all of the

different partners at YC was really just

what's important, you know, in the

earliest days versus what's not

important. The ethos in in YC was

fantastic, I think, for for certainly a

group that um wanted a structured place

to find uh guidance on whether or not

you know, we were on to something. Two

things you had to figure out, supply and

uh actually consumer demand. Yeah. So

driver supply and consumer demand. What

was that like you know sort of over the

10 12 weeks? Yeah. So the number one

thing we were we were very scared about

was whether or not consumers would want

this product. And it's because delivery

is not a new idea. It's been around

since horses. It's been around forever.

And and so um and obviously the US is a

very highly capitalistic market. So if

something doesn't exist, maybe there's a

good reason why it doesn't. And so we

wanted to make sure um from the get-go

whether or not consumers would pay us

for the service. So that was one big

question. The other was whether or not

we knew that restaurants had a need for

it. We didn't know if they would pay us.

Um that was the second you know pillar

and then the third was whether or not uh

there would exist drivers who would

actually want access to this. And so

early on uh we did all the deliveries.

One of the best parts of doing all the

deliveries besides teaching us what are

all of the steps within a delivery is

what customers wanted and our earliest

customers tended to be uh families with

young children. it tended to be the mom

who um ma made a majority of the

decisions when it came to to meal prep

and food. And so they told us what they

wanted. They told us what was important.

They told us what restaurants we that

they preferred. Um and but the most

important thing was that they kept

coming back in again without our

throwing advertising at them, coupons or

discounts at them. um that kind of gave

us the check mark, if you will, on

growing organically. Um on the consumer

front with

drivers, because we did every single

delivery, um it was very easy to speak

knowledgeably um uh about uh what it

would be. So, we would just post ads on

Craigslist, see who shows up, and then

started filtering different segments of

drivers. That was one where we weren't

necessarily sure whether or not there

would ever exist a large enough um

workforce interested in in in this type

of work. One of the questions we had

asked ourselves was would drivers only

be interested in working for a platform

that pays the most? Because obviously

it's going to be more valuable to

transport Gary than to transport a

burrito. And so one of the earliest

tests we ran was we recruited two groups

of drivers. Um, roughly speaking, 20

drivers who drove for Uber X at the time

and 20 who uh delivered for Door Dash.

The control, if you will, variable was

that they both earned $20, uh, an hour

each group. I made them an offer to uh

work for $25 an hour um, guaranteed if

they were to switch jobs. if the Door

Dash drivers would go over to Uber X and

Uber X drivers would come over to Door

Dash. Exactly one driver out of two

groups of 20, so one out of 40 said yes.

Now, this wasn't a very scientific

study, but clearly we were missing

something or I was missing something and

it was actually staring me right in the

face, which was these were very

different groups of people. They self-

selected completely differently. And um

you know on the Door Dash side um we

tended to skew younger, we tended to

skew more female. And so today Door Dash

has over 7 million drivers in on the

platform. Of these dashers, this the

drivers on the platform almost 60% are

women. Today they literally come from

every part of the economy. Um hundreds

of industries represented back then. Uh

they tended to skew younger. they tended

to skew um from segments like retail or

um universities and the like um or

service jobs um and and and they didn't

always deliver in a car. You know

sometimes they preferred uh working on

their scooter or working on their

bicycle or working on their mo from

their motorcycle. Very very different um

from the ride sharing or the ride

hailing segment. I think that was one of

the key experiments I remember running

in YC that gave us enough confidence. We

didn't certainly know, you know, how

large the the the Dasher pool might be

but gave us enough confidence that we

had positive answers that consumers

would pay for this product, merchants

the restaurants would pay for this

product because I sold them doortodoor

and after running this experiment that

there would be enough of a driver pool

to partner with. And then what was that

demo day experience like? Well, we felt

great internally as a team where we

answered our own questions that those

three questions because you know to us

the most important thing was that was

this project worth continuing forgetting

about you know you know the circumstance

of demo day or or how awesome of an

opportunity it was to get in front of

investors? Can we prove to ourselves

that this is worth continuing? The

answer was yes. Demo day however was not

successful. I don't know exactly where

we stacked ranked that day, but we

certainly weren't amongst the favorites.

Um, and and it was really tough. I mean

the company almost went out of business

because uh, you know, we didn't we

didn't raise raise a lot of money from Y

Cominator uh, with the initial grant and

so we were looking for seed financing

and we were we were a couple weeks away

from going to zero. I think at the time

people um, just weren't sure if this

would be a business. Yes, we had great

um metrics. Yes, we had positive

evidence, you know, to each side of our

marketplace in terms of uh thinking

about whether or not they would

participate. Um but it was 10 weeks of

data. And so at the end of the day, if

you were an investor looking at Door

Dash on demo day or anywhere near demo

day, it would be a conviction bet. Be a

conviction bet on the team on that there

would be a potential market. You know, I

think one of the things people missed

early on was that Door Dash was really

in the business of creating a market.

