DoorDash is one of many on-demand food-delivery startups to crop up over the past few years, but the company has big ambitions to move beyond food. Thanks to new investor Sequoia Capital, it has a sizable war chest to go after the competition.
The company just raised a $17.3 million Series A round of funding led by Sequoia, with participation from existing investors Khosla Ventures, Charles River Ventures, Pejman Mar Ventures, and Ted Zagat, of Zagat Survey fame. Along with the funding, Sequoia partner Alfred Lin is joining the board alongside founders Stanley Tang, Andy Fang, and Tony Xu.
That’s a tidy sum for a company that is part of an increasingly crowded and competitive food-delivery space in the San Francisco Bay Area, when you see that Sprig raised $10 million, Spoonrocket just raised $11 million, Caviar raised $15 million, Postmates raised $16 million, and Munchery just raised an additional $28 million.
The funding amount seems especially large when you consider that DoorDash is mainly operating in just Palo Alto, Mountain View, and San Jose today.
So what separates DoorDash from the rest, and why was Sequoia confident enough to invest so much into it?
For one thing, customers seem to love DoorDash — even in its limited launch area, the company has seen impressive growth. In 10 months making deliveries in the South Bay, it’s processed tens of millions of dollars in gross sales. And the company estimates that one in six households in the area has ordered from it.
It’s partly that growth and consumer response that led Sequoia to invest, according to new board member Lin. “When you talk to their customers, as well as all the retailers they serve, they get rave reviews,” he told me. “Anyone who uses them raves about them.”
But Sequoia was also drawn to the larger opportunity that DoorDash represents in the on-demand delivery space. That’s because the company sees the opportunity as bigger than just delivering food.
“We don’t consider ourselves a food-delivery company, but a tech and logistics company that just happens to deal in food,” co-founder Stanley Tang says. “We’re building out the technology and infrastructure to become a super reliant and efficient delivery network.”
In fact, DoorDash has built a number of technologies that are designed to make the process of delivery a lot smarter and more efficient.
It has a dispatch system that self-learns and adapts to different variables based on driver inventory, time of day, and expected demand. It also uses a capacity-planning algorithm to ensure that it has the right number of drivers available at any given time.
DoorDash has smart technology around restaurant preparation time, so that drivers don’t show up too early and wait for meals to be completed. It’s also so that they don’t show up too late while food gets cold.
And to help drivers get from Point A to Point B, it uses an automated driver-routing algorithm for taking the smartest route between shops and a customer’s home.
All of that is designed to make being a DoorDash delivery driver ultra-easy for drivers, since it does all the routing and planning for them. And it also makes them more efficient, meaning they can handle multiple deliveries at once in batches, rather than rely on the usual one-delivery-at-a-time model for most services.
DoorDash also has big ambitions to expand its availability into new markets and verticals. It’s telling that during our conversation, co-founder Stanley Tang kept referring to the company’s upcoming plans for a “nationwide” rollout. It’s clear the company isn’t just thinking about its next market launch, but is targeting multiple cities in a short period of time.
It also plans to eventually expand its capabilities beyond just food delivery. The thinking goes that once the company has built its logistical delivery infrastructure in any given area, it’s no longer limited to picking up and dropping off food — DoorDash believes it could deliver just about anything.
The bad news is that tackling the local small and medium-sized business market isn’t easy: DoorDash has its work cut out for it as it attempts to sign up merchants and drivers in various new markets throughout the country.
The good news is that DoorDash has a good reputation among merchants it works with, and that it can create network effects, according to Lin. And once a company has become big enough, it’s really difficult to unseat them. “If you look at any of these local businesses, whether they’re Yelp, or Grubhub, or whatever… once they’re built, they’re defensible,” Lin said.
DoorDash still has a long way to go before it reaches that point, but at least it’s got a fair amount of cash and a high-profile venture firm backing it to help it get there.