🍔DoorDash’s payday


November 16, 2020

PLUS: How Goldman keeps its mystique.
November 16, 2020
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The latest round of the PlayStation vs. Xbox wars is getting off to a nice start. Xbox is telling people to not “blow vape smoke” into the device while PlayStation 5s won’t be delivered on time to all buyers.

At The Hustle, you can count on one thing: we’ll never tell you where you can or can not blow vape smoke.

The Big Idea
DoorDash IPO announcement

5 things you need to know about the DoorDash IPO

There have been a number of high-profile public listings this fall: Asana, Palantir, Snowflake, Unity Software.

Delivery app DoorDash is joining the fray and there’s probably a 100% chance you’ve used this service more than all those other companies combined.

In honor of the 5x we ordered The Cheesecake Factory from DoorDash over the weekend, here are 5 things you need to know about the upcoming IPO (via Protocol):

1. The pandemic has (predictably) juiced business

Through the first 9 months of 2020, DoorDash’s 18m customers have spent $16B which translates to revenue of $1.9B, up 226% YoY.

2. DoorDash is still losing money though… but it’s getting better

Because of heavy sales and marketing expenses, DoorDash lost $149m on the $1.9B of revenue… this is an improvement over the $534m it lost through the same period in 2019. (It even made a 3% profit in Q2 2020… a first).

3. The startup wants to do more than food

DoorDash wants to “grow and empower local economies” by providing a suite of services: marketing and analytics tools, and delivery subscription services.

Critics may balk at this vision, particularly after DoorDash joined Uber and Lyft to help pass Prop 22, which keeps gig workers on contractor status.

4. DoorDash has A LOT of risks

Its S1 filing has more than 50 pages covering risk factors; some of the most notable:

  • Food delivery is insanely competitive (Uber Eats, GrubHub, Domino’s etc.) and there is no guarantee that the business can achieve long-term profitability.
  • Labor is a challenge. Even with its Prop 22 win, a new wage floor puts pressure on DoorDash’s margins.
  • The COVID-19 business bump is a one-and-done.

5. MASAYOSHI SON!!

Out of the WeWork wreckage, Japanese billionaire Masayoshi Son has made a comeback in 2020. At its present valuation of $16B, DoorDash would be a ~5x return for Son ($680m investment → $3.5B stake).

The co-founders’ combined stake — Stanford classmates Tony Xu (CEO), Andy Fang (CTO), and Stanley Tang (CPO) — is worth $2.3B. 🤯

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Snippets
  • Uber tried everything (*cough* food delivery *cough*) but is scaling back its ambition and wants to unload its self-driving unit, which was once valued at $7B+.
  • Hold my beer: Tired of watching everyone else have fun, grocery delivery app Instacart is eyeing a $30B IPO.
  • Expel my beer: The liver processes 90% of alcohol. But now, scientists (bless them), created a device that lets people sober up by safely hyperventilating.
  • The Golden State Warriors want to host 10k fans at each home game next NBA season (50% capacity).The team will spend $30m for rapid COVID testing and other measures.
  • Uh-oh: Microsoft says that hackers from Russia and North Korea are targeting vaccine makers. No word yet on if data has been compromised.
  • Congrats! Kim Ng became the first female GM in a major North American men’s professional sports league — taking the reins for the Miami Marlin.
 
Wuddup Partna
The Simpsons gif

How Goldman Sachs keeps its mystique

Legendary comedian Groucho Marx famously said, “I don’t want to belong to any club that will accept me as a member.”

Well, there’s a place in corporate America where this aphorism is decidedly not true: a club of Goldman Sachs partners.

Every 2 years, the investment bank hands out its highest title (“partner”) to a group of employees. This year’s incoming class of 60 partners is the smallest — and most diverse — since the bank’s IPO in 1999.

Goldman partners date back to the 19th century

In 1882, Marcus Goldman and Samuel Sachs formed a partnership that operated a commercial paper business (fun fact: this is why Goldman’s retail banking business is called Marcus).

In the partnership structure — which added new people over the decades as Goldman grew into a banking behemoth — profits would be distributed by however many shares each partner held in the business.

