November 13, 2020
DoorDash has had quite the year. After confidentially filing for an IPO back in February, market turmoil caused by the pandemic put a halt to its listing. But that same pandemic then supercharged its business, and markets started to stabilize. Having fought for and won California's Proposition 22, things have never looked better for the company — so now it's finally going public, filing its prospectus on Friday. Here's everything you need to know.
DoorDash really wants you to think of it as more than a food delivery company. Its mission is to "grow and empower local economies," it says, presenting a three-pronged approach to do so. It wants to deliver anything and everything; provide merchants with an array of services such as marketing and analytics; and sell a subscription product that will be "a wallet for the physical world." It's your typical world-changing vision.
But despite all the talk, for now, DoorDash is in fact a food delivery company. And, crucially, it's an unprofitable one.
That 226% year-over-year revenue growth is partly attributable to the pandemic. But DoorDash was growing quickly even before then, reporting 204% revenue growth between 2018 and 2019.
And while DoorDash is still loss-making, there are signs of hope ahead. In Q2 of 2020, the company made a small profit of $23 million, a 3% net margin.
DoorDash thinks it has the potential to get much bigger, too. "We believe we are in the early phases of broad market adoption," it says, noting that in 2019 less than 3% of U.S. delivery and take-out orders were made on its platform.
DoorDash's risk factors section is long — really, really long. Of primary concern:
Competition. "Local food delivery logistics ... is fragmented and intensely competitive," the company notes, citing Uber Eats, GrubHub, Domino's and even paper menus as potential competitors. Making matters worse, "the cost to switch between offerings is low," and many consumers, drivers and restaurants use multiple platforms.
Labor. Unlike GrubHub, which primarily relies on restaurants fulfilling orders themselves, DoorDash handles fulfillment — meaning it has to pay drivers, or "Dashers." DoorDash stresses that it needs to be able to "cost-effectively attract and retain Dashers," which could be easier said than done.
COVID-19. While COVID-19's been good to DoorDash, the good times can't last forever: "The circumstances that have accelerated the growth of our business … may not continue in the future, and we expect the growth rates in revenue, Total Orders, and Marketplace [gross order value] to decline in future periods."
Technology. DoorDash, as with other delivery and transport providers, is betting big on autonomous delivery as a way to improve margins. But "the development of such technologies is expensive and time-consuming and may not be successful," and "there is no guarantee that such technologies can reduce our current costs."
Financial reporting. In its filing, DoorDash says that it "identified a material weakness in our internal control over financial reporting," which could have led to inaccurate results being reported. The issue was because the company had "inadequate processes" and "did not have sufficient resources," it said — something which could rear its head again in future.
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DoorDash most recently raised at a $16 billion valuation in June. Assuming its IPO is at the same or higher valuation, a few shareholders stand to win big.