WhaTech Weekly 11/22/20
DoorDash S-1 summary, China regulates its big tech companies, Tesla enters the S&P500, Bird may go public via SPAC, Google Pay is the new super finance app!
Good morning 🌞
Airbnb and DoorDash both filed for an IPO this week, and I love both of these companies as they’re part of my life: I’ve been living in an Airbnb for 1.5 year, and I (or should I say my roommate Léo) ordered DoorDash 4 times a week as junk food lovers. I had the hard task to choose the company I wanted to talk about, and I finally went for DoorDash, probably because I love food so much 🍔 . Here’s is a quick summary of its S-1.
Launched in California in 2013 by Standford students, DoorDash now operates in the US, Canada, and Australia with 18m consumers, 390,000 merchants, and 1m dashers. Since then, merchants have generated $19bn on DoorDash, consumers have completed 900m orders, and Dashers earned $7bn.
DoorDash is much more than a food delivery marketplace
DoorDash initially started as a food delivery app. It’s a marketplace connecting consumers with restaurants: a consumer order food on the app and a DoorDash delivery worker called Dasher collect the food order at the restaurant, and deliver it to the customer. DoorDash will then collect fees from the consumer and the restaurant and will give part of it to the Dasher and keep the rest.
According to me, the strength of DoorDash lies in its Drive offer which allows merchants to use the DoorDash platform on their own delivery app and website (that’s what Chipotle uses when you order online from them 😋 ). DoorDash is not anymore just a marketplace but it’s also a Shopify for restaurants!
“Our mission is to grow and empower local economies.”
In fact, DoorDash has became much more than just a delivery food marketplace over the past 7 years. The company built:
“An on-demand logistics platform that can facilitate the local delivery of any item”. They started with food, followed with groceries, and now intend to deliver anything and therefore to compete in the convenience economy.
“Merchant services to grow sales in the modern era”. DoorDash aims at providing all the tools merchants need to grow their business, not only delivery solutions but also insights, analytics, customer support, or payment processing solutions.
“A membership program to the physical world for consumers”. Called DashPass, the membership program is “a wallet for the physical world, where a consumer can access not only restaurants, but all the local businesses in their community, and receive benefits while shopping in-store, at home, or anywhere in between”.
DoorDash is now the leader in its category
Though DoorDash aims to go beyond food delivery, the majority of current DoorDash revenues comes from restaurants, so let’s focus on this segment.
The off-premise food & beverages consumption represented
In 2019, Americans spent $1.5 trillion on food and beverages, of which $600.5 billion was spent on restaurants and other consumer food services, of which $302.6 billion was spent off-premise. In 2019, DoorDash generated Marketplace GOV of $8.0 billion, which represented 2.6% of the off-premise opportunity.
The market is huge and it’s also growing as the proportion of food & beverages consumed off-premise increased from 44% in 2009 to 50% in 2019.
DoorDash is now the leader in the category in the US with 50% market share, 2x more than its nearest competitor Uber Eats. The company attributes this success to the strategic choice to focus on suburban markets and smaller metropolitan areas since its founding. This strategic focus has been validated by the fact that DoorDash category share in suburban markets has increased by 35 percentage points from January 2018 to October 2020.
A path to profitability
Before COVID, DoorDash was already experiencing a strong growth by doubling its sales in 2019 (from 50m orders in Q1’2019 to 103 in Q1’2020. The COVID then amplified the company growth as people sheltered and had to order takeaway food to eat from restaurants.
DoorDash is also improving its profitability. While the company still generates a loss (net loss of $149M out of $1,916M revenues on the 9 first months of 2020), its profit is improving. Consumer cohorts only start generating profits on Year 2, and each new cohort is more profitable than the previous one (at least, for Cohorts 2017 & 2018).
As a result, DoorDash successfully generated a positive contribution margin for the first time in Q1’2020 (I don’t talk about Q2 & Q3 2019 as there is a positive impact from COVID that might not last) and we can expect the company to keep this trend going!
👍 Like my post if you enjoyed this summary.
📰 Some other quick news from the week
❌ China regulates its market
We didn’t hear much about this information last week but I think this is very important! While the US and the European Union try without success to regulate Tech companies, China just do it. A few days after the Shanghai Stock Exchange delayed Ant Group IPO, China's State Administration for Market Regulation (SAMR) issued antitrust guidelines to prevent anti-competitive practices and to curb the monopolistic behavior of the country’s internet giants.
Chinese platform companies won’t be able to enter monopolistic agreements through horizontal or vertical integration and will be forbidden to abuse their market dominance by selling below cost or treating suppliers differently without justification.
If you want more information about it, I strongly recommend reading the News #3 from Ark Invest.
📱 The finance super app is here: Google Pay updated its app in the US.
Launched 5 years ago, Google Pay already has 150m users worldwide (compared to 350m for PayPal) and is now accelerating by revamping its app with:
a “Pay” tab which is a peer-to-peer payment system like Venmo,
an “Explore” tab allowing users to get deals & discount based on their transactions history,
an “Insights” tab to get an overview of users’ finances.
In 2021, Google also plans to launch a banking service called Plex, by partnering with 11 existing banks and offering checking & saving accounts. Check out The Verge full analysis of these new features.
🚗 Tesla finally enters the S&P500
In September 2020, the electric car maker became eligible for entering the S&P500 by reporting its 4th straight quarter of profit, but the committee decided to not include the company in the index. But the S&P Dow Jones Indices finally announced this week that Tesla will join the index on December 21. Tesla will become the 7th biggest company of the index with a market cap. of $464bn, accounting for 2% of the index weight. In total, Tech companies Apple, Microsoft, Amazon, Google, Facebook & Tesla account for 25% of the S&P500.
🛴 Scooter startup Birds may go public via SPAC.
If you still don’t know what’s a SPAC, shame on you and take a look at my comprehensive guide.
🙏 Thank you for reading me. Don’t hesitate to comment on your thoughts about this news.