Writing business

How Grubhub went from an apartment project to a $2 billion IPO

As he writes in his memoirs, the story begins with an armpit.

In 2002, Mike Evans, co-founder of Grubhub, was a restless coder at a technology company who dreamed of finding a better — more transparent, you might say — a way to order food, especially online. But he couldn’t find the motivation to do so.

“Lots of bus rides home, I thought, Hey, maybe this time I’ll start coding a delivery guide when I get home“, he writes in his new memoirs, Hangry: A Startup Journeypublished on November 1 by Legacy Lit.

“But each time, that motivation gave way to reading a sci-fi novel, or playing Halo on XBox, or watching reruns of buffy the vampire slayer“, he continues in the book.

Then, on a winter drive to Chicago, he came across, nose-first, a person whose armpit was covered in “cool-fresh-evergreen deodorant,” he wrote, and it annoyed and disgusted him enough that he didn’t. I don’t want to cook dinner. But he was also too irritable to order pizza. So Evans’ open[ed] my laptop and start[ed] coding.”

Twelve years later, Evans’ late-night project Grubhub.com had merged with New York competitor Seamless, debuted at $26 a share on the New York Stock Exchange, and was valued at 2. 04 billion dollars. by Reuters. Entrepreneur sat down with Evans ahead of the release of his book to discuss his crazy journey from armpit to millionaire, his frustration with Grubhub’s current reliance on gig economy workers and how which he is trying to fix his mistakes in his current startup, gender-inclusive DIY company Repairer.

The book flashes between Evans’ journey from Grubhub and the literal, emotional journey of processing his experience there as he rode his bike on the 4,200-mile TransAm bike path from Virginia to California.

But it also contains a wealth of commercial information. “The difference between not starting and starting is the hardest and most important step,” Evans said. Entrepreneur. “It’s the biggest decision and the biggest factor in terms of predicting success.”

How did Grubhub get started?

After the armpit moment, Evans created a map with Chicago restaurants, restaurant names, and phone numbers during an all-night coding session and Lucky Charms binge.

At the time, there was no delivery service – it was just an online list and map split by postcode, and sometimes Evans would scan and add menus after ordering in nearby restaurants using the list. Evans hated his job at the time – like, listening to “I-quit” songs hated his job. So he decided the Hobby Delivery Guide needed to make some money, get it off someone else’s payroll, and maybe even help him pay off $236,000 in student debt. that he and his wife Christine had accumulated.

Enter: friend and colleague Matt Maloney. Evans spoke to Maloney about his idea of ​​making restaurants pay to be listed at the top of the Grubhub website. Shortly after, Maloney left his office for a long lunch, told a Chinese restaurant owner and his bartender son about this new online delivery guide, and they paid $140 to be “premium listed” on Grubhub.com for six months.

It was the first dollar earned by the company. “A business is born with the first sale,” Evans wrote. “From this point on, it’s a legitimate business, not a hobby.” But as he wrote in his memoirs, he was never really the face of this company. Maloney was, and he served as CEO from 2004 to 2021 under an agreement the couple struck when they raised funds a few years later. (Maloney left the company in 2021, seven years later Evans did. Maloney is usually identified as a co-founder, but Evans refers to himself as the founder in the memoirs.)

But before all that, they were just two men with an idea and a desire to promote Chicago restaurants. They — well, mostly Evans, he claims in the book — started out door-to-door, restaurant to restaurant in Chicago and choosing menus to scan while trying to sell the businesses on advertising. paying. It was a churning and burning affair, on foot – until Maloney had the decisive moment. “Why can’t we just charge restaurants per order? Maloney said. He even came up with a slogan: “You don’t make a penny unless you make a dollar.”

It worked. Despite the intensity of building a network, subscription-based business from the ground up, Grubhub was actually good for restaurants, at least as Evans says. He brought orders and Grubhub made a small commission on each sale. Evans taught himself how to board restaurants, as he memorably recounts, by buying Sell ​​for draws at the Borders Bookstore. Evans and Maloney finally realized that ordering online was much easier for customers. After adding it, orders on the site tripled and a month later, Grubhub generated $20,000 in revenue.

