DoorDash CEO Tony Xu
Steve Jennings/Getty Images for TechCrunch
The food-delivery company DoorDash is receiving a massive injection of cash in the latest iteration of the deal spree staged by SoftBank’s Vision Fund.
SoftBank, along with the Singaporean sovereign wealth fund GIC and Sequoia Capital, are giving DoorDash $535 million in a deal that, including the new money, values the company at $1.4 billion, according to people close to the company.
The company initially only sought $200 million in financing, one person said, but the deal size grew and grew amid competition from investors — and now, DoorDash has an enormous amount of cash in its bank account.
The deal is another example of how SoftBank is equipping companies with warchests that they can use to bash, or maybe even acquire, their rivals.
DoorDash said it would use the money to increase its corporate headcount by another 250 employees this year to about 800 and that it planned to expand from the 600 cities in which it currently operates to 1,600. The company also plans to further invest inDoorDash Drive, a service that allows restaurants to use DoorDash to deliver orders to their own customers, not DoorDash’s.
「We don’t take money very lightly,」 DoorDash CEO Tony Xu toldRecodein an interview, swatting away any concerns about how a company like his would manage the hundreds of millions. 「DoorDash has always been a business that is very disciplined at execution.」
Recodefirst reportedthe deal was in progress in December — though there were times since then when its completion looked uncertain.
SoftBank’s Jeff Housenbold is joining the board and, in a somewhat unusual move, GIC is as well, despite not leading the round. GIC, represented by Jeremy Kranz, and SoftBank were at one point competing for the deal, a person said, and the check size likely reflects a desire to accommodate both of them. None of the $535 million is buying out existing investors — those 「secondary」 components are typically a part of SoftBank-led deals.
GIC, which had quietly been a prior DoorDash investor, is taking a larger-than-normal amount of ownership for a non-lead. Although a major tech investor, GIC has generally preferred to keep a low profile in Silicon Valley.
Despite the international focus of the Asia-based funds, the company does not have any imminent plans to focus overseas — instead continuing its expansion in North America. While SoftBank is not pushing right now for a more international presence, it has given the company the capital to do so.
SoftBank has made a series of recent investments in the on-demand economy, such as Uber, the dog-walking company Wag and now DoorDash, part of a fund thesis to invest in startups that improve convenience for consumers. Despite the fierce competition to DoorDash from companies like GrubHub and Postmates, SoftBank does not see the market as winner-take-all, according to a person with knowledge of their thinking.
One of those competitors is, in fact, SoftBank-funded. Uber’s successful food-delivery business, UberEATS, is a rival to DoorDash, and some Uber investors were upset that SoftBank expressed interest in funding both at around the same time.
SoftBank does not see a conflict between the two businesses, the person with knowledge of their thinking said, because they see the market as large enough for two dominant players. SoftBank is also represented by other people, not Housenbold, on the Uber board.
And Xu said he was fine with it.
「This is nothing new. This is not new to DoorDash,」 he said of potential conflicts. 「The biggest investors are placing their bets on the winners and I feel very good about it.」
The number of competitors, in addition to the low margins, has led some venture capitalists to shy away from the food-delivery space in recent years. Each company hasdifferent cities where they are the strongest. DoorDash has tried to differentiate itself by stressing its relationships with nationwide chains like Wendy’s and The Cheesecake Factory (whose president is coming toCode Commercenext month in Las Vegas and appearing alongside Xu for an onstage interview).
Some veterans urge more consolidation in the industry. An acquisition is not a priority for the company, but Xu said he would certainly look at opportunities now that he has the money.
SoftBank and DoorDash first got acquainted last summer after one of Housenbold’s neighbors, early DoorDash investor Pejman Nozad, introduced him to Xu.
When the company prepared to raise money in the winter, both GIC and SoftBank expressed interest in investing lots of capital. That led to thorny, back-and-forth negotiations between the parties, some sources say.
Xu said he did not enter with a certain amount of money he wanted to raise — and so the amount bounced around quite a bit to try and make all sides happy.
DoorDash was last valued in March 2016 at about $720 million; its valuation has now doubled.