DoorDash: Tony Xu

In 2013, Tony Xu was brainstorming ideas for a business school project when he identified a problem he wanted to solve: food delivery. For most restaurants, it was too costly and inefficient, leaving most of the market to pizza and Chinese. Tony and his partners believed they could use technology to connect customers to drivers, who would deliver meals in every imaginable cuisine. That idea grew into DoorDash, a company that's now delivered over 100 million orders from over 200,000 restaurants across the country. PLUS in our postscript "How You Built That," we hear from the winner of our 2018 HIBT Summit Pitch Competition: Ashlin Cook. She combined her love for dogs with an entrepreneurial itch to create Winnie Lou: a Colorado business that sells healthy dog treats in independent pet stores and from a food truck. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

  Hey, it's Guy here. Just want to let you know that on November 13th, I'll be doing a live webinar with Gary Erickson of Cliff Bar. He'll be talking about how to build a business and a business culture that reflects your personal values. The webinar is free. It's supported by GoToMeeting, and it's just one of the projects that grew out of our first How I Built This summit in San Francisco. If you want to check it out, go to summit.npr.org/webinar. That's summit.npr.org/webinar. And one more little thing. This Thursday, we're going to be running our first bonus episode from the summit. It's my live conversation with Jennifer Hyman of Rent the Runway. So be on the lookout for that in your podcast queue. And now, here's the show.

• 0:49Speaker 01

  It was not very scalable. I mean, all things that summer that we did were not scalable. I mean, we would take the orders as basically phone operators, and then we would do the deliveries ourselves. And I remember graduating from business school, and two days later, while my classmates were flying out on their exotic vacations, I was delivering pumice in my Honda.

• 1:20Guy Raz?

  From NPR, it's How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 1:32Guy Raz?

  I'm Guy Raz, and on today's show, the story of how a student named Tony Hsu went from delivering Thai food to dorm rooms to building one of the biggest meal delivery services in America.

• 1:46Guy Raz?

  When I was in college, there was a student who used to roll a giant cooler down the corridors of the dorm. And he would shout out, "Chinese food, man! Get your Chinese food!" And every Tuesday and Thursday night, this very enterprising kid would go to a local Chinese takeout. He'd order $100 worth of chow mein, and fried rice, and beef, and broccoli, and egg rolls, mark it up by about 20%, and sell it to hungry college students at 10 or 11 p.m. that night. This was kind of a big deal in the 1990s, when the only real delivery option was pizza. But of course, at a certain point, the novelty wore off and the Chinese food man

• 2:31Guy Raz?

  got a job somewhere, and that was it. Dorm room food delivery wasn't scalable. Except that today, this very concept pulls in an estimated $13 billion in annual revenue. Just imagine the following situation. It's 10 at night, you want meatloaf, or a burrito, or some fried chicken, or a burger. But you're binge watching some show, and well, let's face it, you don't want to get off the couch. You don't want to leave your house. So you grab your phone, you click on Grubhub, or Uber Eats, or Postmates, or DoorDash, and boom! 30 minutes later, the food is at your door. Now, you might think all of these services got started to solve this exact problem.

• 3:14Guy Raz?

  But actually, when Tony Hsu cofounded DoorDash about five years ago, he wasn't really thinking about us, about the eaters. He was thinking more about the restaurants, the chefs and the owners, who wanted to get more of their food out into the world, but didn't have an easy way to do this. So when Tony was still a student in business school, he and some friends built a system that linked local restaurants to hungry customers, to the drivers who were available to deliver the food. They started with a simple webpage, eight restaurants, and a Honda Accord. Five years later, DoorDash is valued at over $4 billion, and it's done over 100 million deliveries across the country.

• 3:58Guy Raz?

  But getting to that point wasn't so simple. Tony didn't start out with lots of connections or money. In fact, he only started to learn English as a boy. Tony was actually born in Nanjing, China. And when he was four, his father got into an engineering program at the University of Illinois at Urbana-Champaign. His mom left behind her career in medicine and started waiting tables. And as a kid, Tony got to work too, trying to fit in at his new American school.

• 4:28Speaker 01

  There wasn't a lot of diversity at that time, not in the late 80s and the early 90s. And so I had really two ways to learn English, and I really learned English on my own. One was watching lots of TV, and that's actually how I got my name.

• 4:43Guy Raz?

  Oh, your name is not Tony?

• 4:45Speaker 01

  No, my Chinese name was Xu Xing. And when I got to the US, none of my classmates nor my teachers could pronounce my name. I was the only Asian kid in school.

• 4:55Guy Raz?

  On the registration form, it said Xu Xing?

• 4:58Speaker 01

  It said Xu Xing, it did. And as I was learning English, watching lots of TV to do it, I saw many episodes of Who's the Boss starring Tony Danza. And so, pretty much at the age of five, I walked with my dad to the immigration office and legally changed my name.

• 5:14Guy Raz?

  Inspired by Tony Danza from Who's the Boss?

• 5:17Speaker 01

  Absolutely.

• 5:19Guy Raz?

  Did you do any businesses as a kid? Did you say anything?

• 5:26Speaker 01

  I did have a couple of businesses. So we didn't necessarily come with a lot of money. And so, in order for me to buy Nintendo games or a new basketball, I started working at a pretty young age. I'd wash dishes inside my mom's restaurant.

• 5:43Guy Raz?

  The one that you worked at?

• 5:43Speaker 01

  The one she worked at.

• 5:44Guy Raz?

  You were a dishwasher?

• 5:45Speaker 01

  I was a dishwasher. I'm a very good dishwasher today, and I have those days to think. But I mowed lawns. And I realized, actually at a very young age, that, well, because the lawns in Champaign were very large, you could actually make a business out of that. And I could actually charge money for different shapes for lawns.

• 6:05Guy Raz?

  You invested in a lawnmower? Or?

• 6:08Speaker 01

  We invested in an old lawnmower. And I would just go door to door to door and ask if I can cut people's grass. And I started realizing over time, actually, if you cut grass at different heights, you can come up with different shapes and patterns.

• 6:20Guy Raz?

  Like the US flag? You mowed the US flag into someone's lawn?

