Advice Line with Tony Xu of Doordash

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1:50Hello and welcome to the Advice Line on How I Built This Lab. I'm Guy Raz. This is the place where we help try to solve your business challenges. Each week, I'm joined by a legendary founder, a former guest on the show who will help me try to help you. And if you're building something and you need advice, give us a call and you just might be the next guest on the show. Our number is 1-800-433-1298. Send us a one-minute message that tells us about your business and the issues or questions that you'd like help with. And you can also send us a voice memo at hibt at id.wondery.com. And make sure to tell us how to reach you.

2:25And also, don't forget to sign up for my newsletter. It's full of insights and ideas from some of the world's greatest entrepreneurs. You can sign up for free at GuyRoz.com or on Substack. And we'll put all of this info in the podcast description. All right, let's get to it. Joining me this week is Tony Hsu, the co-founder and CEO of DoorDash. Tony, welcome back to the show. It's good to be back. You were first on the show way back in 2018. Of course, it tells the origin story of DoorDash. And for those of you who missed it, we will put a link to it in the show notes. It's a super awesome episode.

2:59It's about how Tony worked at the same restaurant where his mom worked when he was a kid because they, you know, they emigrated to the U.S. when you were like four. You changed your name to Tony because you love the show Who's the Boss? And it starred Tony Danza, which is such a funny star. I love that story. and, of course, how you came up with the idea for a food delivery business while you were at Stanford at the business school. And an idea that I should mention was met with a considerable amount of skepticism at the time, right? Yeah, absolutely. And in part because people probably thought, well, the logistics and all the costs, associated costs, the margins are going to be terrible.

3:36I think when you were on the show in 2018, DoorDash had done something like 100 million deliveries at that point. And I think as of last year, I read you processed over two and a half billion orders. Is that right? Yeah. Yeah. That magnitude of change is hard to comprehend sometimes. But yes, a lot has changed in a short period of time. I mean, it's amazing. DoorDash is now the largest food delivery service in the world. Tony, I know that, you know, today, obviously, you guys are continuing to build DoorDash into an even bigger, broader platform for, you know, local commerce logistics. You've been expanding into grocery and retail, international markets.

4:15I've used some of the other brands that you've acquired like Wolt and Deliveroo, which I think is still the process. Can you tell us a little bit more about some of the things going on with DoorDash now? What is sort of the vision for expanding the platform? Sure. So, you know, when you and I last spoke seven years ago, we were largely a single product. So restaurant delivery, single geography, United States company. And that occupied, you know, well over 99 % of what we did. Today, DoorDash is a business with, you know, five big areas. Obviously, we still bring you lunch and dinner inside the U.S.

4:59We, as you mentioned, expanded about five years ago into other categories, delivering you groceries, convenience items, retail items. We now do this also internationally. So you mentioned that a couple acquisitions that we've announced. We now operate in over 35 countries. We have a B2B business where we help you do delivery from your own channel or help you with online ordering from your own app or your own website. That's amazing. One of the things that I was wondering about, right, because when you started it out, it was called Palo Alto Delivery Service, which doesn't flow off the tongue quite as easily as DoorDash.

5:37It was, I think, just it was like eight PDF menus and a Google voice number that went to you or one of your founders, co-founders. Yes. How are you measuring success? Like, was it from the interest and engagement from restaurants or was it from people ordering from the platform? Like, how did you know this was sticking? Yeah. And you're right. There are three questions, actually, to know whether or not the idea for DoorDash would work. But the first question really was, would consumers care if we made available all restaurants for delivery? You know, in 2013, only about 10 to 15 percent of restaurants offered their own delivery.

6:13And what we looked for really was how often would consumers order and come back without a discount or some sort of a marketing incentive? The other questions, of course, well, one, will restaurants actually want to partner with us in adding incremental sales to their kitchens? And the final question was, would drivers, the dashers, we call them on our platform, would they actually want to partner with us? Yeah. You know, every once in a while, I'll be on LinkedIn and that video, there's a video of you and your three other co-founders, your pitch video for Y Combinator in 2013. And it's so fun to look at because you guys are so young and just naive and bright eyed and very kind of just, you know, humble.

6:59And it's hard to imagine 2013. Today, this is a company with a market cap of over$100 billion. I mean, it's just unbelievable to see how quickly it's grown. But during that time, I mean, there's been a lot of stress, right? Even back in 2018, we talked about on the show how at a certain point Uber saw what you were doing and Uber was a giant, a behemoth. And they start a competitor service, Uber Eats. How have you managed stress over the years of trying to do a lot of things, of dealing with competitors, of just changing laws in different states? How do you manage all of that and handle the company?