There were there were 20,000 maybe

restaurants offering delivery at the

time and that's who incumbents would

work with, you know, the GrubHubs or the

Seamlesses. They would partner with

these restaurants that had their own

delivery fleet and they would, you know

just send them an order and the

restaurants would complete the

deliveries themselves. But the question

we always asked was, if you could build

a last mile logistics network for every

retailer, well, could you open up

everybody else? There's about rough

math, a million restaurants um in the

US. Only 20,000 of them offer delivery.

What would happen if you can enable the

other 980,000 to do it? So, Door Dash

actually almost died, I guess, after a

Stanford football game in the fall of uh

2013. We did. Can you tell that story?

Yeah. So, it was the first Saturday home

game for Stanford football and it was at

an awkward time where after the ending

of the game, everybody in PaloAlto

decided to order Door Dash for

restaurant delivery. Normally a good

thing. Normally a great thing. You know

no one usually complains of too much

demand except when you have no ability

to fulfill the demand or to shut off

you know, the website that kept

receiving these orders when you didn't

have enough drivers on the road. So

that became the complication. What ended

up happening was every delivery was at

least an hour late, probably more like

an hour and a half. It was terrible. And

we also at the time or I at the time

could not raise any seed financing. So

you got the cash going to zero. You have

hundreds of customers very upset because

they either received cold food or

received very very late deliveries. I

remember that night, maybe 9 or 10 p.m.

my co-founders and I looking at what the

refund cost would be because we thought

the right thing to do would be to refund

everybody, but that would take away

about 40% of the bank account, which was

already quite low. We took maybe 10

seconds to make the decision to refund

everybody. We ended up staying up that

night and then baked cookies so that we

could deliver them at around 5:00 a.m.

before everybody had woken up. Oh my

god. That was an early story that

ultimately, you know, became the story

that translated to our internal company

value of customer obsessed, not

competitor focused. And this is

partially survival bias, but um I think

the the the founding team always had

this desire to at least do things the

right way even if we wouldn't have made

it. Well, so what happened like the in

the following weeks like you know how

did you get yourself out of this sort of

situation where the bank account is

dwindling yet I mean seemingly business

is booming in some sense. Business is

doing actually really remarkable. We've

had a few occasions like this in the

history of Door Dash where business is

actually going really well organically

on its own without the aid of marketing

spend or discounts. Um yet I can't raise

a dime. And so I don't know what that

says about my fundraising ability, but

you know, l l l l l l l l l l l l l l l

l l l l l luckily all you need is one

investor to say yes and that's what

happened. So a couple weeks after the

Stanford incident uh in September we

raised our seed financing. You were not

the only player. there were others

especially in urban areas there started

to be a price war you know talk to me

about how you approached that like

because you took a very sort of

contrarian view of it and uh ended up

mainly focusing on suburbs instead of

fighting it out in sort of battleground

cities. One of the things that we

noticed at the time was, you're right

it was a crowded space. Lots of people

more successful at raising capital than

we were. Um, they all went

into perhaps the expected geographies

the San Francisco, the New Yorks, the um

areas where people thought you needed

order density in order to make the

economics work. So, it was all hail, you

know, city centers that had high

population density.

But because we had done all the

deliveries ourselves and we actually

kept that going for about 2 years um

straight after and even to this day um

every person at Door Dash, myself

included, does deliveries every year. We

kept hearing over and again that the

need was very very strong outside of

these city centers. It makes sense when

you actually take a step back to think

about it from the customer's

perspective. If you and I lived in New

York City or and we walked outside of

the elevator of the building, we

probably could walk into hundreds of

restaurants in a place outside in New

York City, Long Island for example, or

you know, when we launched here in Palo

Alto, you would be walking for miles

probably before you would see the first

restaurant. And so from the customer's

perspective, not from, you know, a unit

economics perspective or anything like

that, um it was quite obvious that um

the need was higher in these places

outside of city centers. And I think

that always became, you know, a a a um a

general mantra we had whenever we were

in question of what to build. Listen to

the customer, run the test. And that was

certainly one of the things, you know

early on that we made a very large bet

on that if this industry were to be

created, it would actually be created

outside of the city centers. If you

looked back over the last 10 or 12 years

in this industry, um, you know, the

majority of the growth came from these

places outside of city centers.