Walk towards success

This success led Evans to decide it was time to head to startup capital San Francisco as the next city to add to the platform. In perhaps the most memorable anecdote in the book, Evans recounts walking all over San Francisco picking up menus to add to Grubhub.com

In any market business, says Evans, you have to find a way to set up the network. “My answer to this question is [to] cheating,” he says, like how Uber paid drivers to sit idle before getting customers. “I had crazy energy. It’s not scalable. It’s not a very good idea.” But it drove traffic to the website, which helped him convince restaurants to take online orders and attract more customers.

Evans hired someone named Tyler from Craigslist to be the company’s first employee in the area and open restaurants in San Francisco. Meanwhile, Evans and Maloney went fundraising, winning the University of Chicago’s New Venture Challenge and $50,000 in 2006, which gave them the capital to bring Maloney on full time and access to the “Illuminati startup,” Evans wrote.

The pair used this network to find more investors, eventually signing what Evans joked in the book was the ‘worst investment deal ever’ with Origin Ventures, which gave them $1 million for terms. including what is called a “privileged equity investment” (meaning they get a bigger share of a business after it’s sold than in most venture capital deals).

It also came with another caveat: Evans could not be co-CEO, but the documents included the provision that Evans could leave the company if and when it sold, with no earn-out period. “It allows me to work hard without fear of being blocked,” he wrote. The terms were kinda bad, but it was money. And it was time to grow up.

Get off the rails

And the business grew. Now with the capital to buy Google ads and hire employees, Grubhub has expanded to Boston, New York, Philadelphia and Washington DC, eventually entering 14 markets with just $3 million in outside capital. Early in this process, as Evans wrote, he noticed that a “get rich quick” culture was beginning to develop among company employees – with a focus on getting rich from Grubhub. at the expense of restaurants. Evans worked with the team to continue to focus on “improving delivery” and independent restaurants.

But Evans, whose stake in the company was 14% as a result of that initial venture capital deal, also quickly lost the logistical power to determine where the company should go. In the fall of 2010, after years of slow, hard-earned growth, Maloney and Evans began taking meetings with VCs like Sequoia and Benchmark and raised $31 million. “Nothing would ever be the same again,” Evans wrote, and he was right.

The company returned to profitability after using just a third of that capital and started doubling every 10 months, says Evans, creating a big shiny goose egg for investors, who all want one thing: an IPO in stock Exchange. “Greed. Greed happens,” he wrote.

After 2010, Grubhub bought CampusFood, opened a shiny downtown Chicago office, and merged with New York-based competitor Seamless. Evans writes that he fought to cap the fees restaurants paid the company at 17% and ultimately lost that battle. He also unsuccessfully campaigned against adding Taco Bell or Pizza Hut to the platform and charging them less than independent restaurants for top seats.

The company went public in April 2014 after years of preparation. He added his own delivery network in 2015. Evans was pretty much spiritually out of business at that time, he wrote. But he wasn’t proud of how the gig economy had turned, writing in his book that Grubhub had become something he never wanted: a “wildly exploitative” business that shaves restaurants’ already thin margins. and employs millions of contracts. workers who cycle and drive in the United States without benefits or other job protections

He often argued in the book that the best way to retain customers is to make it easier for restaurants to deliver a good product.

“The way to improve the product is to make sure customers get the best choice and the best food the fastest,” he said. Entrepreneur. “The answer to that, basically, is not to make all your drivers be gig economy drivers. You want full-time employees who provide a higher quality experience. That’s blasphemy in the public [market] kingdom. If I was on the Grubhub board and said that, I wouldn’t be on the Grubhub board anymore.”

As for the post-Grubhub transcontinental journey he also recounted in the book, there were times when he lost control of his recumbent bike, rolling down hills, or injuring himself. This reflects the elements of losing control and exhaustion during his Grubhub journey.

He started the business because he hoped to pay off his debts and find a way to fill his belly more easily. Along the way, he rubbed shoulders with (and snubbed his nose, as he detailed in the book) bankers at Goldman Sachs and took an irreverent, almost manic approach to building a business on a shoestring budget before finally losing the battle against costumes. But he hopes, he said in the interview, not to repeat the mistakes he made in his Grubhub days.

And while Evans may have exhausted Grubhub, he hasn’t exhausted entrepreneurship. In 2017, he launched Fixer, an on-demand handyman service that also provides training and focuses on diversity hiring. “Always learning, right?” he says. “I took a business out of my apartment through the IPO, and I feel like I learned more the second time around than the first time.”

Courtesy object