7:42What are some of the things you do? Yeah, I think one of the principles that helps a lot, at least for me, is just focusing on what I can control. I don't get to control a lot of things. And just starting by, you know, almost writing on a list of things of what not to worry about. I can't control what our competitors do, how much, you know, financial resources they have versus us. But I am able to control what products we deliver. And ultimately, you know, I get to control a lot of how we interact and serve audiences and our customers. And I feel like a lot of times when we experience stress, there's this possible feeling of being overwhelmed where everything is lost, our agency completely goes away.

8:25And I think that's, again, a reason why both on the professional, what I do day to day, as well as personal front of trying to find high agency activities where I know I'm still in control. I'm still getting to feel very satisfied with the majority of hours I spend doing what I do. That's what allows me to keep going. Tony, are you ready to take some calls? Yeah, let's do it. All right. Let's bring in our first caller. Welcome to the advice line. You are on with Tony Hsu, founder of DoorDash. Please tell us your name, where you're calling from, and just a little bit about your business. Hi, Guy and Tony.

8:59It's a pleasure to be here with both of you. I am Ron Kormai, CEO and founder of Steelport Knife Co. in Portland, Oregon. We are a small team crafting heirloom-quality carbon steel kitchen knives in Portland, Oregon. Our basic tenant and every product that we make has to pass three requirements. iconic design, functional details, and everything U.S. source locally made. Wow. Ron, thanks for calling in. So Steelport Knives, I just popped onto your website. You make knives in the U.S., kitchen knives and chef's knives, which I'm a huge fan of because I'm a cook and I've got a bunch of knives. And wow, it's awesome.

9:40Tell me how you started this because many of the best knives in the world are today made in Japan and Germany and even China. There's some excellent knives made, but very few made in the US. Cutco is an example I can think of. Tell me about why and how you started this. Yeah, I think it's like a lot of stories of entrepreneurs is a source of it has been frustration and seeing a big gap in the marketplace. My background is technology and I've been involved with 11 startups throughout my careers. My previous company was a company called Finex Cast Iron, and we were the only premium American-made cast iron.

10:21And we started that in 2012, and I sold it in 2019. And now there are eight other companies that make that category. So we created the category, and one of my drivers is around how do we bring jobs back to the U.S. In 2019, I had the same experience. I went to the kitchen retail stores in the U.S., all the national ones and some of our local ones. And exactly what you said, Guy, every single knife was made outside of the country, primarily Japan, Germany, or low-end China. The premium knives. 100%. And if you know my background and things like that, that's like a call for a fight. Like, why? And if you're in the knife nerds and you're cooking, you know that there's some really good artisans that make amazing knives in the U.S.

11:07So I partnered with my business partner, Eitan Zayas, who has 25 years of experience making knives, sharpening knives. And we started Steelport out of that big gap. But we are standing on the shoulder of a very strong knife industry in the U.S. Even Portland, Oregon is a knife town, USA, because we have so many knives, but they're all outdoor knives. So we're actually building on that. All right. I want to bring Tony in. Before we bring him in, tell us your question. So my question is that as we are a small company growing, when is the right time for a consumer goods startup like ours to expand its product line versus going deeper into its core offering?

11:47But we are smart people and we can start thinking about new stuff. Like you have a new line of cutting boards that are innovative, is patent pending, and has a really potential for doing that. How do we approach that decision? Right now you're selling only knives, but now you're thinking of cutting boards and other things, but when is the right time to do it? Tony Hsu, are you cooked? Do you cook at home? I do cook. I don't cook every night like you do, Guy, that I just learned. That's incredible. That's an aspirational feat for me to do it every night. But okay, so it's a tough question. And first, congrats on everything.

12:28It sounds like it's an incredible success. And I'm going to learn a lot more now also about Portland. I didn't know it was called Knifetown USA. say. You know, the first part of what I would think through is, do I have the management bandwidth? Do I have the talent on my team to do it? What I've tended to find with projects at any company, no matter how much resources or capital you have, what tends to be the rate limiter is do you have a great single leader, lead, it doesn't have to, you know, manage a large team or anything, who can actually be responsible end to end for the next thing. In this case, cutting boards.

13:05If you have that person, it doesn't have to be your co-founder, but it could be someone else who you believe, you mentioned you had a small team, who can do that end to end. I think that's a positive. The second question I would ask is, do you have the financial runway to be able to manage? Obviously, what I would imagine would require some upfront investment, whether it's in materials or team or distribution later on, as you think about selling cutting boards. One of the nice things I do see here, obviously, is cutting boards hopefully will help you sell knives, too, which means that the two products reinforce one another.

