GrubHub Gets a Cash Delivery
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Release time:2010-11-15
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GrubHub.com, a search engine for restaurants that deliver food, has raised $11 million to expand to more cities.
The company is hoping to use the new round of venture capital – its third in six years – to reach more users who want meals delivered to their doorstep, but without the trouble having to sift through a pile of take-out menus and making a phone call.
Benchmark Capital led the latest round of funding. Previous investors also participated including Origin Ventures, Leo Capital and Amicus Capital. Over the years, GrubHub has raised a total of $14.1 million.
The company, based in Chicago, faces a long list of competitors in an industry that has yet to reach much of the country. Most services cover only a limited number of cities and even less of the suburbs. Some charges delivery fees. Challengers to GrubHub include SeamlessWeb, Delivery.com, Eat24hours.com and CityMint. Waiters on Wheels offers a variation in which it handles the delivery instead of the restaurant.
GrubHub works like this: Users enter their address to find restaurants nearby that deliver. They can also search by cuisine like Chinese or pizza. Users look at the menus online and then place an order. The restaurant takes care of the delivery and payment.
GrubHub is free for consumers. The company makes its money by charging restaurants a commission on orders and in return, the restaurants that pay appear higher in the search results. “Restaurants are doing well cooking food but they need some help in the technology space,” said Matt Maloney, GrubHub’s chief executive.
Around 4,500 restaurants have teamed with GrubHub so far. An additional 8,500 restaurants appear on the site, but users must call them rather than ordering online.
Mr. Maloney said that GrubHub would double the number of cities it serves by the end of next year to 26. The company is available bigger cities like New York, Los Angeles and San Francisco.
Orders placed through GrubHub are expected to rise from $70 million this year to $150 million in 2011, Mr. Maloney said.
Bill Gurley, a venture capitalist with Benchmark, and who led its investment in GrubHub, said that the sales figures might seem small now, but that he expected the restaurant industry to increasingly move online in the coming years. He cited the example of companies in other industries like Southwest Airlines, Ticketmaster and OpenTable, the restaurant reservation service that Benchmark also invested in.
“All of these industries have gone from zero percent to 100 percent,” Mr. Gurley said before pointing to restaurant delivery. “This one is starting to move, and we see no reason why it won’t follow the same pattern in maybe 20 to 30 years out.”
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