Doordash is a food company, which provides food delivery services on demand. Evan Moore, Andy Fang, Tony Xu, and Stanley Tang are students of Stanford who founded DoorDash Company in 2013. DoorDash is one of the companies which provide logistic services to deliver food from restaurants on-demand.
Initially, it was launched in Palo Alto and in May 2019 it was expanded in over 4000 cities. It provides services in 50 states of the United States of America, Canada, and Australia. The DoorDash Company has over $13 billion and is a leading 3rd party delivery service all over the world.
It is weighing a direct stock listing for its planned entry in the public markets. It will go to the public without any inspection after listing directly, due for this reason it attracts investors. DoorDash Company helps the local businessmen by developing the local business footprint and catches new consumers which then provides them the ability for Dashers and providers to help consumers save their precious time while understanding the finest their city has to offer.
DoorDash is trying for listing in the United States and not decided yet on the path to take. DoorDash tried to work with the Goldman Sachs bank on a direct listing, but Goldman Sachs refused. Direct listings are not most familiar, but it is the most discussed subject among the tech companies.
Last year, a high profile company Spotify Technology SA went through the direct listing process and earlier this year Slack Technology has done the same. Another company Airbnb is showing interest in doing a direct listing. DoorDash has collected $2B from shareholders, including Sequoia Capital and Soft Bank.
Like Uber and Lyft it also uses gig economy labor and also faces the same risks as Uber and Lyft. DoorDash faced a controversy over drivers’ tips, which is solved to some extent after increasing pay to employees. However, the issue is not completely solved.
DoorDash is not a profitable company yet because it does not charge a heavy amount for food delivery. It charges less than $5 with a tip the consumer may give and charges from the restaurant a 20 percent commission fee.
Moreover, it made an agreement with Walmart to deliver groceries and has since expanded its services to about 300 stores in twenty states. In 2019, DoorDash took over GrubHub in overall sales. It has a worth of $12.6 billion in 2019.
DoorDash Future Outcomes
As a private enterprise, DoorDash only has to answer to a few major investors. But when the company goes public, it’ll be held accountable by a much larger group of shareholders. Moreover, new investors will put even more pressure on DoorDash to generate revenue and succeed. That added scrutiny may prove problematic for the six-year-old startup.
For example, ahead of its IPO, market analysts valued Uber at $120 billion. However, when the company went public in May, it launched with a $45 stock price, establishing its worth at $69 billion. Following the IPO, staggering quarterly losses have reduced the company’s market capitalization by 18 percent. The service has also been dogged by public investors complaining that Uber has lost its way.
Admittedly, DoorDash is in a much more solid financial place than the ride-hailing company. In 2018, it generated $107 million in revenue. Even so, the company may face similar problems if outside factors begin to compromise its profit margins.
In recent months, the firm has faced intense criticism for the way it pays its Dashers (AKA delivery people). Several publications criticized the service for using customer tips to subsidize its contractors’ wages. The corporation’s practice doubtlessly benefited its bottom line, but it also upset customers who believed their tips were going directly to delivery personnel.
Moreover, in 2017, the company paid $5 million to settle a class-action suit brought forth by some of its Dashers. The group argued that the corporation misclassified them as independent contractors rather than employees.
In July, DoorDash CEO Tony Xu said the company would adjust its payment model to ensure Dashers received all of their tips. However, Forbes noted that the policy change could potentially make the startup’s business model unsustainable.
Without a clear answer in sight, the corporation is at risk of gaining the reputation of being fundamentally unprofitable. In that case, investors may draw unflattering parallels between it and Uber.
