The economics and trends of the restaurant industry, with Tony Xu of DoorDash

**John** (0:01)
Tony Xu is the co-founder and CEO of on-demand delivery giant DoorDash. He's grown the business from a Stanford-side project into America's dominant food delivery platform, and is now pushing into everything from grocery to retail, to autonomous vehicles and financial products for gig workers. Great.

**Tony Xu** (0:15)
Great.

**John** (0:16)
Cheers.

**Tony Xu** (0:16)
Cheers.

**John** (0:17)
Good to see you.

**Tony Xu** (0:17)
Good to see you too, John.

**John** (0:19)
As I think back to that era where you guys got started, what year was DoorDash founded?

**Tony Xu** (0:23)
2013

**John** (0:24)
Okay.

**Tony Xu** (0:25)
Yeah.

**John** (0:25)
As I think back to 2013 and those early days, the iPhone and the apps that were made possible by the iPhone was the defining tech trend of the era. Uber and Lyft and ride sharing, Instacart, you guys, all of the magic wand apps that made your iPhone useful for bringing things to you and manipulating the wider world.
And loads of people were going after food delivery, and way more than are around now. As you look back on that journey from, again, it was really kicked off by the iPhone, in my opinion. Not that there wasn't food delivery before the iPhone, but that really massively increased the market size. As you think about from then to today, why did you guys win?

**Tony Xu** (1:13)
Well, the short answer is we have more customers than other people.

**John** (1:17)
Sure, but let's not think five ways here.

**Tony Xu** (1:19)
Yeah, I mean, I think these are very tough things to study because many things are happening in the same moment. But I'll just talk about it from the perspective of things that I think we got right. When you think about something like restaurant delivery, you actually get judged on multiple dimensions as a service. We get judged on what restaurants we bring you, certainly whether it showed up on time, and the quality and condition you expect, how much did it cost, if we screwed up, what did we do about it.
It's not one thing that you have to be good at actually. It's all of the above. Unfortunately or fortunately, this is literally the game that we're playing where customers are judging us on all of these dimensions. I think getting that right better than anyone else, as measured by whether or not people are coming back to the app and using us, using us even when we had no money to market to them or discount offers to them, things like that, I think, was the towel.

**John** (2:16)
Are you saying it was a very complex, multivariate challenge even from early on, and you guys just embraced that complexity and said, okay, this is going to be super complex to get right, whereas maybe others took a bit more simplistic view?

**Tony Xu** (2:30)
I think if I were to become overly reductionist and purely looked at it-

**John** (2:34)
That's what I like to do.

**Tony Xu** (2:38)
From the product perspective, yes, because at the end of the day, any consumer product is judged very simply by its retention and its usage. That's how you know whether you have a differentiated product. I think it's very easy to have differences in opinion about whose app do you like more or whether or not certain apps look similar or different. At the end of the day, though, if our app is performing at a higher retention, much higher retention and frequency of use than others, that's how we know whether or not the things that we say actually are making a difference to customers. And so, getting, I think, all of that right very, very early.
And then building the systems to actually instrument that, as well as to repeat that over and again, I think was very, very important in the development of the company.

**John** (3:24)
Do you think you guys were more focused on retention than others?

**Tony Xu** (3:28)
I don't know if we're more focused. I could tell you, though, one of the things that was happening, especially when you see a competitive fight, is you see everybody race towards it. Everybody is going to try to make offers to customers, try to give discounts, try to give coupons, free this, free that.
One of the things that we had looking backwards is we actually did not have a large budget. In fact, between 2016, 17, 18, we barely were able to raise a dollar relative to our peers. As a result of that, that made it a constraint. One of the constraints is, okay, you can grow but you cannot spend in order to do it. So in order to do that, you effectively have to actually come up with ideas in a product to actually stand out and make a difference, and have organic growth carry you. And then once we were able to demonstrate to ourselves first that we had a product with higher retention than other people and higher frequency, and then we were able to raise capital, then we actually made the decision to pedal to the metal and actually go and acquire customers because we had an unfair advantage.