Obviously, we didn't have the data to

prove it at the time, but what we did

have, uh, was the conviction in doing

these deliveries ourselves that there

was a chance that could be true. So I

mean that's fascinating. I you know from

the outside it always felt like oh well

logically speaking like somehow maybe

gross margin would be higher or you know

CAC would be lower in the suburban areas

and somehow like from the spreadsheet

view some sort of like quantbased

analysis would cause you to you know

sort of choose suburbs. But what I'm

hearing is actually certainly that might

have been true but like being super

customer obsessed was like the number

one reason. Well, it was the number one

reason of how it happened. But actually

if you got into the PNL where I think

the details would surprise you, where in

the um places outside of city centers

the suburbs, you tended to have um a

greater percentage of families, which

have more mouths to feed. As a result

you tended to have higher baskets.

Higher baskets meant larger revenues.

You also tended to have easier ways to

find parking. you tended to have a

greater percentage of single family

homes which made it easier to you know

deliver whereas you can imagine you

contrast that by going into a high-rise

building in downtown Manhattan or

something like this and that would be a

much more complicated delivery when we

studied it you know line by line by line

actually the unit economics were much

stronger outside of the city centers and

that wasn't the first instinct you know

the first instinct was just listening to

what the customers had told us um where

the need does, but it was very easy to

prove out very very quickly, you know

thereafter every line on the line item

on on the unit economic spreadsheet of

how it could be even better if we did a

good job. You just continued to grow.

You kept you raised, you know, multiple

rounds of funding. Your series C was

actually a down round. What was that

like? You know, you're growing the

business, raising more money, you know

you're fighting off competitors, you

know, how did you manage that and what

was that experience like? It was very

tough. I mean because on the one hand

you see all of the internal metrics

going in the right direction. You're

growing organically. You're growing

quite quickly organically. You see that

the market is perhaps larger than you

expect. These are all the positive signs

on one side of the equation. And on the

other hand, um to your point, we're also

investing in scale because this is a

business where um you need enough order

volume to make the math work. To get

there, you have to invest before you get

the demand. And so we needed to raise

capital. And there were a couple there

were a few years actually in a row

three years in a row, 2016, 17, 18

where I continued to struggle to raise

capital. And I think this was the part

that was quite difficult for us where

you have a company whose product seems

to be moving in the right direction

across any metric anyway you want to cut

the data. On the flip side you know I'm

receiving hundreds of rejections um for

investment. I think this was this was

certainly one of the most difficult

periods um so far that we've had to

overcome from the outside like having

never been fully a growth investor in

theory it should be deterministic like

mechanically what the growth investor

should be doing is well I get to look at

this data room I get to look at this

other data room they certainly give the

indication that like they have you know

a sense for what is normal in the market

and yet they were just like wrong about

you well I think one of the things I've

learned that's tough for an investor is

knowing when to invest. And I think that

it's really easy to invest when the

numbers are clear and that you know the

story of repeatable profitable growth

has happened enough times where you just

believe and then there are moments where

it's just before that moment. And I

think for Door Dash 2016, 17, 18, a lot

of those times or moments were just

before that moment. It's not an a game

that's just measured on your own scores.

It it's a relative score um in in some

ways, especially when a market hasn't

been yet defined or that it's not

obvious who the winner is. Investors

were were a bit gunshy because they saw

lots of people going for it, people who

are better capitalized. While Door Dash

may have had very strong numbers, it

wasn't obvious that it would merge as

the largest player. I mean the amazing

thing is you came out of like sort of

the capital as a bludgeon phase uh as

actually the winner like by 2019 you

actually had surpassed Uber Eats and

GrubHub and you became the category

leader. Well, all you need is one

investor to say yes. And so in 2018 when

we raised our series D in March, it was

obvious to the team internally what was

going to happen next. Everyone can have

an opinion about um their product

versus, you know, the fields, but one of

the hardest things to to really fool is

the retention and the engagement of a of

a product. And because Door Dash um

always had superior retention and

frequency, every dollar that we spent

would just go a lot farther for us than

anyone else. And so when we received the

capital to actually be able to invest

and launch all the geographies, it was

just a matter of time before Door Dash

would get to the um largest position. So

fast forward a little bit. I mean at the

start of COVID delivery demand cratered

and then skyrocketed and you cut

commissions in half. You ran a TV

campaign that advertised your

competitors. What gave you conviction

about that? What you know what was that

period like? Co was a bit of a blur.

COVID 2020 was a bit of a blur. Um we

were actually in 2019 preparing you know

to go public. Obviously CO um sheld

those plans but but you know CO was

probably next to 2013. So the the the co

year 2020 that is next to 2013 was

probably the year where it felt most

like Door Dash in YC. you know, it was

seven days a week, 10:00 a.m. to 2 am

all hands on deck, you know, multiple

you know, all company, you know, uh, uh

meetings per day. And sometimes in in

crisis, I actually find that it's a lot

easier operating a company because it's

very clear what to do. Number one, job

number one, keep everyone safe, right?

