The DoorDash IPO this week is set for a valuation of more than $30bn. I’ve identified 4 key learnings from DoorDash’s journey for startups and founders, who are looking to scale and raise venture capital funds.
(1) Position your business within a large and growing market
- DoorDash benefited from the long term trend towards ordering food in as well as the additional growth in restaurant ordering due to the pandemic. Having a potential market of at least $1bn is preferred by many VCs.
(2) Even within a competitive space, find an underserved niche and leverage this to gain market share.
- There are many players in the restaurant delivery space (Uber Eats, Seamless, Grubhub, Deliveroo, Postmates..to name just a few), but they were saturated within city centres. DoorDash focused more on the underserved suburbs which had much fewer delivery options, but often spent more on large family food orders. This was a winning move.
(3) Think big and focus on revenue, revenue, revenue
- Think broadly about the potential of your expertise and product to create a highly valuable business. You may think of DoorDash as a food delivery company but in reality it’s building a global logistics company.
- DoorDash has never reported full-year profit since it began in 2013, yet it’s valuation has grown from $1.4bn in 2018 to over $30bn set for IPO, due to it’s rapid revenue growth. Focusing on growing revenue rapidly (even at the expense of losses) is a strategy favoured by most VCs.
(4) Starting small gives you the opportunity to experiment and learn by being in the market and then apply that to scale as a bigger, better version.
- DoorDash is across the US and globe now, but when it started the founders focused on Palo Alto and the Stanford Campus. This meant they could really see first hand what areas customers needed to see improvement and where opportunities were to grow, before expanding geographically.