GrubHub’s Journey from Pizza Craving to Wall Street

NFL program today. Just speaking with a venture capitalist who raise more than one million dollars to deploy and now we got you who has some real experience, uh, founding a company, which we're gonna talk about in just a second. How did you turn a pizza craving into a hobby and then a business? Yeah, you know, it started out like you said, it was a craving and I ended up quitting my job just after the first restaurant was sold, and I really had to sign up restaurants so that

I could eat because I wasn't making any income. And so it very quickly developed from an online or from a delivery guide to an online ordering platform. Uh. And I was trying to pay off my school debt and I overshot. It got a lot bigger than that. The debt got a lot bigger. That is everything, everything got bigger, Mike, No, the no, I'm sorry, I overshot. The business got a

lot bigger. Uh. And then I was able to pay off my student loans obviously, and then ran the company up through the I p O UM And there was a lot of twist and turns as it happened. I mean it was it's the nature of innovation. Let's get into the twists and turns the time before the I p O tell us about uh, just getting from start A to that ultimate point B. Yeah, you know it was.

It was not a straight line from A to B. And that's the nature of startups, you know, every time that you you innovate something and you create something new. So at start, it was just finding all the restaurants that delivered to you. And then it became online ordering, and every time we did that, there was all sorts of other companies that copied us, and so we the only true competitive differentiator is to keep innovating, to sort

of stay ahead of that curve. And so ultimately we've really doubled down on customer service, and by the time of the I p O, we had eighty thousand restaurants on the platform, and uh, and it was it was homming along. Mike. You're no longer involved in grubhub. You

started another business since then. But I want to talk about the food delivery food delivery as a business because with the likes of Uber Eat, with the lights likes of you know, so many platforms that restaurants can choose from right now, um, and also the way how much it cost restaurants to actually make food. I'm wondering looking back about the business if if there is a chance for this type of thing to become profitable on a wide scale. Yeah, I think so. Grohub was profitable before

every financing we took. We started it without investment money and bootstrapped. It was profitable at the I p O and for eight quarters before and after the I p O. And that was at scale. And so I absolutely think that it's possible to run these companies at at problem. Why isn't that happening now? Really? Two reasons. One is there's certainly there's there has been pressure from public markets

for companies to show growth as opposed to profitability. And so when everybody's banging that banging that drum as loudly as possible, eventually companies listen and uh. And so there's there's certainly no motivation to drive for profitability within within pull market markets for startups, they don't get a market cap as a result of being profitable. But maybe more importantly, as competition has entered the space, the differentiation between the

different entities has really decreased. And so because of that, um, the companies have to spend a lot more on marketing and re marketing back to customers that they already had instead of enjoying loyalty and frequency um like you do when you really have a differentiated product. So well, I'm just gonna say, taking an outside view of from where you're sitting today, and you look at the different business models that are out there when it comes to delivery,

which one is the best in your opinion? I mean, is it the ones that take a portion of the order price and in charge the restaurants? Is it ones that uh have an additional fee for the person who orders it, like that delivery fee that goes on there, Like we see with with some of the platforms now,

which one is. I think that the models as they exist right now are not all that dissimilar from each other, and I think the one that really is going to stand out is going to be the one that gets customers diners to repeat purchase frequently because it's a better product.

And that means that the product that actually those companies delivered to the drivers and to the restaurants has to be the best, and that drives differentiation, and then you're not wasting as much money on marketing and those things become profitable. I don't think that charging like crazy to the customer or to the restaurant is the solution. It's

about differentiation. Yeah, it's incredible because you were so early in on this business and it's it's changed quite a bit too, and investors have certainly treated it differently in the past couple of years. We're talking with Mike Evans. He's the founder of grub Hub. He's got a new book out. It's a memoir. It's called Hungry, a Startup Journey. We talked a lot about the business models of the

different delivery services that exist out there. Now. When we come back, we're gonna talk more about the journey of getting Grubhub from a startup to an I p O that valued it at about two billion dollars. I want to get right back to Mike Evans. He's the founder of grub hub and also the author of a new memoir, Angry, a startup Journey. Mike, Um, I want to go back to the early days of grub hub and the idea of toiling away for eighty hour weeks and the startup

story there. Um, when you look around the landscape today and you see so many the idea that like, so many people are interested in doing startups unless it's you know, it's it's fewer than there were. I don't want to say a fewer because I don't know the actual data here. But it's not getting as much fun. They're not getting as much funding as they did last year because of the way that the economy has been this year and

the way that we've seen ventures spend come down. But I'm wondering when you look at the landscape this year, like what you're optimistic about, what you're excited about in terms of startups. Yeah, you know, there's this narrative that people have this go to go and get a business plan and they um. Then they get this friends and family money, and then venture capitalists throw millions of dollars at them, and then suddenly their idea is a real company.