• 6:25Speaker 01

  So I'd first use the mower to make the stripes, and I could cut them at different heights. And then what I would do is I'd ask if I can borrow one of their clippers, as well as, I am blanking.

• 6:38Guy Raz?

  Those trimmers?

• 6:39Speaker 01

  Yeah, the trimmers that are electric.

• 6:41Guy Raz?

  Yeah, right.

• 6:41Speaker 01

  Yeah, the electric trimmers, and effectively make different shapes in the lawn.

• 6:45Guy Raz?

  Wow. It's quite a lawn, a giant American flag.

• 6:49Speaker 01

  Many hours, but when you really want a Nintendo and you have no money in the bank, you do what it takes.

• 6:57Guy Raz?

  Did you ever have any inkling as a kid that your parents were struggling?

• 7:02Speaker 01

  I had a, maybe when I went to middle school, had small observations of it. For example, you know, we couldn't afford lessons for, you know, or sports uniforms. We lived in a fairly small apartment compared to some of my friends who had single-family homes. I lived off of the free lunch program for pretty much kindergarten through middle school. So I think it's small semblances of that, but I think for most of my childhood, I didn't think too much about that.

• 7:38Guy Raz?

  And just to be clear, your mom was a doctor in China, right?

• 7:42Speaker 01

  She was. She was a doctor and she effectively had to give up her credentials because when she immigrated to the US, no institution in the US would recognize her credentials from China. And so as a result, she kind of had to go backwards. So she worked as a waitress inside of a restaurant. She worked as a babysitter. She worked at a hospice. And, and you know, she did that for 12 years before she could save up enough money to open up a medical clinic and basically relive and regain her life in China.

• 8:19Guy Raz?

  And while your mom was doing all that stuff, your dad essentially became an engineer. And I guess his first job was in California. So you guys moved out there. How old were you when you moved to California?

• 8:31Speaker 01

  I was 15.

• 8:34Guy Raz?

  So you guys moved out to where?

• 8:35Speaker 01

  We moved to San Jose.

• 8:37Guy Raz?

  So you probably, given where you moved to, all of a sudden were at a school where people, there were people who looked like you, where you felt, right? Where you were not the only Asian kid for the first time.

• 8:47Speaker 01

  It felt almost like going back to China.

• 8:50Speaker 01

  I'm one of maybe three kids now, right, in Illinois in my grade that's Asian. But then I moved to San Jose. I'm like, wow. This is, this is a surprise.

• 9:00Guy Raz?

  Yeah.

• 9:01Speaker 01

  And my opening conversation with the principal was one where he and other educators had assessed that I was like two years behind everyone. And it's mainly because I had no idea how competitive the school system is here in the Bay Area. You know, in the Midwest, especially where I grew up, you were recognized for your athletic abilities. Definitely it wasn't cool to be the smart kid in class. Out here, you know, there were math competitions, there were, there were so many academic lessons after school. And I worked my tail off. I was miserable. In my first year, it was just day and night.

• 9:45Speaker 01

  All I did was pretty much, well, first, catch up because I truly was behind. And then, secondly, do a lot better.

• 9:53Guy Raz?

  Sure.

• 9:54Speaker 01

  And I remember looking the teachers in the eye and said, "I'm going to graduate as valedictorian of your class."

• 10:01Guy Raz?

  Wow. You said that as a freshman?

• 10:03Speaker 01

  I said that. It was almost an instinctual response. Looking back, it was certainly a bit presumptuous, but four years later, that happened.

• 10:13Guy Raz?

  You were the valedictorian of your high school?

• 10:15Speaker 01

  I was.

• 10:16Guy Raz?

  Wow. Okay, so you go to college at UC Berkeley, and then eventually you go to Stanford for business school, right?

• 10:24Speaker 01

  Yeah.

• 10:25Guy Raz?

  And one of the things that you do in business school is you create a lot of projects.

• 10:29Speaker 01

  Yes.

• 10:30Guy Raz?

  Which, spoiler alert, this is the sort of the beginnings of what eventually would become DoorDash. But tell me about this project that you did for a class. What was it?

• 10:42Speaker 01

  Well, the assignment was work on a customer audience that you're passionate about and try a bunch of things. And that was really what my co-founders and I kind of gravitated towards. You know, my co-founders and I, we all met really because of a shared interest for local businesses.

• 11:00Guy Raz?

  Were they in the class with you?

• 11:01Speaker 01

  They were.

• 11:02Guy Raz?

  So you all sat around and said, "How can we help local businesses? Like, scale or just make their operations more efficient?"

• 11:10Speaker 01

  We didn't even know what problem to work on at first. It was just that audience that we were passionate about. And, you know, each person has their own personal connection with a local business. Mine was clearly to my mom's business. I've watched her in the world of local business for 20-plus years, growing up as a kid. So I've always been a fan. And we started by talking to a lot of businesses in the Bay Area, all sorts of businesses.

• 11:33Guy Raz?

  What were you asking them?

• 11:35Speaker 01

  Asking them about...

• 11:38Speaker 01

  If there was a magic wand and we could take away any problem for you this week, what would it be?

• 11:43Guy Raz?

  So you would call up a restaurant and say, hey.

• 11:45Speaker 01

  We'd go in physically.

• 11:46Guy Raz?

  You'd go, hey, I'm Tony. I'm a student at Stanford and we're working on a project. And if you had a magic wand, what's one problem you could solve? That's what you guys would do?

• 11:53Speaker 01

  Yeah.

• 11:54Guy Raz?

  What are they telling you? What's their problem?

• 11:56Speaker 01

  Well, there are a few. We had heard a few. So we had heard challenges with staffing. We had heard challenges with how do we know where customers find out about us? And actually, the first idea that we had worked on was really an idea towards helping them better understand where their customers were coming from. It was more of a marketing solution where we'd put a tablet at the checkout and ask very simply when a customer was checking out, where did you or how did you hear about this business? And that was actually the very first idea we worked on.

• 12:26Guy Raz?

  All right. So where did that idea go? What happened to it?

• 12:29Speaker 01

  We realized that while it's a helpful idea, that it wouldn't be the fastest way to help a small business. So maybe we can help and tell you where your customers are coming from and you can deploy more dollars into those marketing channels. Or maybe we can just get you more customers. And that was when we started shifting our thinking.

