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New DoorDash Payment System Means Customers Who Tip Up Front Will Get Their Food Faster

A month ago, facing widespread criticism over DoorDash’s policy of reducing pay to delivery workers who receive tips, DoorDash CEO Tony Xu promised to introduce a new payment scheme in which delivery workers could keep their tips without seeing their pay reduced. Now that new model is here, and it’s a powerful incentive for customers ordering DoorDash deliveries to add a tip when they order. Preferably, a generous one.

Under the old system, a DoorDash delivery person (or “Dasher”) would be promised a certain fee, say $7, to make a given delivery. If the customer tipped zero, DoorDash would pay $7. If the customer tipped $3, DoorDash would pay $4, and the Dasher would still receive a total of $7. (If the customer tipped more than $7, DoorDash would pay its minimum fee of $1, and the Dasher would keep the entire tip.)

According to some accounts, the majority of customers who use a food delivery service such as DoorDash don’t tip–perhaps believing that most of the fee they pay to the service goes to the deliverer–while others do tip. Thus, the old system created greater predictability for drivers when deciding whether to accept a delivery. (Dashers are independent contractors who accept or decline each delivery as they see fit.)

Some Dashers liked that model, and New York Times reporter Andy Newman, who spent several days as an undercover deliverer for DoorDash, PostMates, and Uber Eats, found that he generally earned more from DoorDash than from the other two services. There was just one problem with that model, which Xu identified in a series of tweets announcing the change: “What we missed was that some customers who *did* tip would feel like their tip did not matter.”

Want your food to arrive hot? Add a big tip.

Well, it’s about to start mattering big time. The new model is short on essential details, but this is what DoorDash has announced: From here on out, all Dashers will keep 100 percent of their tips and DoorDash will no longer reduce their base pay when they do. Xu has vowed that the new scheme will increase Dashers’ pay overall, and to that end the company is doubling its minimum pay from $1 to $2. The company is adding “promotions,” bonus pay for Dashers to work at busy times, and also “challenges,” in which Dashers who work frequently will receive extra pay for reaching certain goals. DoorDash has not yet released the details of these promotions. It also says the new payment system will roll out to all Dashers by the end of September.

The company has made one thing very clear. DoorDash will give every Dasher 100 percent of the customer’s tip without reducing the Dasher’s base pay, and if a customer adds a tip when placing the order that tip will be included in the pay offered for the delivery. Although the Dasher won’t be able to see the tip amount, he or she will be able to see the total payment for the delivery, including the tip, which obviously will be higher than for an untipped delivery job.

Thus, if a customer ordering a DoorDash delivery adds a big tip when ordering, Dashers will likely scramble to grab that delivery job, knowing it will pay better than usual. Conversely, customers who doesn’t add an upfront tip will likely wait a bit longer for their food to arrive since those jobs will be much less attractive to Dashers. A customer may be planning to tip after the food arrives, but since the Dasher can’t know that in advance and most customers don’t tip, he or she won’t bank on it.

That’s what many people who posted in a Reddit forum for DoorDash drivers are saying. For example, one Dasher posted, “The nice part about this is that you will be able to see what the customer tips up front before accepting the order so those big fat 0 tippers even if they’re gonna tip afterwards I’m not risking it.”

And here’s a comment from another Dasher: “My thinking also is that the low-paying offers (from non-tippers) are going to be passed over repeatedly, so the food may be cold and will arrive late. So not only is it a low-paying job, but the odds are likely that you’ll get 1 star for taking the order. Wow, sounds great, huh?”

For the moment, there are more unknowns than knowns about this new payment scheme, but one lesson is clear. If you’re ordering food via DoorDash and you want it to arrive hot, add a tip when you first order. Preferably a big one.

Source: New DoorDash Payment System Means Customers Who Tip Up Front Will Get Their Food Faster | Inc.com

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DoorDash Is Now Worth $12.6 Billion After New $600 Million Investment

The investor feeding frenzy around food-delivery startups hasn’t stopped. Just three months after raising $400 million, DoorDash confirmed it has closed another $600 million with New York City hedge fund Darsana Capital Partners leading the round. That’s an extra billion in its war chest so far this year, and half of the total of $2 billion raised for the San Francisco startup since its founding in 2013. The new funding round increases DoorDash’s post-money valuation from $7 billion to $12.6 billion, according to cofounder and CEO Tony Xu.

