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Illustration: Annelise Capossela/Axios

The race to scale isn't always won by the companies that dominate the largest markets.

Why it matters: DoorDash and Airbnb both filed to go public this week, ratifying the thesis that for real-world businesses, the road to multi-billion-dollar valuations does not need to go through major cities.

The big picture: Many new companies first concentrate on the biggest markets with the most demand. DoorDash and Airbnb, by contrast, became dominant in their sectors by focusing on places where there was little if any competition.

How it works: Truly innovative businesses create value by unlocking economic potential where it was previously entirely untapped. Suburban restaurants never used to deliver meals, while vacationers wanting to stay in such areas had almost no good choices at all.

Context: Platform businesses such as meal delivery tend towards local monopolies — local success breeds more success, as the platform become the place where all the local restaurants and the customers are. As a result, most cities are dominated by one of the big three companies — DoorDash, Uber Eats, and GrubHub (which owns Seamless).

  • DoorDash is the largest of the three, despite dominating no big U.S. city. That's by design.
  • "We started our business with a strategic focus on suburban markets and smaller metropolitan areas," says the company in its prospectus. Its first city was Palo Alto, population 65,000.

By the numbers: "Tier 1" cities — New York, Los Angeles, Chicago, Philadelphia, Washington D.C., San Francisco, and Boston — might make up 36% of the food delivery market, but they're also the slowest-growing segment.

  • "Tier 4" cities, by contrast — anywhere with a population greater than 100,000 that isn't in the top 100 cities by population — are growing almost twice as fast in terms of food delivery.
  • DoorDash dominates those suburban markets, where checks are family-sized and where parking and traffic are much less of a problem.

Airbnb has similarly dominated the suburbs, where there is much less competition from hotels and where demand for family-friendly accommodation is greater. It also has a dominant position in rural getaways, for much the same reasons.

Between the lines: Both companies have made acquisitions to get a foothold in big cities (HotelTonight for Airbnb, Caviar for DoorDash). But those purchases weren't necessary for either company's success.

The bottom line: Big cities by their nature are already full of choices and amenities. Smaller towns can present much greater opportunities.

Go deeper

Mayors fear long-lasting effects of COVID-19

Data: Menino Survey of Mayors; Chart: Axios Visuals

U.S. mayors tend to be an optimistic bunch, but a poll released Thursday finds them unusually pessimistic about prospects for post-pandemic recovery.

Why it matters: In a survey of mayors of 130 U.S. cities with more than 75,000 residents, 80% expect racial health disparities to widen, and an alarming number predict that schools, transit systems and small businesses will continue to suffer through 2021 and beyond.

Dan Primack, author of Pro Rata
9 hours ago - Technology

TikTok gets more time (again)

Illustration: Aïda Amer/Axios

The White House is again giving TikTok's Chinese parent company more to satisfy national security concerns, rather than initiating legal action, a source familiar with the situation tells Axios.

The state of play: China's ByteDance had until Friday to resolve issues raised by the Committee on Foreign Investment in the U.S. (CFIUS), which is chaired by Treasury secretary Steve Mnuchin. This was the company's third deadline, with CFIUS having provided two earlier extensions.

Federal judge orders Trump administration to restore DACA

DACA recipients and their supporters rally outside the U.S. Supreme Court on June 18. Photo: Drew Angerer via Getty

A federal judge on Friday ordered the Trump administration to fully restore the Deferred Action for Childhood Arrivals program, giving undocumented immigrants who arrived in the U.S. as children a chance to petition for protection from deportation.

Why it matters: DACA was implemented under former President Obama, but President Trump has sought to undo the program since taking office. Friday’s ruling will require Department of Homeland Security officers to begin accepting applications starting Monday and guarantee that work permits are valid for two years.

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