13:44So that might be a nice offset. The final thing I would say, I think if you're feeling fully ready, you're probably too late. So there should absolutely be some element of risk. But I do think you can manage the risks if you can disentangle the problem. I really like the points that you're bringing up. And again, as your experience in DoorDash probably matches that, the answer to those questions is never yes. You never have enough resources like that. It becomes a question of trade-off. And I'm curious, as a side, another role I have is a faculty at university and adjunct professor. So my professorial question is always - You're a polymath.

14:27But my professorial question always is, oh, look at the trade-off that's in the classroom environment. I can advise that. But when it comes to my own business, it's really hard, especially as a small company, to project. if I grab those resources that you're mentioning and put it in the core, I don't really know with any confidence more than 50-50 what it will result versus putting something else. And I think looking at the history of DoorDash, you had to make similar stuff around, do you focus around region and things like that. Is there a certain point you just throw your hearts in it and go with your gut?

14:59I do think some of these kinds of strategic decisions are hard to your point, Ron, of putting it in pencil and paper or on a spreadsheet or asking AI to help make the decision. I think, like you said, you're not going to have the inputs required. You're not going to have the data required. So it is a bit of a gut call. But what I'm trying to say is it doesn't have to be this like all or nothing kind of bet that those tended to not be, I think, the decisions in this particular case where you're talking about, adding a second product. One that comes to mind for us at DoorDash was in 2016, we wanted to launch DoorDash Drive, which was this product to enable anyone to offer delivery from their own channel, from their own website, their own app.

15:47They don't have to list even on the DoorDash app to do this. And when we thought about starting that project, some of the things we thought through, even though as we were still scaling our own app across different cities, was, you know, who is this small group of leads that we can put together where we don't feel like we have to bet the whole company, but we can give it a great college try, since you're a professor, I'll use that, where we're going to put one of our best leads on it, who we think can do the job end-to-end, first and foremost, to figure out whether or not there's something there.

16:26I totally agree. I would start by treating it as an experiment and an experiment in which you are willing, even willing to lose on, willing to lose money on. In other words, if you want to do the cutting boards, it sounds like you are patent pending cutting boards. I'm excited. What innovations could possibly be being made in cutting boards? Can't wait to see. But what I would probably, the way I would go about it is, treat it like an experiment, right? Maybe do a limited drop to the most loyal customers. You just make a few. And if it sells out and builds buzz, if there are only 100 available and they sell out and they build buzz, you know the demand is real.

17:07But if not, you've kind of protected the core here, which right now are knives. And you could always go back and try it again. I think of so there's so many hex clad is a great brand. We did that that episode on the show a couple months ago. And you know, those guys started with pans, you know, nonstick pans and pots. Now it's a multi I mean, they do knives, they've got all kinds of bakeware. And it's it's a huge business called hex clad. Your name steelport gives you a lot of room to try a lot of different things, right? You don't it doesn't just have to be knives, it can be a broader category of of US-made kitchen tools, right?

17:47And so I think to Tony's point here, you have an opportunity to really just experiment and to take, let's say, not a baby risk, but like a toddler risk here, right? Not a full-on grown-up risk where you're bedding the farm, but you try something and see how people respond. I really love the combination I'm hearing from you guys, which is testing, which is not only testing the market, But I think, Tony, you highlighted the leveraging, which is a potential opportunity. People like Guy might not be ready for a high-end, top-of-the-line knife, but they need a cutting board. And why not use this? And they might get into and say, it's still poor cutting board.

18:30It was really amazing. Now I'm ready to make my experience complete or vice versa. And that cross-leveraging and pollination is not knowable until we actually launch it. And Guy, I really like your connection of the name. The name Steelport comes from Steel First Half and Port from Portland. So Steelport combined becomes, kind of opens up. And our new innovation is basically embedding steel inside two different layers of end grain cutting board and a composite recycled paper. So you have a two-sided cutting board with a steel reinforcer. allows you to not only have two-sided cutting board, but also make the cutting board extremely thin.

19:13It's about a half inch thick compared to one and a half inch. I love that because I have one of those slots in my kitchen with my cutting boards. I got rid of all my plastic cutting boards because everybody was telling me that you don't want to be eating plastic, but the wood cutting boards are so thick that it just takes up so much space in that cabinet. Great. So I expect to have a couple of customers coming through with names Tony and Guy All right. There we go. You'll see it. Yeah, for sure. For sure. Ron Cormayi, Steelport Knives is the brand. Good luck. Thanks for calling in, man. Really appreciate it.

