Grubhub Faces its Own Mortality
Food Delivery and a new accelerator class calls Birmingham home.
Welcome Back and Happy New Year to you all. It’s 2020. Can you believe that?
Australia is on fire. We almost started World War III with Iran. Tesla is the most valuable automaker in the US (worth more than Ford and GM combined). Former Reality TV star Donald Trump is still our president.
No doubt that we are living in a computer simulation. Now, we’re talking startups… and 2020 has gotten us off to a lot of new things in the world of startups, so let’s hop in.
The Macro
Grubhub is exploring selling itself to the likes of Uber Eats and DoorDash. Now remember — Grubhub was the original food delivery service. It went public back in 2014 at a $4.5 billion valuation ($26 per share) and grew to a $13 billion valuation before the stock dropped 40% in 2019. Today the company is worth around $4.9 billion (around $53 a share). That steep decline in value for Grubhub equals big gains for Uber Eats (valued at $20 billion alone from Uber) and DoorDash ($12.6 billion valuation).
Both Uber Eats and DoorDash have gobbled up a tremendous amount of market share from Grubhub.
Stiff competition has forced Grubhub, which was founded in 2004 before the iPhone (whoa…) to face its own mortality. Even Amazon had to end its delivery service because they couldn’t compete, and that’s saying something for a company known for being one of the most competitive in the world.
Much how Uber and Lyft are the two dominant ride-sharing businesses in the states, Uber Eats and DoorDash are shaping up to be the same in food delivery.
Opinion: I’ve used both Uber Eats and DoorDash and I like both of them. In my opinion, there isn’t much difference between the two other than variety of restaurants. What I don’t like is when my $10 meal from Chick-Fil-A turns in to $26.50 due to delivery fees and tips. However, like many people, I justify it because, well, why would I get off my couch to get food while watching Netflix when I can just have it delivered?
That is the world we live in: one where we will pay for convenience if it means we can spend a little bit more time watching the Mandolorian on Disney+ (great show, by the way) or laying in bed scrolling through Instagram.
That being said, providing a convenience doesn’t always equate to positive unit economics. Uber is estimated to lose $3.36 on every order, and DoorDash was projected to lose $450 million in 2019. Meanwhile, Grubhub is profitable.
It’ll be interesting to see who wins ownership of Grubhub. DoorDash has the good folks over at Softbank backing them, which helped them obtain majority of the marketshare. Uber is also a strong contender with $12 billion in cash ready to be spent.
My bet is Grubhub gets its final order from Uber.
While we’re speculating, I do want to suggest a long shot acquirer: Netflix. Netflix spends the vast majority of its money on content. Now imagine watching your content and being able to order food on Netflix. It is like being in one of those fancy movie theaters where they bring you your food.
While Netflix is trying to differentiate from the new players in the streaming field — Disney+, HBO, and Hulu — this could be a way for them to rise above. In 2020, content alone might not be enough for them to win the streaming battle.
Takeaway: Food Delivery isn’t going anywhere, especially with the rise of ghost kitchens. Check out former Uber CEO and co-founder, Travis Kalanick’s latest start-up CloudKitchens to learn more on that topic. Ghost kitchens will continue to accelerate the growth of food delivery startups and turn the fast-casual business on its head.
The Micro
Birmingham’s very own Velocity Accelerator announced its new 2020 Cohort. Velocity tends to be pretty industry-agnostic when it comes to cohorts. You’ll see everything from consumer-focused startups to fintech, and in-between. In their past cohorts, they’ve have been very consumer-focused with 12 total companies focused on providing products and services in the consumer space. Without further adieu, the 2020 Velocity Cohort!
2020’s Velocity Cohort
Chip (Indianapolis, Indiana): A web- and app-based platform that provides a solution to help individuals pay off their debt. Chip rounds up the spare change made on debit and credit card purchases and applies them as a principal payment to student debt, auto loans or a mortgage.
Founder: Graham Watson
DownTime (Montreal, Canada): DownTime is a digital behavioral health agent that connects people to the right mental health providers as well as providing support throughout their journey.
Founders: Aristo Mohit-Coker and Angela Di Paola
Gainvest (Pittsburgh): Gainvest provides a way of investing in Opportunity Zones. Investors can defer taxes immediately, invest into qualified deals and receive updates and returns.
Founder: Nasher Ali
Leadhr (Birmingham): An HR tech platform that helps businesses and organizations identify leadership potential.
Founders: Ross Blankenship and Howard Glenn
LEVELD (Mobile): An app-based marketplace that enables location-specific tool and equipment rentals for peer-to-peer transactions. LEVELD provides individuals access to tools and equipment and enables consumers to generate passive income from their personal stock of tools when not in use.
Founder: Matthew Gray
Stroll (Nashville): A patented, end-to-end location-based marketing platform designed for tourism; connecting cities to citizens intending to spark economic development for local businesses.
Founders: John Mark Eberhardt and Charleson Bell
Vendrix (Birmingham): A purchasing platform for card-based business to business transactions. The Vendrix platform gives business owners a higher level of accountability while affording employees to makes purchases with a credit card. Customer-specific spending controls are enforced at the point of purchase, so decision-makers can see employees are spending in real-time, ensuring cumulative spending among users will not exceed a group or project budget.
Founders: David Stewart and Joe Turner
Shout-Out: Sarah Mcfarland, Molly Laborde and the Velocity team for bringing more great tech companies to our city. Here’s to hoping that they decide to continue to make Birmingham their home!
Takeaway: I think this could be one of Velocity’s strongest classes yet. I’ve gone to Velocity Demo every year I’ve lived in Birmingham. Each time I go I bring a journal, and write down which companies I’d invest in if I had $1 million. This year’s class will make my little investment game a lot tougher.
Must-Reads This Week
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