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Tony Xu, the co-founder and CEO of DoorDash, has a straightforward but powerful strategy for startups: don’t go head-to-head with the big players in their stronghold. Instead, find areas where they either aren’t focused or aren’t built to serve. By doing this, you can carve out your own space in the market and gain an advantage that sets you apart.
Photo: Meta
When DoorDash began, food delivery services were focusing on dense, urban areas like San Francisco, where they believed the most demand was. Most companies assumed the key to success was capturing these city centers. But Xu saw something no one else did—the real market was outside of the city.
Seeing What Others Miss: The Suburbs as an Opportunity
At the time, many delivery companies avoided suburban areas, thinking they were harder to serve. The assumption was that fewer people in these spread-out areas meant fewer deliveries, making it less profitable. But Xu thought differently. He realized that although San Francisco was the heart of the Bay Area, only about 5-7% of the population actually lived there. The vast majority of people lived in the suburbs, which no one else was serving.
This is where Xu’s strategy came into play: deliver food to where everyone else lives, not where everyone else is competing. While it seemed counterintuitive to his competitors, it made perfect sense to him. Focusing on suburban areas meant DoorDash could avoid fierce competition in the city while tapping into an untapped market with tons of potential. It was a risk, but one that paid off handsomely.
Strategic Thinking: Carving Out Your Own Niche
Xu's approach is a textbook example of how to strategically avoid direct competition with incumbents. Rather than go where everyone else is, he found a unique space where the market was underserved, and where his competitors weren’t built to succeed. This allowed DoorDash to grow rapidly in suburban areas before expanding into more competitive urban centers later on.
Xu likens this strategy to "finding your own playing field". By choosing a battleground where your competitors are not incentivized to operate or are structurally weak, you can shift the odds in your favor. It’s a form of competitive judo—using the strength of your larger rivals against them by not fighting where they are strongest.
Example: Competing Differently in Other Industries
Xu’s strategy isn’t unique to food delivery. Many successful but lesser-known entrepreneurs have followed a similar path. Take Warby Parker, for example. Instead of competing directly with established eyewear brands by opening expensive retail stores, Warby Parker sold glasses online at much lower prices. The big players in the eyewear industry were tied to brick-and-mortar locations and couldn’t easily adjust to the new e-commerce model. Warby Parker saw an opportunity to serve price-conscious consumers in a way that the incumbents couldn’t match.
Similarly, Basecamp, a project management software company, didn’t try to outdo its competitors with a feature-rich, complex product. Instead, they built a simple, streamlined tool that catered to small teams and startups. Larger companies like Microsoft or Salesforce were serving enterprise customers with heavy-duty software, but Basecamp saw an opportunity to offer something lightweight and easy to use for a different type of customer.
Strategic Bets and Calculated Risks
Of course, Xu’s bet on the suburbs was exactly that—a bet. No one knew for sure if people living in suburban areas would actually use a food delivery service at scale. But Xu had a strong belief in his vision and trusted that his strategy would give DoorDash the advantage it needed. As it turned out, his assumption was correct, and DoorDash quickly became one of the most successful food delivery services in the U.S.
But it wasn’t just about serving a different market; it was about doing it better. By focusing on logistics and operational efficiency, DoorDash made sure that it could deliver food quickly and reliably to suburban areas that were traditionally underserved. This not only helped the company grow but also positioned it as a leader in the delivery industry when it expanded into more competitive urban markets.
Takeaway: Play Where You Can Win
Tony Xu’s story is a reminder that the path to success doesn’t always involve taking on giants in their own arena. Instead, find the areas where your competitors aren’t focused, and create your own market space. The key is to look for places where they aren’t incentivized to compete or aren’t set up to win. By doing so, you can avoid direct conflict and build your company in a space where you have the advantage.
In the end, it's about understanding the market, seeing the opportunity others miss, and having the courage to take a different path. It’s a strategy that doesn’t just apply to food delivery—it can work in any industry. Just as DoorDash succeeded in the suburbs, Warby Parker thrived online, Allbirds took off with sustainability, and Basecamp grew with simplicity. The lesson is clear: don't play the same game as everyone else—create your own playing field and play to your strengths.
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