• 12:50Guy Raz?

  Your attention.

• 12:51Speaker 01

  And our attention towards how do we do that?

• 12:52Guy Raz?

  So how do you do it?

• 12:55Speaker 01

  So while we started hearing about challenges with delivery and.

• 13:00Guy Raz?

  Delivering like.

• 13:01Speaker 01

  From restaurants, florists, some retail stores. And this is very bizarre because delivery has been around.

• 13:08Guy Raz?

  Forever.

• 13:08Speaker 01

  Forever.

• 13:09Guy Raz?

  Yeah.

• 13:09Speaker 01

  And yet, outside of New York City, just about no one does delivery. 85% of restaurants in America don't deliver.

• 13:18Guy Raz?

  So you were hearing from restaurants saying, delivery, delivery, delivery. And then what?

• 13:22Speaker 01

  So let me tell you about one customer. So this is a cake store owner.

• 13:28Speaker 01

  And her store is 500 square feet, maybe the size of your studio. And she would say things about turning down 10 to 15 orders a week. This is material. This is very, very material.

• 13:42Guy Raz?

  Especially when you're making cakes, because they're expensive.

• 13:44Speaker 01

  They're expensive. And as I remember how many orders my mom would used to do in her restaurant in Illinois, I'm like, 10 to 15 orders is a lot.

• 13:53Guy Raz?

  She was turning them down, why?

• 13:55Speaker 01

  Because she had no way to deliver them. She didn't want to do it herself.

• 13:58Guy Raz?

  Okay.

• 13:59Speaker 01

  She, you know, she was a one-person show many of the days.

• 14:03Guy Raz?

  So she could not afford to hire.

• 14:04Speaker 01

  She could not afford to hire.

• 14:05Guy Raz?

  Right.

• 14:06Speaker 01

  And when she did try to hire, you know, she had this challenge of, well, you know, only sometimes were the drivers busy. Because, you know, when there was a spike in demand, then maybe the driver's very busy. But on most days, the driver was doing nothing. And but she had to pay the driver, obviously, for both the uptime and the downtime. She literally had copies of customers' payment information and details that she could not fulfill.

• 14:31Guy Raz?

  Huh.

• 14:32Speaker 01

  And so this is just crazy. This is so un-American, to turn down all these credit cards. And so that was really what turned our eye towards, is there an opportunity in delivery? If so, what is it?

• 14:46Guy Raz?

  So at that point, you guys started to do some research to find out?

• 14:49Speaker 01

  We did, one, we did research to figure out, why is delivery not a thing outside of New York City? And then the second thing we did was, can we run a small pilot here at Stanford campus to test out our idea? So on the first piece, we would, you know, do deliveries for services like Domino's or FedEx. And we would learn, well, how does deliveries actually work?

• 15:12Guy Raz?

  What do you mean you would do deliveries? You would go and?

• 15:14Speaker 01

  We'd just be drivers.

• 15:15Guy Raz?

  Oh, you mean you applied to Domino's for a job?

• 15:17Speaker 01

  Yeah, we'd just be a driver.

• 15:18Guy Raz?

  You actually went to go work for Domino's?

• 15:21Speaker 01

  Yeah.

• 15:22Guy Raz?

  So you guys were, you were students at Stanford Graduate School of Business, but you also had these, like, part-time gigs, working as drivers for FedEx and Domino's, just to, really to learn about how this works?

• 15:34Speaker 01

  We were just trying to figure out how delivery works, because none of us, you know, necessarily had a background, you know, in logistics.

• 15:39Guy Raz?

  Yeah.

• 15:39Speaker 01

  And so we learned a couple of pretty interesting observations. The first to us was, it is so hard, as a single store, to know how many drivers to put in the store. You know, if there's, for example, a football game at Stanford. Way times would skyrocket.

• 15:55Guy Raz?

  Sure.

• 15:56Speaker 01

  You know, we would, we would, we wouldn't know what to do. We wouldn't know how to flex up the number of drivers. You know, this would happen to Adiflorist, too. If there's Valentine's Day, good luck. You know, we're calling, the, the store owners are literally calling all of their families and relatives and friends.

• 16:11Guy Raz?

  To deliver flowers.

• 16:11Speaker 01

  To deliver flowers on Valentine's Day. Right? Because you can't, you can't flex up. Okay, but then think about, you know, a, a, a normal day of the week. Where literally, we're folding pizza boxes, the drivers, because there isn't the volume. And so you have this very difficult and inefficient use of expensive labor. And, and so as consumption is becoming more last minute, isn't it strange that the way these goods are brought to us require advanced planning? And it was just this weird juxtaposition to us that says, well, maybe there's something here. And, and so we said, well, well, let's just, let's just run a test. Let's just do something on Stanford campus, something simple. Let's, let's pick one thing to deliver instead of trying to deliver everything.

• 16:55Speaker 01

  We chose restaurants because, well, people eat 20 to 25 times a week. And we had researched that 85% of them did not do their own deliveries. In fact, all of the restaurants we had spoken to in the Bay Area had zero delivery. And so when we saw that, we said, well, okay, is that because nobody wants the deliveries? Or is that because of something else? And so that's what, that was really the crux of what we wanted to test when we were at Stanford.

• 17:20Guy Raz?

  All right. So you decide to test this theory out.

• 17:23Speaker 01

  Yes.

• 17:23Guy Raz?

  And, and how, and what did you do? What, what, what were you offering and, and how did you do it?

• 17:29Speaker 01

  So on a Saturday, we built a website called Palo AltoDelivery.com.

• 17:34Guy Raz?

  You guys all knew how to do this?

• 17:35Speaker 01

  Uh, we, we, we did. Well, building a website, fairly straightforward. And what we did is we put eight PDF menus on PaloAltoDelivery.com.

• 17:47Guy Raz?

  From local restaurants?

• 17:48Speaker 01

  From local restaurants.

• 17:49Guy Raz?

  Okay.

• 17:50Speaker 01

  There was a Google Voice number that I had signed up for that would ring the cellphones of all of my classmates and now founders and me. And that was it.

• 17:58Guy Raz?

  And did you partner with these restaurants? You called them and say, hey?

