S-1 Teardown of Doordash

• First thing - interesting to not see Morgan Stanley anywhere in the lineup (led Uber IPO)

• Love this story: "We started DoorDash to help people like my Mom. I was five years old when I immigrated from China with my parents. Like many immigrants, my family came to this country to pursue the American Dream. Dad came to pursue a Ph.D. in Aeronautical Engineering from the University of Illinois at Urbana-Champaign. Mom hoped she could retain her job as a doctor, her occupation in China, but the odds were against her. The United States didn’t recognize her Chinese medical license and with only $250 to our family’s name, putting her through school again was impossible. But that didn’t stop her. Mom put food on the table by working three jobs a day for 12 years. One of those jobs was as a server at a local Chinese restaurant, where I got a front row seat as a dishwasher. For Mom, working at a restaurant was a means to an end. After deferring her dreams for more than a decade, she saved enough money to return to school and open her medical clinic, which she still runs more than 20 years later. DoorDash exists today to empower those like my Mom who came here with a dream to make it on their own. Fighting for the underdog is part of who I am and what we stand for as a company. Having spoken to countless merchants since DoorDash’s founding in 2013—from a Mom and Pop store like Oren’s Hummus to the General Managers of Chili’s (aka “ChiliHeads”)—I am humbled by their relentless drive to create and build, and their contribution to their communities. While small businesses are vital to our communities and created approximately two-thirds of net new jobs in the United States from 2000 to 2018,1 they now risk being left behind in the convenience economy where consumers have become accustomed to obtaining everything in a few clicks, a trend that has only accelerated in a COVID world. Helping brick-and-mortar businesses compete, succeed, and flourish in these rapidly changing times is the core problem we are trying to solve."

• Another startup borne out of Stanford - good or bad, they crush it

• Interesting that this is the number one principle highlighted: "Be customer-obsessed, not competitor-focused" - I guess is this a response to all the critiques around Lyft and Uber fighting with eachother in bad ways? Seems odd but hey what do I know

Market and Partnerships

• " We have partnerships with over 175 of the 200 largest national restaurant brands and provide consumers access to a wide selection of merchants. Broad selection, coupled with personalization and curation that is driven by our proprietary data science and analytics, enables us to provide extensive yet customized choices to consumers."

• We help small businesses but we also offer most of the big restaurants too - a bit odd from a marketing perspective but frankly that's what the enterprise investors will care about

Growth Strategy

P&L - 2018, 2019, Nine Months End Sept. 2020

• First of all the whole document doesn't focus on recent performance - the first 9 months BS is trying to capture some of the Q1 performance so as to create the appearance of better revenue growth in the future

• Revenue clearly growing astronomically - 204% 18/19 and 226% in the past 9 months

• Gross margins: 2018 - 22%, 2019 - 41%, First 9 months of 2019 - 40%, First 9 months of 2020 - 55%

• My bet is a ton of gross margin is included in sales and marketing (free deliveries, discounts especially) which can help improve gross margin picture

• Biggest thing tho - THE BURN ISN'T THAAAAT BAD - which is very surprising especially after seeing Uber and Lyft

Adjusted EBITDA

Unit Economics

Cohort Performance

AB5

• "Depending on whether and how much we choose to increase fees and commissions, these increased costs could also lead to a lower Take Rate. The provisions resulting from the 2020 California ballot initiative that would become applicable to us include, but are not limited to, (i) net earnings (which excludes tips, tolls, and certain other amounts) to Dashers no less than a net earnings floor equal to (a) 120% of the minimum wage for a Dasher’s engaged time and (b) for Dashers using a motor vehicle, $0.30 per engaged mile (which amount shall be adjusted for inflation after 2021) and (ii) for Dashers averaging at least 15 hours per week of engaged time during a calendar quarter who subscribe to a qualifying health plan, payments to such Dashers of healthcare subsidies of varying dollar amounts depending on a Dasher’s engaged time per week."

Cash Flow

• Net cash from operating activities was negative 308M and including investing activites it was -530M

• This year its been positive 315M - the cash considerations are important in theory because it show how much Doordash will need to raise and the answer is probably a decent amount

Products

• Doordash for Work was a new product I've never heard of but makes sense

• Drive - doordash's white-label logistics service that basically pairs drivers with companies like Chipotle, Wingstop, and Little Caesar's that build and maintain their own technology and apps (And maybe or maybe not list on doordash marketplace)

• Dashpass - 5 MILLION Consumer's on Dashpass is insane - $9.99 per month that means $120 * 5,000,000 = $600,000,000 subscription run-rate business

  • THAT IS HUGE and what's probably keeping the gross margins so high

  • Does Dashpass hurt restaurants? I actually don't know

  • It's also concerning around the pandemic - I would expect a ton of those are new adds during the pandemic and they haven't broken out historical detail on Dashpass consumers over time

  • Puts real risk in the forward numbers - more marketplace and the business is just worth less

Key Considerations

• Demand for this is going to be super high - people love Tony and he's super young

• Growth is really really strong (obviously because of the pandemic) but people will give Doordash credit for future growth for sure

• Gross Margin profile is strong (probably because of Dashpass subscribers / recurring revenue) which will get more credit

• Sales and marketing spend was actually below what I was expecting which was good to see

• Adjusted EBITDA and cash flow are non-existent (their definitions are pretty adjusted) although not too far out of reach from actually being profitable from a cash flow from operations - capex perspective

  • This is the golden question for Grubhub, Uber, Lyft, Just Eat, and Doordash - can anyone ever be profitable - I think yes but its going to be painful for those organizations because of reduced headcount and more outsourcing of tech / operations

IPO Demand / Outcome

• I would expect it to get a ton of retail demand given people know the technology and the Company pretty well

• I'm going to bet it goes out around a ~$20B-$25B valuation or around 10x 2020E Revenue

Bull Case

• This becomes the only market leading solution and Uber Eats and Grubhub go out of business do to unprofitable growth - hard to see that happening but its possible given burn rates / challenges and especially in the US

• Dashpass becomes a staple way of eating for even more consumers across the world, WFH continues for a lot of people post-pandemic, and revenue shifts to more recurring, higher gross margin as a result, turning more into a software business

• Self-driving cars literally change the unit economics on gross profit - ridiculous but has to be included

• Drive and Dash for Work become much bigger businesses and start to contribute more to revenue

Bear Case

• Growth stalls post pandemic - This is a very real threat / possibility and could materially hurt the stock price if it happens given it will likely trade in the public markets based on revenue growth - if this happens, they better show profitability

• Never reaches profitability and continues raising money at worse and worse terms for the next ten years until it gets acquired / shuts down - probably won't happen - they would likely try to make it more profitable by changing cap structure and outsourcing more

• Continued litigation / legal challenges hurt the company

• Incremental customer acquisition is legitimately unprofitable and the company has to pivot into other delivery services - grocery, last mile, convenience, healthcare -at worse / more competitive margins

• Competitors pour more money in than doordash and come up with better unit economics - Uber maybe if they can get a fleet of self-driving cars? Idk this feels a bit ridiculous