“Sometimes a [startup] has to go a very long distance out of [its] way to come back a short distance correctly.”*
That appears to be the case with Bay Area delivery startup DoorDash, which is rolling out its service in San Francisco after 18 months of operating just south of the city. Moreover, the new launch comes after the company has expanded into such far-flung U.S. markets as Los Angeles, Boston and Chicago.
As DoorDash becomes available in SF, the company will have more than 100 restaurant options available for customers. However, at least at launch, the service will only be available in certain neighborhoods, like the Mission, Castro, Noe Valley and Potrero.
DoorDash co-founder Tony Xu said that, rather than entering the largest market closest to them, they wanted to learn about cities which are more representative of the average US city before heading to SF, which was similar to Palo Alto where they started. So far the plan has worked, as each market that it’s launched in has done better than the last.
In SF DoorDash will face intense competition from a wide range of food delivery companies. In addition to services like GrubHub and Seamless, there’s also companies like Postmates, Sprig, SpoonRocket, and probably a dozen other startups seeking to get food to hungry customers.
While consumers probably see DoorDash as just yet another food delivery option in a crowded sea full of them, it is more like a delivery-as-a-service offering for restaurants. Rather than hiring their own drivers and having to pay them hourly — even if they aren’t actually delivering anything — restaurants can partner with DoorDash and only contribute a small portion of their sales to the company.
As a result, DoorDash is focused on creating technology for all of the different stakeholders in its ecosystem — that is, the consumers who order from them, the restaurants who partner with it, and the drivers who pick up and make deliveries. By doing so, DoorDash believes it can more efficiently route orders by working with all groups to optimize pickup and delivery times.
It hopes that it can become just as popular in SF as in other markets it serves. When we talked to DoorDash last May, the company estimated that it had served one-fifth of all households in Palo Alto. That’s up to one-third of households in the same market.
Merchants are benefitting as well: Xu says some of its merchants have seen double-digit percentage increases in sales on the top line, with up to 5x increases on the bottom line. He says some of its top merchants are earning well over half a million in revenue with DoorDash.
DoorDash has raised about $20 million in funding from investors that include Sequoia, Khosla Ventures, Charles River Ventures, Pejman Mar Ventures, and Ted Zagat.
* Edward Albee, paraphrased