• 18:02Speaker 01

  We did not do that.

• 18:03Guy Raz?

  Did you ask their permission?

• 18:04Speaker 01

  We did not in the beginning.

• 18:05Guy Raz?

  You did not ask?

• 18:06Speaker 01

  In the beginning.

• 18:06Guy Raz?

  And what, you just picked eight restaurants?

• 18:08Speaker 01

  We picked eight restaurants that we liked.

• 18:09Guy Raz?

  And what were they?

• 18:10Speaker 01

  Oh, there was Bangkok Cuisine, which is a Thai restaurant. There was Orin's Hummus, which was a hummus store, Middle Eastern hummus food. There was a Chinese restaurant. There was an Indian restaurant. There was a salad bar.

• 18:23Guy Raz?

  And people could call the number and just order off the menu and then?

• 18:27Speaker 01

  Yeah.

• 18:27Guy Raz?

  And so, how are you gonna make money if the restaurants didn't know? Like, who was, you were just gonna hope that they tipped you? Like, how is that gonna work?

• 18:35Speaker 01

  No, we were not necessarily making money. So, we were, so we would take the orders as basically, you know, phone operators and then we would do the deliveries ourselves.

• 18:44Guy Raz?

  There was no app? There was no?

• 18:45Speaker 01

  There was no app.

• 18:46Guy Raz?

  It was just a website?

• 18:48Speaker 01

  It was a janky webpage.

• 18:49Guy Raz?

  And you called the number?

• 18:51Speaker 01

  And you called the number.

• 18:51Guy Raz?

  And you would say, hello, it's Tony from Palo Alto Delivery. May I help you?

• 18:55Speaker 01

  Yes.

• 18:55Guy Raz?

  And they would say, sure, I want a big bucket of hummus and some pita and, you know, some babaganous. And you would say, great. And then how would you know how long that was gonna take?

• 19:08Speaker 01

  We would make an estimate in the beginning. We would guess.

• 19:11Guy Raz?

  You'd say forty-five to an hour?

• 19:12Speaker 01

  We would say forty-five minutes. And then we would drive to the store, the restaurant.

• 19:16Guy Raz?

  Presumably, you would call Orin's, who moves first, and say?

• 19:19Speaker 01

  We would call on the way. We would call on the way.

• 19:21Guy Raz?

  Okay.

• 19:21Speaker 01

  We'd call on the way. And we would place the order, pick it up on behalf of the customer, show up at the customer and use, so I used to work at Square as well, so I would take a Square card reader and use that.

• 19:34Guy Raz?

  You did like a summer internship at Square?

• 19:36Speaker 01

  I did a summer internship at Square. And I had so take, I had many Square card readers with me. So, I would plug them into my phone and use that to receive the payment.

• 19:44Guy Raz?

  Essentially, meaning you were just being reimbursed for buying their food at the hummus bar?

• 19:49Speaker 01

  Yes. We weren't, we weren't losing money. We just weren't making any money.

• 19:52Guy Raz?

  And how quickly, from the time you put it out there until the time your phones rang, did you, did you start getting orders?

• 20:00Speaker 01

  We got our first order 45 minutes actually after launching.

• 20:05Guy Raz?

  Wow.

• 20:06Speaker 01

  And that was a very pleasant surprise. The only way this customer could have found us was by typing in Palo Alto Delivery into the browser, hitting enter and finding us.

• 20:17Guy Raz?

  Yeah.

• 20:18Speaker 01

  And this customer places an order at a Thai restaurant.

• 20:23Guy Raz?

  Who delivered it?

• 20:25Speaker 01

  My co-founder and me.

• 20:26Guy Raz?

  And then when you showed up at this place, did you say, "Thank you so much. We're grad students at Stanford Business School doing this research." Or did you just say, "Here's your food"?

• 20:34Speaker 01

  We actually did the former. We actually taped the whole thing. We actually asked for permission and--

• 20:39Guy Raz?

  You videoed it?

• 20:40Speaker 01

  With my phone. And asked them how you found out about us and a few other questions.

• 20:46Guy Raz?

  He was just like, "Okay, thanks for the food," or what?

• 20:48Speaker 01

  He was really friendly. He was actually a visiting author. And he was a bit of entrepreneurial spirit himself. And he was very supportive of what we were doing.

• 20:59Guy Raz?

  So you decide that you're going to keep this going.

• 21:03Speaker 01

  Yes.

• 21:03Guy Raz?

  So how are you-- If your Google Voice phone was going to ring presumably 24 hours a day and you and your co-founders had to do all the deliveries, how did that work?

• 21:14Speaker 01

  Well, it was a bit of a limited service. So we only offered service when we were not in class.

• 21:19Guy Raz?

  I see, okay.

• 21:19Speaker 01

  So it was really--

• 21:21Guy Raz?

  Great technology there.

• 21:23Speaker 01

  Yeah.

• 21:23Guy Raz?

  That's a killer app.

• 21:24Speaker 01

  I know.

• 21:25Guy Raz?

  We're available from 9 to noon.

• 21:27Speaker 01

  We were available from 5 to 8 p.m. That was actually what we were available. And so this was certainly not-- Certainly not a venture, but those were the early days.

• 21:38Guy Raz?

  So how long did you guys do this for?

• 21:39Speaker 01

  We did this-- We did this for five months.

• 21:44Guy Raz?

  And what were you--

• 21:45Speaker 01

  This was for five months.

• 21:45Guy Raz?

  I mean, every time you were doing a delivery, were you recording like how long it took you? Did you have like a book or like a spreadsheet that you were putting numbers in?

• 21:54Speaker 01

  Yeah, there were a few things. So there are three major questions on our minds at the time. You know, number one was, do people want delivery? And how much are people willing to pay for it?

• 22:04Guy Raz?

  Yep.

• 22:04Speaker 01

  Number two, we were interested in, you know, our restaurants are interested in working with us. So as we started getting orders, we would talk to the restaurants and ask, is this something that you find valuable? Would you pay for this service?

• 22:17Guy Raz?

  In other words, instead of the customer paying a premium, would the restaurant pay you guys?

• 22:22Speaker 01

  Yes.

• 22:23Guy Raz?

  Okay.