After Goldman’s IPO, any old pleb investor could own shares in $GS and participate in the bank’s profits.

Creating a new exclusive class

Finance writer Marc Rubinstein notes that the official title for a Goldman partner is actually “participating managing director.”

And here’s what Goldman’s biggest ballers get to participate in:

  • Good: A base salary of $950k
  • Great: Access to Goldman-exclusive investments
  • Best: The title of “partner”

Of Goldman’s 38k employees, only 400-450 are partners (~0.01%).

“The firm has to manage the cost of disappointing those who missed out,” writes Rubinstein, “with the benefit of protecting the value of its currency.”

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Q&A
Jason Harris

Jason Harris, one of America’s best marketers, shares insights on the ‘soulful’ art of persuasion

Jason Harris is a 20+ year veteran of the advertising industry and the:

  • Co-Founder & CEO of Mekanism, an independent creative ad agency that’s worked with companies like Peloton, HBO, Amazon, and, recently, the brand identity for President-elect Joe Biden’s campaign
  • Founder of Creative Alliance, a coalition of communications experts dedicated to pro-bono initiatives

Harris distills lessons from his long career in the book The Soulful Art of Persuasion. The Hustle caught up with him to talk all things persuasion:

What do you think about the classic books on influence and persuasion?

If you take the classics like Robert Cialdini’s Influence: The Psychology of Persuasion or Dale Carnegie’s How To Win Friends & Influence People, the books are useful and give accurate advice to a certain extent, but in my opinion they miss 2 key marks: playing the long game and being inspirational.

Throughout my career I have found that my biggest successes came from building long-term relationships, not short-term transactional tips described in these older books.

After re-reading Influence and How to Win Friends, I felt compelled to share what I thought these books were missing and what’s worked for me in both my business and personal life.

Who’s the best persuader you’ve ever seen?

The biggest persuader in my opinion is also one of my role models: [the musician] David Bowie. His persuasive ability came from the fact that he was always able to “be original.”

Through the ‘70s, ‘80s, and ‘90s he had changing visions of himself from a gender-bending rock star to [extraterrestrial rocker] Starman. Bowie believed in his vision so much and stuck to his path, people wanted to follow him.

What’s the most persuasive ad you’ve ever seen?

A persuasive ad needs to be provocative. Some people will love it and some people will hate it:

  • Apple’s 1984 commercial: This is an obvious one, but it’s definitely a classic.
  • Nike and Colin Kaepernik: Nike lost customers here, for sure… but they probably gained more because of the campaign.

(Read the full Q&A here)

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Zuck Me
Instagram’s new look

Instagram’s redesign goes hard AF on short-form video and shopping

The co-founders of Instagram (Kevin Systrom and Mike Krieger) left Facebook in the fall of 2018. They were tired of dealing with Facebook CEO Mark Zuckerberg, who was implementing a number of redesigns to wring $ out of the app.

The pair are probably having convulsions right now.

Last week, Instagram replaced the “+” photo upload button at the bottom of the app with Reels (AKA its TikTok clone) and a shopping tab next to it.

Short-form video is here to stay

In response to TikTok’s meteoric rise — going from 0 to 100m US monthly active users in less than 3 years — Instagram launched Reels in September.

Instagram was able to rip off Snapchat’s Stories with its own version but taking on TikTok is a different challenge.

TikTok is built on an interest graph (and will feed you content regardless of who you follow) while Instagram is built on a social graph (and prioritizes content from those you follow).

While these are very different use cases, Instagram is clearly seeing enough traction to double down.

The bigger fish may be the shopping tab

As noted by ecommerce expert Web Smith, Instagram — with its Shopify integration, Facebook Pay, marketing and audience development tools — is building an ecommerce alternative to Amazon.

The model Instagram is pursuing is known as social commerce. It’s massive in China, where this ecommerce model did ~$190B in 2019 (10x the US).

For Scrooge McZuck, that opportunity is a priority and the redesign is proof.

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Editing by: Zachary “Dasher” Crockett, Boris Karlarm (Director of Automotive Security).

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