Founder Story: Tony Xu of DoorDash

From washing dishes in his mother's restaurant to revolutionizing the food delivery industry, Tony Xu's journey is a testament to the power of immigrant grit and entrepreneurial vision. As the co-founder and CEO of DoorDash, Xu transformed a simple idea born in a Stanford classroom into a multibillion-dollar company that has reshaped how America dines. His story is one of perseverance, innovation, and a deep-rooted desire to empower local businesses – a mission that began in his childhood and continues to drive him today.

Early Life and Influences

Tony Xu's story begins in Nanjing, China, where he was born in 1984. At the age of four, Xu and his parents immigrated to the United States, settling in Champaign, Illinois. This move would prove to be the first of many pivotal moments that shaped Xu's entrepreneurial journey.

Xu's parents, like many immigrants, faced significant challenges in their new home. His mother, a doctor in China, found her medical credentials didn't transfer to the U.S. Undeterred, she took on multiple jobs to support the family, including working as a server in a Chinese restaurant. His father, a former professor in China, pursued a Ph.D. in aeronautical engineering at the University of Illinois.

It was in this environment of hard work and determination that young Tony began to form his work ethic and entrepreneurial spirit. At a young age, he started working alongside his mother in the restaurant, washing dishes and observing the inner workings of a small business.

"I grew up working in restaurants, and I've been a dishwasher, a server, and a manager. I've seen every side of the small business world. That's what inspired me to start DoorDash," Xu reflected in a 2019 interview with Forbes.

This early exposure to the challenges faced by small business owners would later become the driving force behind DoorDash's mission to empower local merchants.

A Vision Born from Personal Experience

Xu's journey to founding DoorDash was not a straight path. After graduating from the University of California, Berkeley with a degree in Industrial Engineering and Operations Research, he worked as a business analyst at McKinsey & Company. He then moved on to roles at eBay and PayPal, gaining valuable experience in the tech industry.

However, it was during his time at Stanford Graduate School of Business that the seeds of DoorDash were planted. In the fall of 2012, Xu and his classmates – Stanley Tang, Andy Fang, and Evan Moore – were working on a class project aimed at helping small businesses. They interviewed hundreds of local merchants, trying to identify their most pressing challenges.

The breakthrough came when they spoke to Chloe, the owner of a macaroon store in Palo Alto. She showed them a thick binder full of delivery orders she couldn't fulfill due to a lack of drivers. This moment was a revelation for Xu and his team.

"That was the light bulb moment," Xu later recalled. "We realized that delivery was a problem not just for this one store, but for many small businesses."

With this insight, the team pivoted their project to focus on solving the delivery problem for local restaurants. They created a simple website called PaloAltoDelivery.com, offering delivery services from local restaurants that didn't have their own delivery staff.

The Unconventional Path

The early days of DoorDash were far from glamorous. Xu and his co-founders were full-time students, attending classes during the day and making deliveries at night. They used their own cars and often had to leave class to fulfill orders.

"We were the first delivery drivers, the first customer service representatives, the first salespeople," Xu shared in a 2020 interview with CNBC. "We did everything ourselves."

This hands-on approach gave them invaluable insights into every aspect of the business, from the challenges faced by restaurants to the expectations of customers. It also instilled a culture of hustle and problem-solving that would become central to DoorDash's success.

In June 2013, the team incorporated as DoorDash and received their first seed funding of $120,000 from Y Combinator. This was a crucial moment, validating their idea and providing the resources to expand beyond Palo Alto.

Crisis and Transformation

DoorDash's journey was not without its challenges. In September 2013, just months after their official launch, the company faced its first major crisis. During a Stanford home football game, DoorDash received an unprecedented number of orders – far more than they were prepared to handle.

Every single order was late, some by over an hour. The founders were faced with a difficult decision: refund the orders and potentially deplete their limited funds, or risk damaging their reputation with customers.

"We had days of runway left in our bank account," Xu recalled. "But we decided to refund every single order and stay up all night baking cookies to deliver to the affected customers before 5 AM."

This decision, which cost nearly half of their remaining funds, became a defining moment for DoorDash. It established their commitment to customer satisfaction above all else and laid the foundation for one of their core company values: being customer-obsessed, not competitor-focused.

Building the Right Team

As DoorDash began to grow, Xu recognized the importance of building a strong team that shared his vision and values. He sought out individuals who were not just skilled in their respective areas but also aligned with the company's mission to empower local businesses.