• 22:23Speaker 01

  And then the final question was, well, as you mentioned, we were in class at the time, and so sometimes it was difficult being in class and on a delivery at the same time. And so we started trying to recruit drivers at Stanford. And so we're trying to figure out, well, can we do that? Would people be willing to use their own vehicles? Would people be willing to, you know, how much do they need to be paid? Things like this. Those are the three areas that we were really interested in.

• 22:49Guy Raz?

  And at what point did you and your co-founders say, this is our business? We're gonna, like, what information did you get, did you gather, that convinced you this was gonna be the thing we're gonna try to do?

• 23:03Speaker 01

  Yeah, there wasn't, there wasn't that moment. We were doing such little volume. We were delivering maybe five to 10 orders a day, half of whom from our friends. And so certainly from the data, it would have been too far a jump to say there's a business here. But, you know, I think two things kept us going. One was just enjoying working with one another. And then second was, we kept getting positive answers to the questions we were asking. You know, is this something that consumers wanted? Is this something that restaurants were willing to pay for? Is this something that drivers were willing to partner with? And so it was more incremental, and there wasn't these, you know, step function jumps,

• 23:48Speaker 01

  per se. We were a very small service still at the time.

• 23:51Guy Raz?

  Did you strike a deal with any of these restaurants in that time to pay you?

• 23:54Speaker 01

  We did.

• 23:55Guy Raz?

  You did?

• 23:55Speaker 01

  We did.

• 23:55Guy Raz?

  So some of them were like, sure, we'll give you like a percentage of the sale?

• 23:58Speaker 01

  Yeah, all of them, actually.

• 23:59Guy Raz?

  Oh, wow.

• 23:59Speaker 01

  Yeah.

• 24:00Guy Raz?

  But it's not like you were bringing them a whole lot of business.

• 24:02Speaker 01

  No, the first check, I remember cutting to a very popular store today. Was for $21 and some change.

• 24:11Guy Raz?

  So this, I mean, at this point, this thing, this thing is not scalable.

• 24:16Speaker 01

  It was not very scalable. I mean, all things that summer that we did were not scalable. I mean, I remember graduating from business school and two days later, while my classmates were flying out on their exotic vacations, I was delivering hummus in my Honda.

• 24:38Guy Raz?

  When we come back in just a moment, how Tony Hsu went from delivering hummus in his Honda in Palo Alto to delivering just about every food you could imagine all across the country. Stay with us. I'm Guy Raz and you're listening to How I Built This from NPR.

• 25:21Guy Raz?

  Hey, welcome back to How I Built This from NPR. So it's 2013 and Tony Hsu's company, Palo Alto Delivery, isn't really growing a whole lot. And it's clear he and his partners need more money to make this food delivery service thing grow. So they decide to apply to the Y Combinator Accelerator Program. And, well, they get in. So that's like, that's kind of the golden ticket, right?

• 25:49Speaker 01

  I don't know if we viewed it as a golden ticket as much as just the next step on the way to, of our project, because it was still very small at the time. We were, we were high fiving each other when we did 20 orders a day, right? This is not a very large service. So it was certainly not obvious that there would be a business here.

• 26:07Guy Raz?

  So what does Y Combinator get you? Does it, do they, do they give you, because they don't give you a whole lot of cash, right?

• 26:12Speaker 01

  No, they gave us $20,000 at the time.

• 26:15Guy Raz?

  And then they get a small piece of ownership?

• 26:17Speaker 01

  Yes.

• 26:17Guy Raz?

  And but you're in this thing, which is very prestigious. And of course, all these

• 26:22Guy Raz?

  VCs are like vultures circling around Y Combinator looking for the next big thing. But then what with 20,000 bucks? I mean, was it still a webpage with PDFs of menus?

• 26:34Speaker 01

  It was still a webpage. It got a little bit more sophisticated. We evolved from the PDFs.

• 26:41Guy Raz?

  To?

• 26:42Speaker 01

  To actual store menu pages where a customer can order. It was still all web, though. Nothing on your phone. So at the end of Y Combinator, it culminates into what's called Demo Day.

• 26:55Guy Raz?

  Where you pitch.

• 26:56Speaker 01

  Yes, where you pitch. And there are about 40 companies in our group. And all 40 companies pitch on stage to a group of investors.

• 27:05Guy Raz?

  So let's say I'm an investor there. I'm going to listen to this and I'm going to say, Tony, you're a really smart and impressive guy. You present really well. I just don't understand what's the big deal? Like, how is this going to be different than, you know, there's Grubhub and there's this and there's that? And I don't get it. What are you offering? What did you say?

• 27:26Speaker 01

  I said that we're building a logistics business, not a food delivery company. And our goal is to not just do food. But we need to start somewhere and we need to show value from day one. And this is the best way to serve businesses.

• 27:45Guy Raz?

  So how much money did you guys, were you able to raise out of those pitches?

• 27:50Speaker 01

  So we raised $2 million, $2.2 million in our seed round.

• 27:56Guy Raz?

  In the seed round?

• 27:57Speaker 01

  In the seed round.

• 27:58Guy Raz?

  You said it was hard to raise money, but that's pretty amazing.

• 28:00Speaker 01

  It was. It was a bit of a harrowing experience because our bank account was dwindling quickly to 10, you know, between $10,000 and $20,000. I had debt from grad school, as did my co-founders. I had a wedding also upcoming, my own wedding, that I was struggling to pay for. So I had to take a loan.

• 28:19Guy Raz?

  You should have eloped.

• 28:20Speaker 01

  Should have eloped, that's true.

• 28:22Guy Raz?

  So, all right. So what was that $2 million going to get you guys? I mean, what did you need to do with that money?

• 28:30Speaker 01

  Well, we needed to prove that the service was viable in a market.

• 28:35Guy Raz?

  Right.

• 28:35Speaker 01

  In one area. And so we chose San Jose.

• 28:40Guy Raz?

  But you couldn't do that with a webpage. You had to, at this point, I'm assuming, build an app.

• 28:45Speaker 01

  Yeah. So after graduating Y Combinator, we'd launch our app in September, so the month after.

• 28:51Guy Raz?

  And were you called Palo Alto Delivery at that point, or DoorDash?

