DoorDash doing things that don't scale

In the competitive landscape of food delivery services, DoorDash stands as a testament to the power of starting small and doing things that don’t scale. Founded in 2013 by Stanford students Tony Xu, Stanley Tang, Andy Fang, and Evan Moore, DoorDash has grown from a simple website with PDF menus to a multibillion-dollar company that revolutionized the way people receive food and other goods. Their journey exemplifies the entrepreneurial principle of validating a problem manually before building for scale—a strategy that proved crucial to their eventual success.

The Origin: A Problem Discovered in a Macaroon Shop

The DoorDash story begins in late 2012 in a small macaroon shop in Palo Alto, California. Tony Xu and Evan Moore, both Stanford business school students at the time, were conducting interviews with local business owners as part of a project to identify pain points for small businesses. They were wrapping up one such interview when they overheard something that would change their lives: the shop manager turning down a delivery order.

“If there was a lightbulb moment, this was it,” Moore later recounted. “Why couldn’t businesses send things across town, on-demand? There should be an on-demand FedEx!”

This chance observation sparked their curiosity. They began investigating the delivery landscape and discovered a surprising gap in the market: outside of New York City, approximately 85% of restaurants in America didn’t offer delivery services. For those that did, delivery was often their biggest operational headache.

Xu and Moore saw an opportunity to create a service that would benefit both restaurants and customers. They brought in Andy Fang, an undergraduate computer science student, who then recruited his classmate Stanley Tang. Together, the four Stanford students set out to validate their hypothesis that there was significant unmet consumer demand for restaurant delivery.

The Experiment: PaloAltoDelivery.com

Instead of immediately building a sophisticated platform or raising venture capital, the founders decided to test their concept in the simplest way possible. In a single afternoon, they created a basic landing page called PaloAltoDelivery.com. The website was rudimentary by any standard—it featured just eight PDF menus from local restaurants and a Google Voice number at the bottom that forwarded to their personal cell phones.

“We spent about an afternoon just putting together a quick landing page,” Xu explained in a later interview. “When I went on the Internet, I found some PDF menus of restaurants in Palo Alto. We stuck it up there and added a phone number at the bottom, which was actually our personal cell phone number. And that was it.”

The founders didn’t even ask permission from the restaurants to list their menus. They simply put up the website and waited to see if anyone would call. Their goal was to test a fundamental assumption: was there enough consumer demand for food delivery to justify building a business around it?

The First Order: Thai Food and a Scholar

The team didn’t have to wait long for their answer. Shortly after launching their basic website, they received their first phone call—someone wanted to order Thai food.

“This is a real order; we’re going to have to do something about it,” they realized. Without any delivery infrastructure in place, the founders jumped into their cars, picked up the Pad Thai from the restaurant, and delivered it themselves to a customer on Alpine Road.

When they arrived, they asked the customer how he had heard about their service and what he did for a living. He handed them his business card and introduced himself as the author of a book called “Weed the People.” It was, as Xu described it, “the best delivery/worst delivery you could ever ask for”—an unforgettable first customer that validated their concept.

Manual Operations: Doing Things That Don’t Scale

With their hypothesis validated, the founders continued to operate in a decidedly non-scalable manner. They personally answered every phone call, took orders manually, picked up food from restaurants, and delivered it themselves. When they were in class, they would sometimes run out to answer the phone, not wanting to miss a potential order.

“All the things we did at the beginning were not scalable,” Xu recalled. “I remember graduating from business school and two days later I was delivering hummus in my Honda.”

As demand grew, they began hiring drivers from Craigslist and by distributing flyers. They even employed an unconventional recruitment tactic: ordering pizza and then hiring the delivery driver on the spot to work for them.

The founders immersed themselves in understanding the delivery business from the ground up. They took jobs at places like Domino’s Pizza and FedEx to learn how established delivery operations worked. This hands-on experience provided valuable insights, such as the difficulty small businesses faced in predicting how many drivers they would need, especially during special events or holidays.

Y Combinator and the Birth of DoorDash

After six months of operating their makeshift delivery service and proving that it could be profitable, the founders applied to Y Combinator, the prestigious startup accelerator. Despite having completed only 217 deliveries and not even having an app, they were accepted into the program.

However, their acceptance wasn’t without skepticism. Paul Buchheit, the creator of Gmail and a Y Combinator partner who reviewed their application, initially had doubts about the viability of their business. It took months of watching the business grow for his skepticism to dissipate.

During their time at Y Combinator, the founders received valuable advice, including the directive to “do all the things.” When they presented a list of 20 growth ideas and asked which to prioritize, they were told to implement all of them simultaneously rather than focusing on just a few.

