Programming Note: MBI Deep Dives will be off tomorrow, and the regular cadence of daily posts will resume on Thursday when I expect to cover Meta’s 2Q’26 earnings.

You can listen to the Deep Dive here

The very first Deep Dive I ever wrote for MBI Deep Dives back in 2020 was on Uber. While discussing Uber Eats in that Deep Dive, I made the cardinal mistake of doubting the American eaters! I thought the pandemic likely pulled forward consumer propensity of ordering food online and once things normalize, people would likely go back to dine in restaurants and food delivery companies would face noticeable headwind afterwards. Six years later, as I was studying DoorDash over the last few weeks, I can now confirm that I was, in no uncertain terms, wrong!

My mistake was viewing food delivery purely through the lens of pandemic-era consumer convenience, rather than as a fundamental infrastructure bottleneck for local commerce which was unleashed during Covid to become increasingly integral part of everyday life for millions of Americans. To understand why the habit stuck, let’s go back to when that bottleneck was first identified.

In the fall of 2012, four Stanford students: Tony Xu, Stanley Tang, Andy Fang, and Evan Moore were working on a class project in the GSB’s “Startup Garage” course, interviewing small business owners around Palo Alto to figure out what technology they could build for them. One of those interviews was with a one-person macaron shop. During the interview, the shop owner pulled out a thick booklet pages and pages of delivery orders she had been forced to refuse because she had nobody to deliver them. As Xu recalled in Sequoia’s “Crucible Moments” podcast, small businesses running on 17-18 days of cash don’t have the luxury of turning away business and yet, the owner was forced to do it since there was not quite any viable solution.

The four of them spent the following weeks interviewing another ~150-200 small businesses and kept hearing the same complaint: everyone wanted delivery, but nobody could afford to staff it. So, they thought they might be onto something here. In an afternoon, they stood up a landing page called PaloAltoDelivery.com with PDF menus of local restaurants and a Google Voice number that rang their own phones. DoorDash’s S-1 mentioned what happened next: on January 12, 2013, “…the first DoorDash consumer ordered prawn pad thai and spring rolls”, and one of the founders drove it over himself. For months, the founders were the dispatchers, the customer support, and the delivery fleet. Xu himself was among the company’s very first Dashers, a tradition that survives today in the form of “WeDash,” a program under which every salaried US employee must do delivery shifts each year. The company went through Y-Combinator in the summer of 2013 and renamed itself DoorDash.

In some ways, restaurant food is perhaps the worst thing to deliver as they can be perishable within minutes, ordered in unforgiving lunch and dinner spikes, with customers who expect the whole thing done in under 45 minutes for a minimal fee. Indeed, Xu wrote for Sequoia that when they started, they had exactly three questions to answer: “Would customers be willing to pay $5 for this service?” “Would restaurants be willing to pay us a certain percentage?” “Would drivers be willing to work for this wage?”

If you can build a logistics network that can reliably move hot scrambled eggs across a suburb in 30 minutes, you can probably move basically anything else in local commerce later i.e. groceries, convenience, flowers, the tube of toothpaste...you name it! Restaurants also happened to be the largest category of local commerce with essentially no delivery infrastructure of its own; outside of pizza and Chinese food, most American restaurants simply didn’t deliver. Today, we take food delivery for granted, but it’s actually not that long ago it was far from the norm. Given that context, even though DoorDash’s ambition is to build last-mile logistics for every merchant on Main Street, restaurants were probably the hardest, AND the largest beachhead which means it made a lot of sense to solve that problem first!

While Grubhub, Seamless, and Postmates fought over Manhattan and San Francisco, DoorDash deliberately went to the suburbs. When DoorDash finally launched in San Francisco in 2015 (two years after founding), Xu told TechCrunch that they had wanted to first learn in cities that looked like the average American city rather than the largest market next door. Suburbs had less competition, higher car ownership, easier parking, larger family order sizes, and more importantly, households for whom delivery was a genuinely new capability rather than a substitute for walking a block. Even though suburbs may have looked like a niche strategy at the time, it turned out to be one of the most important pieces of the puzzle to solve the broader problem.

However, for a long time investors were highly skeptical. When Xu and his co-founders were raising money, more than 100 investors said no since on-demand delivery still carried the stench of the dot-com graveyard (Webvan, Kozmo etc), and the margins looked impossibly thin. Sequoia’s Alfred Lin, who would later lead a round and take a board seat, initially called Xu just to pass on the seed. Xu later admitted that solvency worried him for three years as he recalled in this podcast:

I always was nervous, and I think a lot of people involved with DoorDash were very nervous about, you know, our solvency. We were always worried about running out of cash and it was three years of being worried.

…Besides just the constant financial stress, we had people lose confidence in the company, right? Even internally—about maybe a quarter or 20 to 25 percent of the company—voluntarily left over those three years.

Xu and DoorDash went through those dog years to eventually become the dominant player in food delivery market.

On December 9, 2020, DoorDash IPO’d at $102 per share. Then the pandemic-era market did exactly what it did to every 2020 IPOs: shares popped ~80% on the first day of trading, briefly pushing the market cap toward $60 billion. Enterprise Value (EV) reached ~$80 Billion during the 2021 peak and then crashed to just ~$15 Billion in 2022. Since then, the company has recovered in value but EV is still hovering around $80 Billion.

In 2025, DoorDash processed ~$102 Billion of Marketplace Gross Order Value (GOV) across 3.2 billion orders, generated $13.7 Billion of revenue, posted its first meaningfully profitable GAAP year, and after acquiring Wolt in 2022 and Deliveroo in 2025, it now operates across more than 40 countries with over 56 million monthly active users. Not bad for a company that started with a PDF menu website with a Google Voice number.

In the rest of this Deep Dive, I will first walk through how the three-sided machine actually makes money and dissect the unit economics of an order. I will then discuss the competitive dynamics: whether food delivery is recession proof, whether the model is actually net beneficial to all three sides, why DoorDash beat Grubhub and the competition it faces against Uber, its chances in grocery against Amazon, Walmart, and Instacart, and whether AI is an opportunity or a disintermediation threat. Finally, I will cover capital allocation and management incentives before getting into valuation.

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