• 28:55Speaker 01

  In Y Combinator, we launched as DoorDash.

• 28:59Guy Raz?

  How did you come up with that name?

• 29:00Speaker 01

  So it was a bit of a nerdy experience. But we, my co-founders and I, we had a few very simple criteria. We wanted a name that was easy to spell, a name that was two syllables or less, whose domain name was available. And those are the three criteria. And we ran a script across the internet to crawl many third-party services that list websites, the GoDaddies of the world, and found DoorDash.

• 29:25Guy Raz?

  And nobody owned it?

• 29:26Speaker 01

  Nobody owned it. So for $9.95, we were able to purchase DoorDash.com.

• 29:32Guy Raz?

  Wow. And who were your drivers?

• 29:34Speaker 01

  They're mainly ourselves. It was my co-founders and me and the early employees at DoorDash. We did all of the deliveries for the first, almost the first year.

• 29:43Guy Raz?

  So you ran the business and you were delivering?

• 29:46Speaker 01

  Yes. So it wasn't exactly 24/7, but it was very close.

• 29:52Guy Raz?

  And what was it that you were, in that year, trying to figure out? What information were you trying to gather?

• 30:01Speaker 01

  Well, we were realizing that the most difficult part of what we do with consumers, merchants, and drivers, so you have three parties now, not just two, is that you have to build a lot of products that consumers don't see. How do you get the order to the restaurant? How do you reconcile orders if they go wrong? What about payments? How do you actually tie to the accounting that restaurants are already doing?

• 30:29Speaker 01

  How do you know which door you should be entering if you're a driver delivering food?

• 30:33Guy Raz?

  Because all of these things save precious minutes.

• 30:36Speaker 01

  Which also saves money for consumers because if we can save costs out of the system, we can lower fees to consumers.

• 30:44Guy Raz?

  So who was doing all of the coding and the data analysis and sucking all that stuff in and organizing it?

• 30:53Speaker 01

  So my co-founders led the engineering team and a lot of our early recruits, we had an unfair advantage of friendship. We would hire a lot of friends.

• 31:02Guy Raz?

  Right.

• 31:03Speaker 01

  Most of that initial early engineering team are actually still at DoorDash today. But that was really the early crew that built the product.

• 31:11Guy Raz?

  How did you get the word out about it? And yeah, how did you even start?

• 31:15Speaker 01

  Well, we employed a tactic that worked for us pretty well at Stanford campus, which was at the time, we would print out flyers and we would stuff takeout bags at restaurants. Here's the challenge, the printing is not free.

• 31:32Speaker 01

  And that summer, when we were just testing this project out, we had printed out 100,000-plus copies of flyers.

• 31:41Guy Raz?

  Wow.

• 31:41Speaker 01

  So I broke every single color printer on campus. And it's a mystery, right? School's out, no students are supposed to be on campus, but yet all the color printers and the toners need to be replaced every day. And so when we launched San Jose, we did something very similar. We printed out flyers and we distributed them to the different restaurants and the restaurants got the word out on our behalf.

• 32:05Guy Raz?

  So were you on the phone all the time with restaurants, trying to explain what you did, trying to get them to sign up with you or to partner with you?

• 32:14Speaker 01

  Absolutely. I went door to door to door to sign up our first 50 restaurants. And later on, we evolved into phone calls and other ways of reaching the restaurants.

• 32:24Guy Raz?

  After that first year in San Jose, when did you decide, okay, this is going to work. Let's go to the next city?

• 32:31Speaker 01

  Yeah. So San Jose, over a three, four month period of time, was growing very, very, very fast. And once we discovered that, that's when we decided to...

• 32:43Speaker 01

  Raise our next round of financing to see if we can take this beyond the barrier.

• 32:48Guy Raz?

  And you needed that money to create new technology?

• 32:52Speaker 01

  To create new technology by hiring people, to hire salespeople. When we launch into a city, we have to make sure drivers are on the road. And so we have to pay dashers on the road. We have to spend on marketing. It was really to operate the business, we needed the capital.

• 33:09Guy Raz?

  So let's just talk about this for a minute because my understanding of DoorDash is there's an app for the user, like I have DoorDash on my phone, and then the restaurant has a different app, and the driver has a different app.

• 33:21Speaker 01

  Yes.

• 33:22Guy Raz?

  That's really expensive to do all that backend technology.

• 33:26Speaker 01

  It's even more complicated than that. We have to then build lots of systems to figure out, well, how long is it going to take for this delivery? What's it going to be for deep dish pizza versus a salad? What if they come in in the same order?

• 33:39Guy Raz?

  How do you even start to figure that out?

• 33:41Speaker 01

  Well, you get into the lowest level of details. You have to... So this is why one of the best things that could have happened to our company was that every single person did deliveries and customer support every single day for the first year. And actually, we still do this today. We do this once a month instead of every day, every single person in the company. And so as a result, you become an expert. You learn about different systems. You learn about the nuances of how difficult is parking versus if the food is in a different aisle from the drinks from a different aisle, from the desserts. You learn how to collate those orders. You learn how to build that into the software so that you can scale this across the country.

• 34:23Guy Raz?

  So it's a little bit like Stitch Fix, which is, yeah, they sell fashion, but ultimately, you're really a data company.

• 34:30Speaker 01

  Yes. In many ways, we're an applied math company. We are collecting lots of information. We're trying to digitize the physical world. We're trying to understand, where is every parking lot? We're trying to understand, where is every construction zone? Where's every alley? Where's every elevator inside of a mall?

• 34:48Guy Raz?

  And how does it work? Because the delivery fee is how much?

• 34:52Speaker 01

  The delivery fee is a range from $1.99 to $5.99. So there's two ways that DoorDash makes money. DoorDash makes money from the consumer. So delivery fee, and DoorDash makes money from the restaurant.

• 35:04Guy Raz?

  Ah, right.

• 35:05Speaker 01

  A percentage of the order.

• 35:06Guy Raz?

  Okay.

• 35:06Speaker 01

  And so, it's really, you know, the combination that makes the model work.

• 35:11Guy Raz?

  I'm curious, like, when you think about this disaggregated world we live in, right? Can this industry, the logistics industry, support DoorDash, Grubhub, Uber Eats, Postmates, on and on and on? Do you think they can all coexist in that world? Or do you think there's ultimately going to have to be one or two winners?

