DoorDash outmaneuvered Grubhub and Uber Eats by subsidizing economics for market dominance
Sarah Tavel · 20VC: Benchmark's Sarah Tavel on Why Chasing GMV Will Lead To The Wrong Direction, The 2 Crucial Tipping Points For Marketplace Adoption, Why UGC Plays Are Like Marketplaces & How To Determine Between Existential and Non-Existential Risk · Nov 23, 2020 · at 18:09
Benchmark General Partner Sarah Tavel explains how DoorDash leveraged private capital availability to outlast public competitors before using COVID-19 volume growth to renegotiate restaurant contract terms.
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“DoorDash in particular that was able to raise an incredible amount of capital, and they were competing against Grubhub and Uber Eats, both of whom were at that point public companies, and then were being evaluated by a completely different rule book in a way. And so it continues to be an incredible challenge for building a company right now, because there is a little bit of this, it's almost feels like a game of chicken sometimes of who can spend the most money and care the least about the unit economics in order to get to that market leadership point. And then the belief, and this is a playbook that DoorDash did do, and they may have gotten pretty lucky with COVID because COVID actually ended up being a catalyst to let this strategy convert for them is eventually once you get to enough market leverage, Then you go back to the suppliers and renegotiate your contracts with them in order to go to a place where the unit economics actually work.”
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