19:46Thank you for having me. Have a great day. We're going to take a quick break, but when we come back, another caller, another question, and another round of advice. I'm Guy Raz. Stick around. You're listening to The Advice Line on How I Built This Lab. Say what you want about AI, but it's here. And it's helping businesses get more done in a day. Wix's website builder is infused with AI so you can stay ahead. Create a beautiful, functional website just by describing your idea. Track how your site appears in AI search results. Create custom images on demand. Or launch an entire campaign in a matter of minutes.

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20:33Welcome back to the advice line on how I built this. I'm Guy Raz and my guest today is Tony Hsu. He's the co-founder and CEO of DoorDash and we are taking your calls and let's bring in our next caller. Hi, Guy. Hi, Tony. Thanks for having me. I'm Catherine Shaw from Raleigh, North Carolina, and I'm the co-founder of Spring and Mulberry, a line of date sweetened dark chocolate bars. Spring and Mulberry began with a radical question. Can sweets be indulgent without refined sugar? Thank you, Catherine, for calling in. Welcome to the show. Thank you. So Spring and Mulberry, it's a chocolate company.

21:09You make chocolate bars, right? I think. But you use dates to sweeten them, not cane sugar or corn syrup or other kinds of sweeteners. Yes, correct. We use dates because they're a whole food ingredient. they're full of antioxidants. They actually have more antioxidants than blueberries, more magnesium than bananas. And the key is that they're full of fiber and fiber helps slow the absorption of sugar in the body, reducing the glycemic index and glycemic load. Awesome. I'm looking at your website and I see that they're very artistic bars. It's like the dried strawberries pressed into the bar and pecans, whole pecans and like mango pieces.

21:51is really beautiful. Tell me about the idea or the origin story of the company. Well, it all started on a trip to Dubai on the way to visit my husband's family in India. There I discovered dates presented and elevated in beautiful gift boxes. And a few years later, I unfortunately was diagnosed with breast cancer in my mid thirties. And that led me to quit refined sugar and explore the healing power of whole foods. And I wanted to showcase this wider world of flavor in our chocolate bars. So we either top them with fruits and florals, nuts and spices with flavors like mulberry fennel or mixed berry or pecan date, or we infuse the chocolate with essential oils, creating nostalgic flavors like mint leaf, coffee, and blood orange.

22:41That's awesome. Tell me a little bit about your background. Did you come from food or or confections? Both my co-founder, Sarah, and I have worked in consumer products and luxury goods our whole careers. She was an early employee at Harry's Grooming and at Siggy's Yogurt, working in product development, operations, and finance. And I got my start in marketing and sales at Unilever and then at LVMH, Moet Hennessy Louis Vuitton. Yeah. Wow. That's a great, background to have. Maybe you should be telling us what to do with that background. One day, guys. I hope so. Tell us a little bit about how the business is doing.

23:22You said you started it in 2022? We did. We launched in beta in the spring of 2022, launched fully for holiday that year. We've grown two to three X year over year consistently, and now we're doing mid seven figures. We expect to double that in 2026. Wow. We have omni-channel distribution strategy. We want to be in natural channel grocery stores like Whole Foods and Sprouts, but we also want to be in specialty retailers like airports, Total Wine, Nordstrom's, and Bloomingdale's where we've launched this year. And direct-to-consumer is still 50 % of our business. And probably the best margins. Of course.

24:06Yeah. Cool. I have more questions for you. Before we get to them, what is your question for us? Well, we're really at an inflection point. So far, to date in the business, we've been profitable, but we're now starting to feel the cash flow strains of rapid scaling. I would love to hear from both of you as we think about what types of capital to raise, which partners to bring on, and how much risk to take in growth versus profitability. What frameworks would you recommend for helping us make those decisions as we fundraise into the next year? All right. Some big questions to answer. Tony, I want to bring you in.

24:45Questions for Catherine. Yeah, I mean, Catherine, it's, first of all, incredible. your personal story, you know, of turning a life event into, you know, this awesome, you know, solution, not only for yourself, but for a lot of other people. So that's incredible to see. You know, when I think about what you're saying, the first question I kind of want to ask is, what is the goal with the company? Our long term goal is really to help transform America's relationship with sugar and to do that by creating a product that's wholly better, to showcase how sweetness doesn't need to come from something that is linked to every major disease we face.

25:27We really believe in kind of sustainable, consistent growth, but in the next year, in order to hit eight figures, we need to launch nationally at Whole Foods, Sprouts, or other major players. And that just requires a lot of cash. Grocery stores require slotting fees. They require free fills where you send in free product. You of course need to support the product once it gets on shelf to make sure you're hitting strong velocities. And so we have two reasons we're in a bit of a cash crunch. The first is just the seasonality of chocolate. We have to buy all of our holiday inventory during summer, which are the slowest months in the chocolate business.