March 12, 2020
Tony Xu
Chief Executive Officer and Director
DoorDash Inc
303 2nd Street, South Tower, 8th Floor
San Francisco, California 94107
Re: DoorDash Inc
Draft Registration Statement on Form S-1
Filed February 13, 2020
File No. 377-03046
Dear Mr. Xu:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
Draft Registration Statement on Form S-1 filed February 13, 2020
Prospectus Summary
Overview, page 1
1. We note that you provide definitions of "individual customer accounts,"
"Dashers," and
"individual Dasher accounts" in footnotes 1 through 3. Please revise
your filing to
provide more prominent placement of these definitions in your filing,
including your
disclosures that:
"An individual consumer account is identified by a unique email
address. If a
consumer had accounts under two different email addresses, and such
consumer
completed orders using both accounts during the measurement period,
such
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consumer's activity would be counted as two separate consumers;"
and
"An individual Dasher account is identified by a unique email
address. If a Dasher
had accounts under two different email addresses, and such Dasher
delivered orders
using both accounts during the measurement period, such Dasher's
activity would be
counted as two separate Dashers."
As a related matter, you disclose that your local logistics platform
includes approximately
300,000 merchants, and you disclose in footnote 1 that this
calculation is "[b]ased on the
number of individual stores that have completed an order through
DoorDash in the past
month, measured as of September 30, 2019." Because you disclose
elsewhere that you
have partnered with national chains, please clarify whether
"individual stores," and
therefore "merchants," includes chain stores individually, or if chain
stores are collectively
counted as one "merchant."
2. We note your disclosure that you have "already started to serve
merchants in other
verticals, such as grocery and flowers, but [you] are still in the
very early stages of
expanding beyond food." To provide context for investors regarding
your current growth
into other verticals, please disclose an estimate of the number of
merchants you serve in
these other verticals for the periods presented in the filing, and the
percentage of your total
revenue attributable to these other verticals.
The Offering, page 12
3. Here and throughout your filing, you disclose that "the Capital Stock
Conversion will
occur immediately prior to the completion of this offering," but we
cannot find in your
filing where the term "Capital Stock Conversion" is defined. Please
amend your filing to
provide greater detail about the Capital Stock Conversion, including
which shares will
convert, the timing of the conversion, and any other relevant details.
Risk Factors
Risks Related to Our Business
"Systems failures and resulting interruptions in the availability of our
website . . .", page 24
4. We note your disclosure that you have experienced system failures and
other events or
conditions that interrupt the availability of your platform, and that
you have in the past
voluntarily provided credits to merchants, consumers, and Dashers to
compensate for
related harm. Please describe the circumstances of these past events,
including the
magnitude of the incidents and the consequences to your business, if
material. Please also
provide an estimate of the extent of your liability for credits
voluntarily provided by you
to compensate for related harm.
"We face certain risks associated with our pay model for Dashers. . .", page 25
5. We note your disclosure that "[yo]ur pay model for Dashers,
particularly with respect to
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gratuities for Dashers, has previously led, and may continue to lead,
to negative publicity,
lawsuits, and government inquiries." Please amend your filing to
provide more detail
regarding the specific aspects of your pay model, including those
related to gratuities, that
have caused this negative publicity and other issues, and whether and
how you have
addressed or plan to address them.
"If we fail to manage our growth effectively . . .", page 26
6. You disclose that "[you] have experienced rapid growth in [y]our
headcount, the number
of users on [y]our platform, [y]our geographic reach, and [y]our
operations, and
[you] expect to continue to experience growth in the future." Please
define "headcount" as
it relates to the growth in your platform. In this regard, you refer
to merchants,
consumers, and Dashers as your three key constituencies, but it is
unclear whether
headcount relates to one or more of these constituencies, or another
metric you track.
"We have been subject to cybersecurity incidents . . .", page 29
7. We note your disclosure that you have previously experienced
cybersecurity breaches and
other instances, including in September 2019. Please describe the
additional breaches and
instances, if material. Please include a discussion of the magnitude
of the September 2019
incident and other relevant incidents and their consequences,
including steps you took to
remediate the specific issues disclosed in your filing. Please discuss
any related costs or
other consequences to your business in your "Management's Discussion
and Analysis of
Financial Condition and Results of Operations," if applicable.
"We primarily rely on Amazon Web Services to deliver . . .", page 46
8. Please file your commercial agreement with AWS as an exhibit to your
registration
statement, or tell us why you do not believe you are required to do
so. See Item
601(b)(10) of Regulation S-K.