One of Xu's key hires was Christopher Payne, who joined as Chief Operating Officer in 2016. Payne, a veteran of Microsoft, Amazon, and eBay, brought valuable experience in scaling operations and improving customer experience.

"Hiring Christopher was a game-changer for us," Xu stated in a 2018 interview. "His expertise has been crucial in helping us navigate the challenges of rapid growth while maintaining our focus on merchants and customers."

Xu also emphasized the importance of diversity in building a strong team. Under his leadership, DoorDash has made significant strides in promoting diversity and inclusion. As of 2021, 55% of DoorDash's delivery drivers were women, a statistic that Xu points to with pride.

The Fundraising Journey

DoorDash's path to becoming a multibillion-dollar company was paved with multiple rounds of funding. After the initial Y Combinator investment, the company raised $2.4 million in a seed round led by Khosla Ventures in September 2013.

However, the fundraising journey wasn't always smooth. In 2015, during a period dubbed the "unicorn winter," many investors were skeptical of on-demand startups. DoorDash faced challenges in raising its Series B round.

"We were running out of cash and had term sheets pulled at the last minute," Xu revealed in a 2020 interview. "It was a make-or-break moment for the company."

Despite these challenges, Xu's persistence paid off. In March 2016, DoorDash announced a $127 million Series C round led by Sequoia Capital. This was followed by increasingly larger rounds, culminating in a $400 million Series H round in June 2020 that valued the company at nearly $16 billion.

Innovation Philosophy

Throughout DoorDash's growth, Xu has maintained a strong focus on innovation. His approach is centered on solving real problems for merchants, customers, and delivery drivers.

"Innovation isn't just about technology," Xu explained in a 2019 keynote speech. "It's about finding creative solutions to real-world problems. We're constantly asking ourselves: how can we make the experience better for everyone in our ecosystem?"

This philosophy has led to several innovative features, including:

DoorDash Drive: A white-label service that allows restaurants to use DoorDash's logistics platform for their own delivery operations.
DashMart: A concept of "virtual convenience stores" that offer household essentials and local restaurant favorites for delivery.
Project DASH: An initiative that uses DoorDash's logistics network to help solve the last-mile problem for food banks and nonprofits.

Industry Impact

Under Xu's leadership, DoorDash has had a transformative impact on the food delivery industry and the broader restaurant ecosystem.

Before DoorDash, only about 3% of restaurants offered delivery services. By 2020, that number had grown to over 80%, with DoorDash playing a significant role in this shift. The company's market share in the U.S. food delivery sector grew from 17% in 2018 to 50% by 2020.

DoorDash's success has also forced established players to innovate. In response to DoorDash's growth, companies like Uber and Grubhub have expanded their services and improved their technology platforms.

Moreover, DoorDash has changed the way many restaurants operate. The company's data-driven insights have helped restaurants optimize their menus, pricing, and operations for delivery. This has been particularly crucial during the COVID-19 pandemic, when many restaurants relied heavily on delivery to survive.

"We see ourselves as a technology partner for restaurants," Xu stated in a 2021 earnings call. "Our goal is to help them grow their business, not just provide a delivery service."

Legacy and Future Vision

As DoorDash continues to grow and evolve, Xu's vision extends beyond food delivery. He sees DoorDash as a logistics platform that can facilitate the delivery of any item within a city, from groceries to retail products.

"Our mission is to grow and empower local economies," Xu explained in a 2022 interview. "Food delivery was just the beginning. We want to be the platform that connects customers with all types of local businesses."

Xu's journey from immigrant dishwasher to tech CEO has also made him a prominent voice on issues of immigration and entrepreneurship. He has been a vocal advocate for policies that support immigrant entrepreneurs and has used his platform to highlight the contributions of immigrants to the American economy.

Closing Thoughts

Tony Xu's story is more than just a tale of entrepreneurial success. It's a testament to the power of perseverance, the importance of staying true to one's values, and the impact that can be made when technology is used to solve real-world problems.

From those early days of making deliveries himself to leading a company with millions of users and hundreds of thousands of partner merchants, Xu has never lost sight of his original mission: to empower local businesses and create opportunities for people to earn.

As Xu often says, "We're still in the first inning of this journey." With his innovative spirit and unwavering commitment to his vision, it's clear that Tony Xu and DoorDash will continue to shape the future of local commerce for years to come.