Get tens of millions of units of PPE.

Make sure that we can ship no contact

delivery or contactless delivery. We

ship that product in four or five days.

Number two, got to make sure that

everybody gets liquid. Why? Because the

average merchant has 17 days of cash on

hand.

So every hour of cash is I is very very

important. Same thing for Dashers um who

who um a lot of them are f furoughed or

or laid off um because of COVID and and

so getting them instant liquidity. The

third thing was making sure that we

could take care of the community

actually. And so we partnered with

dozens of the largest hospital networks

um from UCSF or Stanford here in in

California to Mount Sinai on the east

coast where we wanted to make sure that

all the hospital workers and and nurses

um you know could get free delivery and

also because they were doing the hardest

jobs. Um it was very easy to run the

company. Now, you called out a couple of

decisions that were made that were more

controversial in the company. One was

running a national TV campaign where we

spent millions of dollars advertising on

behalf of the industry, basically saying

whether you order on us or any of our

peers, just order. You know, the dining

rooms may be closed, but the kitchens

are open. Um, and the other decision

which we were the only platform to do

we cut our commissions by half, which

cost us over $und00 million. Now, these

things sound inconsequential um when you

look at our balance sheet today. Back

then, Door Dash was not profitable. Um

and it was also when we were thinking

about going public um which is not

usually the first decision you'd make if

if that's what you know you're trying to

do. And you know to me I think what made

it easy was what do you want to build

became the question I I I think I asked

you know everybody who worked at the

company you know and are we just here to

build a company that ends in 2020 or

ends you know in an IPO or something. No

we're here to hopefully um build a

company that will grow and empower every

physical business and grow the GDP of

every city if we are successful in doing

so. that's not going to happen in 1

year, 2 years, 5 years, 10 years. That

hopefully can be a forever or an eternal

mission. And so when I thought about it

from that perspective, I mean, this was

a drop in the bucket in in the grand

scheme of the journey. And that's how we

made that decision. That's amazing. It's

so super long-termist basically. I think

that's the only way you can make some of

these decisions. I think if you're just

purely looking at some of these

decisions in the in the here and now or

just looking at it as a as a business

line item on a spreadsheet or something

like that, it's very difficult perhaps

to make the justification. I think

sometimes there are moments, it's not

always, but there are moments whether

it's the start of the company or a

crisis situation like CO 19 where it

becomes very clear why you're doing what

you're doing or should be very clear to

you why you're doing what you're doing.

And when you have that kind of clarity

it makes it a lot easier to make those

decisions. What advice would you have

for sort of the 18 or 22year-old version

of yourself knowing what you know now?

And I might ask you to uh modify it a

little bit in that obviously we're at

the beginning of this sort of uh age of

intelligence, this boom in large

language models, you know, what what do

you have to pass on to the next

generation right now? One of the things

I would tell, you know, the the

18-year-old self is that um especially

when you're on the cusp of something

new, take AI, there's no better way to

be the expert than just to do the work.

And you might be surprised at how

quickly you get to become the expert. I

mean, that was really my experience with

logistics and delivery. I mean, I had no

background um in in in any of this, but

by doing deliveries two years in a row

three years in a row, even 12 years

later, you get to very very quickly um

have a strong point of view on how the

physical world works. And whether

that's, you know, now in software, in

AI in

biotechnology, in whatever field of

interest, the best way um really to be

the expert is just to get started and do

the work. What are you excited about for

Door Dash? Like what, you know, what

what comes next and what does Door Dash

look like in the future? I think there's

obviously a big um exploration and set

of battles right now for all of the the

digits and the bits, right? And and

these things obviously come and go in

terms of the level of excitement versus

the level of progress. And I'm long-term

super optimistic about what's happening

um in the digital world. I'm as

optimistic though about what's happening

in the physical world. I think um

sometimes we still forget that um it's

still even in 2025 whether it was 2013

when we started the company or or

present day that it is the physical

businesses small medium and large that

produced the vast majority of jobs and

GDP in any society and I think GDP

growth is probably the best offensive

weapon for any city and so I can't

really think of

anything more worthwhile than trying to

grow the GDP of the cities. And so, you

know, I I I think that as important as

the digital battles are happening, I

think there's still this um massive

opportunity to understand the physical

world, you know, where is the last

parking spot in a rainstorm here in San

Francisco? How many apples does the

local grocery store have in aisle 6?

These are questions that actually nobody

has the no LLM has the answer to. uh no

one uh has the answer to. And I think

that the physical world is just as

interesting as the digital world. When

you say GDP, I mean what that means is

prosperity, abundance, jobs, and uh you

know, problems being solved. So Tony

thank you so much for creating Door Dash

and spending time with us. It's great to

be here.

[Music]