• 35:34Speaker 01

  So, it is a very giant space, as you mentioned. There are, when we were doing our research, starting the company five years ago, there were 800-plus companies just in third-party logistics. I know we know about the FedExes and the UPSes, of course, and the postal service. But there are 800-plus companies just delivering parcel that we researched.

• 35:56Guy Raz?

  Around the country.

• 35:57Speaker 01

  Around the country.

• 36:00Speaker 01

  The offline world is just so much bigger and disaggregated, to your point. You know, the second thing I would say is, when you look at our current industry, the restaurant industry, it is not yet even online. 95% of orders still happen through a phone call or an in-person visit. Only 5% occurs through an internet connection. I know we talk about a lot of these other services, but the fact of the matter is that we were in the very earliest innings of a gigantic industry. We really remember, this all started because of a want and desire to help local businesses. It's also given DoorDash the clarity to go and get all the details right,

• 36:44Speaker 01

  even the ones that don't seem scalable. There's, for example, a cheesecake factory that we deliver from in San Francisco. It's on the sixth floor of a mall of Macy's. To make that-

• 36:56Guy Raz?

  In downtown.

• 36:57Speaker 01

  In downtown, in the Union Square, in the shopping district.

• 36:59Guy Raz?

  Which is a nightmare to drive in.

• 37:01Speaker 01

  It's a night- it is very hard to make those deliveries. And to make that one deliveries from that one store happen, we have to find dedicated parking that we negotiate with the mall. We have to find dedicated access to a mall elevator that only mall employees and dashers receive. That we have to figure out how to get orders from different stations because that store is so large. So to make that one store happen-

• 37:27Guy Raz?

  I am losing sleep just thinking about trying to figure that out. That's just one problem.

• 37:32Speaker 01

  That's one of 242 Cheesecake Factory's, one of 200,000 businesses.

• 37:37Guy Raz?

  Tony, I am really interested in just the pressure. You know, like, I want to try to get into the movie in your head, right? Your sort of like internal dialogue. You guys have raised enough money now from different major investors where your valuation is $1.4 billion. If I'm you, I am like, phew, I'm nervous. I mean, of course, you've got to project confidence and you've got to believe in this thing, but that's a lot of pressure. Does that feel like a lot of pressure?

• 38:11Speaker 01

  It's a lot of responsibility, but it's one that I feel very, very lucky to have. I mean, if you think about-

• 38:20Guy Raz?

  Are you just wired to think of it that way? Are you just kind of an even keeled guy? I mean-

• 38:27Speaker 01

  So, I don't necessarily focus on, you know, some of those metrics. You know, I've- we started this company again to help the businesses on the streets. Why are we doing that? We're doing that because the businesses on the streets, even in Silicon Valley, produce 60% of the jobs inside every city. And we need to help them. We need to help morph their stores. We need to give them technology. We need to offer them logistics. I guess when my brain thinks about that, it thinks a bit less, maybe about-

• 39:01Speaker 01

  You know, the company valuation or how much pressure necessarily we are under. I think more instead about the future. I think about how do we actually service that opportunity? How do we make the job easier for the Dashers? How do we think about serving other types of businesses? That's where my brain goes.

• 39:21Guy Raz?

  Where do you see this in 10 years? If you are, if you're building your sort of dream house vision, right? Like, you've got your magic wand. You ask these businesses early on, hey, you got a magic wand? What's a problem you want to solve? You've got the magic wand. And DoorDash is what in 10 years? Is it the Netflix of delivery? Is it the Amazon? What is it?

• 39:49Speaker 01

  DoorDash is the biggest infrastructure for a city that connects consumers and merchants. We would be your first phone call if you wanted to start a company. We can help you start that business. We can introduce you to customers on that business. We would want to introduce all of the customers to all of your use cases, delivery being one of them. But certainly, I still envision, even in 10 years, people going into stores. We're still social creatures. We're still going to go hang out with our friends or our coworkers or our spouses and partners. And we're going to do that in the physical world. DoorDash will help you figure out which businesses to do that with. And we'll be the best way to grow local businesses.

• 40:36Guy Raz?

  When do you, I mean, there's different sort of different measurements, but from what I understand, you don't have the biggest market share, right? You don't have the biggest chunk of market share yet, but I have to assume that's a goal, right? To capture the greatest share of the market.

• 40:55Guy Raz?

  Do you feel like you're heading in that direction?

• 40:59Speaker 01

  We've been the fastest growing service in the space for the past year. And we're actually the biggest service in about 60% of the population in the US. So we have ground to cover, as we were not the first service. But we feel very, very good about the trajectory. And we feel very, very good about the fact that the ideas that we had come up with a few years ago around servicing merchants in the best way have really proven out well.

• 41:30Guy Raz?

  Yeah. Can you even imagine what you would do afterwards? Once this company goes public, or is sold, or whatever happens, you know? Once everybody cashes out? What do you think?

• 41:45Speaker 01

  I haven't given that a lot of thought. You know, most of my days are pretty obsessed over the people that we have and the plans for the future. I am in the business. I haven't given much thought about, you know, when I, so again, I go back to my life decision framework of where am I going to have the most fun and the least regret? And that's what I'm enjoying today.

• 42:14Guy Raz?

  How much of your success do you attribute to skill and hard work and intelligence? And how much of what is happening is, do you think is because of luck?

• 42:23Speaker 01

  There is a lot of luck involved in shaping a lot of the circumstances for me. It's absolutely a combination, that's the short answer. But when I think back in my life, I've come a long way on the shoulders of a lot of great people. Who I was going to meet in school, to things I studied in the past that somehow have magically made its way back into my life today.

• 42:50Speaker 01

  To people in Silicon Valley who, before even having a business partnership with me or the company, who have more than volunteered the time to help me. There's been a lot of fortunate circumstances for me. On the flip side, of course, there's a lot of hard work. And I think the hard work and skill is really not of one person. And I think that's the thing that sometimes people forget. I think we live in a world where it's easy to idolize the stars.

• 43:32Speaker 01

  To me, the real heroes are my teammates and the people whose collective hours, skills, hard work, and drive are what has allowed me to be successful today.