It was also during this period that they changed their name from Palo Alto Delivery to DoorDash. The criteria for the new name were simple: it had to be easy to spell, two syllables or less, and the domain name had to be available. They ran a script to crawl third-party sites that listed available website domains and found “DoorDash.com,” which they purchased for just $10.

Growing Pains and Scrappy Solutions

As DoorDash began to expand, the founders maintained their scrappy, hands-on approach. They rented a house to use as a makeshift office, where at one point, 15 people were working out of a two-bedroom apartment. The conditions were far from glamorous—Tony Xu was once found sleeping on the floor when a new employee arrived for her first day of work.

“When one of our first employees arrived for her first day, Tony was sleeping on the floor of the apartment,” Moore recounted. “I tried to quickly deflate and hide the air mattress while he distracted her out front. We wanted to seem like a real company. I’m sure we did not.”

This level of dedication and willingness to do whatever it took extended to their approach to customer service and operations. Every team member, regardless of their role, was required to do deliveries and customer support for the first year. This policy ensured that everyone understood the nuances of the business from the ground up and could identify opportunities for improvement.

Xu personally went door-to-door to sign up the first 50 restaurants on the platform. This direct, high-touch approach allowed him to build relationships with restaurant owners and understand their needs firsthand. It also gave him the opportunity to explain the value proposition of DoorDash in person, addressing concerns and objections on the spot.

The Three-Sided Marketplace

What set DoorDash apart from competitors like Uber Eats and Seamless was their focus on what Xu called a “three-sided marketplace.” While other delivery services primarily focused on the customer experience, DoorDash recognized the importance of creating value for all three stakeholders in their ecosystem: customers, restaurants, and dashers (delivery drivers).

For customers, they offered convenience and access to restaurants that previously didn’t deliver. For restaurants, they provided a new revenue stream without the need to hire and manage their own delivery staff. And for dashers, they created flexible earning opportunities.

This holistic approach to the marketplace helped DoorDash build a more sustainable business model. They generated revenue through a combination of delivery fees from customers and a percentage of the order value from restaurants. This dual revenue stream made the economics work in a notoriously low-margin industry.

Scaling Beyond Food

From the beginning, Xu and his co-founders saw DoorDash as more than just a food delivery company. They envisioned building a logistics infrastructure for local businesses of all kinds—essentially, “the last-mile delivery layer for every city.”

“We are building a logistics business, not just a food delivery company,” Xu explained. “Our goal is not to do just food. We had to start somewhere and show value from day one.”

This broader vision has guided DoorDash’s expansion beyond restaurant delivery into grocery delivery, convenience items, alcohol, and even retail products. By leveraging the same logistics network for multiple categories, DoorDash has been able to increase efficiency and create more opportunities for dashers to earn money.

The Road to Success

DoorDash’s journey from a simple website to a public company valued at over $30 billion wasn’t without challenges. The food delivery market is highly competitive, with thin margins and significant operational complexities. However, the founders’ willingness to start small, validate their assumptions, and do things that didn’t scale laid the foundation for their eventual success.

By December 2020, when DoorDash went public, the company had become the largest food delivery service in the United States, with operations in thousands of cities across North America. The IPO made billionaires of Xu, Fang, and Tang, while Moore, who had left the company after 17 months, also benefited significantly from his early involvement.

Lessons from DoorDash’s Growth Hack

DoorDash’s story offers several valuable lessons for entrepreneurs:

1. Start with a simple experiment: Instead of building a complex platform, the founders created a basic website to test their hypothesis about consumer demand.
2. Do things that don’t scale: The founders personally made deliveries, answered phones, and signed up restaurants—activities that couldn’t possibly scale but provided invaluable insights and built the foundation for their business.
3. Learn by doing: By working as delivery drivers themselves and taking jobs at established delivery companies, the founders gained firsthand knowledge of the industry’s challenges and opportunities.
4. Focus on all stakeholders: DoorDash’s success came from creating value for customers, restaurants, and dashers, not just optimizing for one group.
5. Think bigger than your initial product: From the beginning, the founders saw DoorDash as a logistics company, not just a food delivery service, which has guided their expansion into new categories.
6. Embrace scrappiness: Even as they grew, the founders maintained a scrappy, resourceful approach, making the most of limited resources and focusing on solving problems rather than creating a polished image.

Today, DoorDash continues to evolve and expand, but its success can be traced back to those early days when four Stanford students were willing to answer phone calls, drive around Palo Alto picking up food orders, and do whatever it took to validate their idea and build their business one delivery at a time. Their story is a powerful reminder that sometimes the path to building something that scales begins with doing things that don’t scale at all.