"Our amended and restated bylaws will designate . . .", page 63
9. We note your disclosure that "[i]f a court were to find the exclusive
forum provision in
[y]our amended and restated bylaws to be inapplicable or unenforceable
in an action,
[you] may incur additional costs associated with resolving the dispute
in other
jurisdictions." Please revise to more fully discuss whether and why
there is any question
as to whether a court would enforce this provision.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, page
78
FirstName note your references throughout the filing to your "Marketplace,"
including disclosure
10. We LastNameTony Xu
regarding total sales and orders on your Marketplace for the periods
presented. However,
Comapany NameDoorDash Inc
we were unable to find disclosure defining your "Marketplace" in your
filing. In an
March appropriate place in your filing, please disclose the definition of
Marketplace.
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11. Please address here the material challenges and risks to your business
as you implement
the material components of your growth strategy such as increasing
merchant selection,
cost-effectively attracting consumers, and enhancing your competitive
position. Also
discuss the material challenges and risks posed by relevant economic
or industry-wide
factors. Refer to Section III.A of Securities Act Release No. 33-8350
(Dec. 29, 2003). As
a related matter, please describe any known trends or uncertainties
that have had, or that
you reasonably expect will have, a material favorable or unfavorable
impact on revenue or
results of operations. Refer to Item 303(a) of Regulation S-K and
Section III.B.3 of
Release No. 33-8350.
12. We note your disclosure in your risk factor on page 25 that "[w]e have
also launched, and
may in the future launch, certain changes to the rates and fee
structure for Dashers that
utilize our platform, which may not ultimately be successful in
attracting and retaining
Dashers. For example, in September 2019, we implemented a change to
our pay model
which led to an increase in Dasher compensation and incentives and
which may result in
an increase to the fees we charge to consumers, which in turn could
affect our ability to
attract and retain consumers." Please provide more detail regarding
the specific changes
to your pay model, the impact on your business and operations related
to this pay model
change, and whether you expect to continue to change your pay model in
the future.
Merchants, page 78
13. We note that you enter into contractual agreements with merchants and
Dashers. In an
appropriate place in your filing, please describe the material terms
of your agreements
with merchants and Dashers. For example, describe the typical length
of these
agreements, any terms related to termination of the agreements, etc.
Please also discuss
any known trends or uncertainties relating to these agreements that
could reasonably have
a material favorable or unfavorable impact on net revenue, including,
but not limited
to, the length of these agreements and any exclusivity or termination
clauses, pursuant to
Item 303(a)(3)(ii) of Regulation S-K.
Our Business Model, page 81
14. We note your disclosure that you "generate the substantial majority of
[y]our revenue
from commissions charged to merchants and fees paid by consumers for
orders completed
on [y]our Marketplace." Please disclose the percentage of your total
revenue
attributable to commissions from merchants and the percentage
attributable to fees from
consumers, respectively, for the periods presented. Please also
disclose your other sources
of revenue, and their respective percentages of total revenue.
15. With a view to understanding your business model, please amend your
filing to provide
more detail regarding how you generate revenue from fees paid by
consumers. For
example, disclose whether consumers pay flat fees or variable fees per
order based on
order total. In this regard, we note your disclosure on page 121 that
your subscription
service, DashPass, costs $9.99 for a monthly subscription fee, but it
is unclear how
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consumers who do not subscribe to DashPass are charged fees for your
services.
Factors Affecting Our Performance
Cost-effectively attract consumers and increase their engagement, page 87
16. We note your disclosure that you offer certain promotions to drive
consumer acquisition
and activation, such as a $0 delivery fee and discounted delivery fees
for a consumer's
first month using DoorDash. We also note your disclosure elsewhere
that you offer
various incentives to Dashers, which are primarily recorded within
Dasher payout and
reduce revenue. In an appropriate place in your filing, please provide
qualitative and
quantitative disclosure discussing your reliance on these incentives,
and the extent to
which you will rely on these historical incentives in future periods.
Please also explain how you measure the effectiveness of your Dasher
and consumer
acquisition efforts. In this regard, we note your disclosure on page
123 that you "closely
manage [y]our acquisition efforts to ensure that each channel and
initiative has a
quantifiable return on investment within a reasonable window of time."
Please clarify
how you determine whether this return on investment demonstrates a
successful
acquisition effort.
17. We note your disclosure that "[c]onsumers that subscribe to DashPass
have higher order
frequency relative to non-subscribers." To provide context for this
disclosure, please
disclose the percentage of your total consumers that use DashPass
compared to those that
do not, and quantify the order frequency for DashPass and non DashPass
consumers,
respectively.