• 43:50Guy Raz?

  Tony Hsu, co-founder of DoorDash. DoorDash has now delivered more than 100 million orders in cities across the United States. And if you happen to live in the San Jose area and use DoorDash on the right day of the month, you might get your noodles, or breakfast, or hummus delivered by Tony himself in his Honda Accord.

• 44:13Speaker 01

  It is the same Honda.

• 44:14Guy Raz?

  What kind of Honda is it?

• 44:15Speaker 01

  It's a 2001 Honda Accord.

• 44:16Guy Raz?

  It's a sweet Honda Accord?

• 44:18Speaker 01

  It's an amazing Honda Accord. It's a great delivery vehicle.

• 44:21Guy Raz?

  How many miles do you have on your Honda Accord?

• 44:22Speaker 01

  Nearing 200,000.

• 44:23Guy Raz?

  I love it. Today, you're the CEO of a $4 billion valuation company, and you've got a 2001 Honda Accord.

• 44:30Speaker 01

  It's a great car.

• 44:31Guy Raz?

  Great. You should be driving that.

• 44:33Speaker 01

  I will do it for as long as it lasts.

• 44:45Guy Raz?

  And please do stick around because in just a moment, we're going to hear from you about the things you're building.

• 44:54Guy Raz?

  Hey, thanks so much for sticking around because it's time now for how you built that. And today's story begins a few years ago in Miami with Ashlin Cook and her dog.

• 45:05Speaker 02

  So my dog's name is Winston, and he is a German shorthaired pointer. He is liver colored.

• 45:11Guy Raz?

  Anyway, Ashlin was working in Miami in the fashion business, and she met a guy named Dean who also had a pointer.

• 45:17Speaker 02

  We started hanging out and running with our dogs, taking the dogs to the beach, and eventually it turned into more.

• 45:25Guy Raz?

  Ashlin and Dean and the dogs Winston and Louis bonded. And eventually, the humans in the story started dating. Now, things were going great, but then, earlier this year, Dean got a job offer in Boulder, Colorado. So Ashlin decided that might be a sign to get out of Miami and head to the mountains. So the four of them, two humans, two dogs, relocated, and Ashlin had to figure out what to do next.

• 45:51Speaker 02

  I really wanted to do something on my own. I had had the entrepreneurial bug for over a year at that point. And I knew I wanted to do something with dogs, but with a little twist. So we had bounced ideas off of each other for dog food. And honestly, I just thought of a food truck for dogs just came out of my mouth. And we looked at each other like, is that a thing?

• 46:13Guy Raz?

  Well, it turns out, food trucks for dogs were sort of a thing. There were a few scattered across the country, but nothing in Colorado. So Ashlin and Dean pooled together their savings. They got a loan from Ashlin's dad, and they bought a custom-built trailer that looks like one of those vintage models from the 1950s.

• 46:33Speaker 02

  They have that iconic paint job where half of the bottom is a different color, and it has that canned ham shape with the rounded edges.

• 46:42Guy Raz?

  And after she ordered the trailer, Ashlin got together with a local chef to come up with a bunch of recipes for healthy dog treats with no salt. No sugar, no fillers. And Winston, Ashlin's pointer?

• 46:55Speaker 02

  He was a good taste tester for us because he is a picky dog of finding out like, okay, he really liked this one. He didn't like this one. I remember I tried to make a dried banana treat, but he would put it in his mouth and spit it out. So I realized, okay, Winston does not like bananas.

• 47:12Guy Raz?

  But Winston did like some of the other treats Ashlin came up with. Pumpkin apple spice cookies, zucchini squash biscuits, and one of his favorites, bison burger jerky.

• 47:23Speaker 02

  It is made with just three ingredients. Ground bison, which we do source from a local bison ranch, cranberries, and organic flax seeds.

• 47:32Guy Raz?

  And I know, this stuff sounds like food you might order at one of those farm-to-table restaurants, right? But of course, Ashlin's target demographic was just dogs. And the dog-centric nature of her business actually proved to be a problem when she started to apply for the permits she needed to launch the truck.

• 47:51Speaker 02

  The most challenging part was defining ourselves as a new category. A lot of the cities would say, well, we only allow food trucks for humans. Other cities would say, well, no one's ever come to us with that type of business before. We have no idea how to define you guys. So we ended up going the route of just full-on getting all the permits of a human food truck.

• 48:13Guy Raz?

  So finally, this past June, Ashlin started parking the truck at breweries, dog parks, and farmers markets all around Boulder. And since then, things have been going pretty well. The treats are popular and a major sign of customer buy-in? A lot of the dogs are starting to recognize the truck.

• 48:33Speaker 02

  Oh, absolutely. They will literally jump up to the counter with their two front legs and stand up at the counter. It is hysterical.

• 48:41Guy Raz?

  The company is called Winnie Lou. It's named for Ashlin's dog Winston and Dean's dog Louie. And in addition to that one food truck, Winnie Lou now sells treats online and at six independent pet stores in Colorado.

• 48:55Speaker 02

  So there are thousands of pet stores in the United States, and we would love to be in all of the independently owned, smaller pet stores that...

• 49:07Speaker 02

  We can.

• 49:08Guy Raz?

  To find out more about Winnie Lou or to hear previous episodes, head to our podcast page, howibuiltthis.npr.org. And of course, if you want to tell us your story, go to build.npr.org.

• 49:22Guy Raz?

  And thanks so much for listening to the show this week. You can subscribe wherever you get your podcasts. You can also write to us at [email protected]. And if you want to send a tweet, it's at how I built this. Our show was produced this week by James Delahoussaye, with music composed by Ramtin Arablouei. Thanks also to J.C. Howard, Noor Kutsi, Niva Grant, Sanaz Meshkhanfor, and Jeff Rogers. Our intern is Mia Venkat. I'm Guy Raz, and you've been listening to How I Built This from NPR.

• 49:59Speaker 03

  We all have moments where our limits are tested. What I want to talk about is how we define those limits and what it means to exceed them. I'm Jay Williams. Check out my show, The Limits, where I talk to people who have overcome theirs and achieved great things in business, sports, and culture. Listen to The Limits from NPR.