“This allows us to pull forward the future sooner,” Xu tells Forbes. “It’s helpful to raise capital, especially when the macroclimate seems to be a bit choppy.”

That external turbulence has shaken some of DoorDash’s competitors in what’s already a cutthroat market. Tensions around U.S. and China trade talks have put the markets in a precarious state, affecting stock in publicly traded Grubhub (2018 revenue: $1 billion). Postmates, which announced that it had confidentially filed to go public in February, still has not made its filings public or started an IPO roadshow. Uber’s public debut in early May was disappointing. Shares are trading below its initial pricing. But Xu isn’t shaken, even after seeing Uber or other consumer tech IPOs falter in the public markets. “The short answer is that it hasn’t had an impact on how we thought about our business or how we’ve thought about our future,” Xu says.

Investors clearly haven’t been spooked, either. Last week, Amazon announced it was leading a $575 million in London-based Deliveroo, bringing its total funding to $1.5 billion.

“Capital accrues to the winners in markets that people think are growing,” says Sequoia’s Alfred Lin, a board member whose firm has invested in every round since the Series A. “You don’t just get money because lots of money is in the system.”

Three years ago, it didn’t look like DoorDash would become the delivery darling. In 2016, DoorDash raised a down funding round, after investors lowered the share price. and a slew of other delivery startups failed in the months following. That’s changed, and now DoorDash’s market share has surpassed Postmates and Uber Eats in the U.S. (Uber Eats operates internationally and did $1.48 billion in revenue in 2018 globally.)

“There’s no doubt that this a competitive environment,” Lin says. “They’ve shown that they can come from behind and win.”

DoorDash now has an extra $600 million in firepower to continue gaining market share in the U.S. and Canada, the only two markets in which it operates. Xu won’t disclose revenues (and his company still isn’t profitable), but he says the company’s gross bookings run rate in March was on pace for $7.5 billion, which indicates gross bookings in March were around $625 million. The Information previously reported the company planned to raise capital. In addition to Darsana, new investor Sands Capital and existing investors Coatue Management, Dragoneer, DST Global, Sequoia Capital, Softbank Vision Fund and Temasek Capital Management also participated.

Xu says the money won’t be going into fueling a price war with its rivals. He’d rather focus on market expansion and what he calls DoorDash’s next billion-dollar business, DoorDash Drive, which delivers for businesses like Walmart.

“Our growth has not come on the back of any discounts,” he said. “I think that’s why investors have continued to approach us in an excessive fashion since the beginning of 2018.”

Click here for details on how to send Biz information anonymously. Follow her on Twitter at @bizcarson or email her at bcarson[at]forbes.com.

I’m a San Francisco-based staff writer for Forbes with a focus on Uber, the sharing economy, and startups.

Source: DoorDash Is Now Worth $12.6 Billion After New $600 Million Investment

DoorDash Is Now Worth Nearly As Much As Grubhub After $400 Million Funding Infusion

Investor appetite in food delivery companies is growing, notwithstanding a rash of customer complaints about how these startups pay contract workers. On Thursday, DoorDash announced it had raised another $400 million in a Series F funding round led by Temasek and Dragoneer Investment Group. The cash infusion brings DoorDash’s total capital raised to $1.4 billion, of which $978 million came from funding rounds in the last year.

Source: https://www.forbes.com/sites/bizcarson/2019/02/21/doordash-funding-400-million-grubhub-7-billion-valuation/#3df12b267e10

DoorDash And Amazon Won’t Change Tipping Policy After Instacart Controversy; If You’re Worried, Carry Cash

The tipping controversy that prompted Instacart to reverse a compensation plan to its contract workers isn’t likely to go away: Rivals DoorDash and Amazon Flex are continuing to adjust driver pay based on how much they get tipped, saying doing so ensures a minimum payout. The practice, which has its roots in the way brick-and-mortar restaurants pay waitstaff, has been adapted to suit the needs of app-based delivery companies…………

Source: DoorDash And Amazon Won’t Change Tipping Policy After Instacart Controversy; If You’re Worried, Carry Cash

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