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DoorDash's Founder Won by Going Where Nobody Else Wanted To Go

By Tony Xu · Startup Growth · 1 min read

Every delivery company was fighting over San Francisco. Tony Xu realized SF was 5% of the population. Everyone else lived in the suburbs.

Key Points

You can't compete against an incumbent on their territory — you'll lose
Find where they're not incentivized to go (Innovator's Dilemma)
San Francisco is 5% of the Bay Area. The suburbs are 95%.
Focus is easy when you only have one product

San Francisco is maybe 5 to 7% of the population. Everyone else lives outside of San Francisco.

Don't Fight on Their Turf

Tony Xu has a rule: you cannot compete against an incumbent on their territory. You will lose.

You have to find something they're not incentivized to do. The incumbents in food delivery didn't want to touch end-to-end delivery because it was lower margin. They focused on dense cities because of network effects. That left the entire rest of the country wide open.

"You have to find something where they're not incentivized to do it. Innovator's Dilemma. Where it's lower margin. That's your opening."

The Suburbs Were the Real Market

Every competitor was fighting over San Francisco. Xu looked at the numbers. SF is maybe 5-7% of the Bay Area population. Everyone else lives outside the city.

So DoorDash went to the suburbs. It was a bet. They didn't know it would work. But structurally, that's where most people lived. And it turned out to be where most of the market was.

"Knowing where the market is and knowing structurally why that's different and why that might be difficult for a competitor to serve — that's pretty important."

Focus Is Easy

Xu's other edge: speed. Big companies have capital allocation decisions across multiple business lines. DoorDash had one product. One thing to build. Focus was effortless.

That's the startup advantage most founders waste. You don't have committees or twelve product lines competing for resources. You have one product. Build it.

"Focus is actually really easy. You've got to build that one product."