Business

DoorDash CEO Tony Xu on why profitability is his best precedence

DoorDash CEO Tony Xu visited Fortune’s offices this
week, and he had a lot to say about the basics of good business.

Xu is the chief of a tech juggernaut valued at approximately
$13 billion that’s still fighting to win in an ultra-competitive market. His
rivals—UberEats, Postmates, and Grubhub—are looking to grab a slice of the
food-delivery pie, but DoorDash
is reportedly in the lead
when it comes to growth. Now Xu says his company
is big on profit, too.

“We’ve had to dial in the unit economics since day one, and
make sure the business had a path to profitability long, long, long before all
the headlines started popularizing this theme,” he told Fortune. “I
don’t understand why everyone’s talking about [profits] now, because candidly,
for us, we had no choice but to focus on a path to profitability from the
beginning.”

I was skeptical of this comment because many
founders—including Xu—have openly spoken about prioritizing growth over
profitability. Last February, Xu
told CNBC,
“Right now we’re choosing to invest in growth and delay
profitability for the entire company. But we have the means in which to do that
and we know how to get there. But right now we want to accelerate to the
number-one position sooner.”

The company had then just raised $400 million in venture
funding from Temasek Holdings and Dragoneer Investment Group. The funding came
a year after DoorDash raised a monster round of $535
million
from backers including SoftBank, Sequoia Capital, GIC and Wellcome
Trust.

This week, though, Xu heavily emphasized the importance of
capital efficiency and turning a profit in spite of its war chest of capital.
When I made a comment that DoorDash is not yet profitable, Xu said, “No, but
we’re working our way there.”

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“What I know is, delivery is not profitable,” Chris Webb,
CEO of ChowNow, recently
told Fortune
. “It’s been the same way since these companies
started.”

Xu hopes to be the first in his industry to change that
trend. “As a founder, you can’t be confused. You have to know how to grow
efficiently,” emphasizing that DoorDash is hyper-focused on its unit economics.

Profitability is a hot topic these days. I recently wrote
about scooter
startup Lime
’s plans to lay off 14% of its staff—approximately 100
people—as it pulled out of a dozen markets in the U.S. and abroad. At the time,
co-founder and CEO Brad Bao said, “Part of realizing our vision to transform
urban mobility is achieving financial independence; that is why we have shifted
our primary focus to profitability.” So has Bird.
So has WeWork.
So has Fair.

In the past, venture capital firms that fund unicorns (or
decacorns) like DoorDash have had a much higher tolerance for forgoing
profitability for growth, but as more and more of these unicorns trot–and
stumble—to the public markets, the sentiment has begun to change.

Xu declined to comment, but there’s been talk that DoorDash
will go public in 2020. We might have much more insight into its business
fundamentals sooner rather than later.

HOUSEKEEPING: Term Sheet won’t be in your inbox on Monday for the Presidents’ Day holiday. Additionally,I’ll be out of the office on Tuesday and Wednesday, so please send deals for inclusion to my colleague Lucinda Shen at lucinda.shen@fortune.com.

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