Business, page 106
18. Please provide support for the following statements, or characterize
them as management's
opinions or beliefs:
"[c]onsumers value frictionless online shopping experiences and
on-demand delivery
and are willing to pay for these conveniences;"
"[c]onsumers' expectations of ease and immediacy with every
purchase has been a
boon for some companies but damaging for many others,
particularly local
businesses;"
"many local businesses lack the capabilities to reach today's
consumers or deliver to
consumers off-premise;" and
FirstName LastNameTony Xu
"[t]he improving value proposition of local logistics platforms,
including DoorDash,
Comapany with wider selection than ever before, increasing convenience, and
lower consumer
NameDoorDash Inc
March 12, 2020 have contributed to increasing off-premise consumption" (see
page 114).
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Our Business, page 107
19. We note your disclosure that, "[i]n 2018, [you] generated Marketplace
GOV of $2.8
billion, which represented less than one percent of the $287.6 billion
off-premise spend at
restaurants and other consumer foodservices in the United States
during the same period."
To provide context for investors, please define "off-premise spend,"
and discuss the extent
to which it is comparable to your Marketplace GOV metric. Please also
clearly disclose
how this off-market spend "highlights the significant runway that
[you] have in food
alone," including an explanation of what is meant by "significant
runway." Make
conforming changes to your filing.
Why Merchants Win with DoorDash, page 111
20. We note your disclosure that you "offer [to merchants] additional
business enablement
services that solve challenges including insights and analytics,
merchandising, payment
processing, and customer support." In an appropriate place in your
filing, please disclose
how you charge merchants and generate fees for these additional
services, and the
percentage of your total revenue attributable to your offering of
these additional services.
Our Opportunity, page 114
21. We note your disclosure that total consumers on your platform in
Canada grew 195%
year-over-year in September 2019, based on the number of individual
consumer accounts
that have completed an order on your Marketplace in Canada during the
months of
September 2018 and September 2019. To put this large growth percentage
into context,
please disclose the percentage of your total revenue attributable to
your operations in
Canada.
Our Growth Strategy, page 116
22. With a view to understanding how you measure your consumer engagement,
please
amend your filing to include a definition of "consumer wallet share."
Because you
disclose that you "expect to gain additional consumer wallet share" as
you continue to add
new categories beyond food, include a discussion of how and whether
you currently
measure consumer wallet share, and the measures of consumer wallet
share for the periods
presented. As a related matter, please define "churned" or "lapsed"
consumers, disclosed
on page 119, to provide context for how these terms relate to consumer
engagement for
merchants.
Our Offerings
Payment Processing, page 119
23. You disclose that "DoorDash handles payment acceptance from consumers,
which means
merchants do not need to be concerned with credit card authorization,
chargebacks, or
fraud." With a view to understanding your business model, please
briefly describe how
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you then remit payments to merchants and Dashers.
Non-GAAP Financial Measures, page 185
24. We note you reference this section of your filing in the footnotes on
pages 16 and 77 for
more information regarding the use of Non-GAAP measures and
reconciliations to the
most directly comparable financial measures calculated in accordance
with GAAP, but
your disclosure here does not include "Contribution Margin" and
"Adjusted EBITDA
Margin." Please advise.
25. Please remove the table presented on page 187 that adjusts Revenue to
calculate
Contribution Profit (Loss).
26. Please tell us why you believe Loss from operations is the most
directly comparable
GAAP measure to Contribution Profit (Loss) given the nature of the
adjustments
presented in the Non-GAAP reconciliation on page 188. Also, tell us if
you consider this
measure to be more akin to a measure of GAAP Gross profit or loss,
regardless of the fact
that you do not present this measure on the face of your consolidated
statement of
operations.
Operations and Support, page F-17
27. We note that you distinguish expenses between "Costs of Revenue" that
are directly
attributable to revenue, and "Operations and Support" which includes
customer support,
onboarding costs, local operations, technology platform infrastructure
costs, and allocated
overhead. Please tell us how you determined which costs are presented
in each category,
and how you concluded that the expenses presented in "Operations and
Support" are not
directly attributable to revenue and therefore required to be included
in Cost of Revenue
pursuant to Rule 5-03.2(a) of Regulation S-X. Please consider
expanding your disclosure
to clarify.
28. We note that technology platform infrastructure costs are included in
"Operations and
Support" and platform maintenance costs are included in "Research and
Development."
Please tell us how you distinguish between these costs and how you
determined which
costs are presented in each category.
General
29. Please supplementally provide us with copies of all written
communications, as defined in
FirstName LastNameTony Xu
Rule 405 under the Securities Act, that you, or anyone authorized to do
so on your behalf,
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present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
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You may contact James Giugliano at (202) 551-3319 or Theresa Brillant
at (202) 551-
3307 if you have questions regarding comments on the financial statements and
related
matters. Please contact Katherine Bagley at (202) 551-2545 or Lilyanna Peyser
at (202) 551-
3222 with any other questions.
Sincerely,
Division of
Corporation Finance
Office of Trade &
Services
cc: Rezwan D. Pavri