And that is the extraordinarily like small percentage of businesses that are started in the United States. Um grub hub was started. We bootstrapped. We we had no investment for the first four years, and we got all the way up to just just about half a million dollars in revenue before we took investment. And so, you know, I always suggest to other entrepreneurs just start like you don't

need a ton of investment. You can. You can learn almost every skill that you need to know to do is start up and do it yourself, which does take a lot of work. It does take. It is a bit of a grind, um, but it's a lot more uh, it's a lot more controllable output than sort of hoping that a VC will invest in you. And so I think there's still plenty of UM start up activity, entrepreneurial activity happening in the very early seed stages right now

that doesn't necessarily have to depend on venture capital investment. Mike, you touch on something I actually think about a lot because obviously on Bloomberg Radio we off to a lot of the successful founders, the successful entrepreneurs. We don't talk to a lot of people, you know, who have tried to start something new, to create a business and it

ultimately didn't work out. And I'm curious. I mean, in those four years, for example, where you didn't have necessarily investor funding, I mean, did you know that grub hub would be a success? Talk us through some of the self reflection that you went on. Yeah, I was pretty clear with my goals. Early on, I wanted to make it a puny to pay up my school det and then later on I wanted to create a business that really leveled the playing field for independent restaurants and its like.

As I was going through that, I tried things that didn't work right, I tried things that did work, and I tried things that it didn't. And because of that, because it's the nature of innovation is experimental, you have to be willing to quit the things that aren't working. You have to put the work in on the things

that might work and that are working. But it's really important to not get a blind spot and just get stuck in beating your head against something where it's it's just not working out, and and that like that was the nature of the thing that I really learned in those first few years. Um and in venture capital can hide that if you have enough cash to not make tough choices, then you don't you don't necessarily have as much motivation to stop the things that aren't working well.

You write in towards the end of the book about how in the later years when you were with the company, how you engineered yourself out of a job knowing that you'd be leaving at the I p O. What happened then? So uh, I then rode off into the sunset. I took I took a bike ride, a bicycle ride from Virginia to Oregon. I literally rode off into the sunset to sort of reflect on what I was gonna do and then think about what came next. And ultimately what came next is my my new business, which is an

on demand handy person service called fixer dot com. And it's a lot like any of those other businesses you see thumb tack, Range's List or home Advisor, with the very significant difference that we employ the workers because we don't think there are enough skilled workers around to go around. That's very different. It's very different. That's not gig work, No, it's it's about as far away from big work as you get. It's a it's a very uh. It's it's

a high income career with economic mobility. But it creates great experiences for customers in the home. And so ultimately, since we're providing great experience, we can charge a premium for it. Uh. And we can pair pair workers a great living wage. Um. And so it's both creating impacts,

but it's also a profit. It's a profitable business. Well, let's talk about scaling that, Mike, because and and maybe this is maybe maybe you're onto something with you know, because gig work is so hard to to scale and actually make profitable, as we've learned. When I'm talking real profits here, not you know, adjusted eve profits. Um. When we talk about uber and left and other services that employ gig workers, how much do you have to pay uh the workers you employ that end up being handy people.

You know. What blows my mind about this debate is that everybody says that it's hard to scale a W two workforce, and for like what five six thousand years of human history. It's like ten of it that we had gig work, and suddenly everybody's well, that's the only way you can do it. Uh. Yes, there are plenty of businesses have ten fifty employees and are doing just

fine for both growth and margin. And so we think that we can do that by by virtue of the fact that we're hiring people who are who we're in retail or work at a grocery store or something like that, and then we're giving them a career path. The economic mobility is so so fast that um that people people sign up for opportunity. You don't have to outpay those other roles. You just have to give people the training so that they can ladder themselves up into uh those

higher income roles. I didn't hear a number though, Mike, eighteen fifteen an hour. Uh No, we paid thirty. We paid thirty an hour. So much, especially when you think about it from the context of gig work. Yeah, with benefits, by the way, and and and to be clear, it's still a great, great experience in the home and you and and it's not like it's crazy expensive for the for the homeowner, especially when you consider it. You know, we clean up after ourselves. The quality of the work

is good. We show up and we say we're gonna work. Show up. You know, when we're all working from home, it's so hard when somebody doesn't actually show up at the right time, and then you have to leave it like a zoom call to like go, uh, you know, go work with Go work with somebody who showed up at the wrong time. And so ultimately we're creating such

a good experience in the home um that the economics work. Yeah, I've definitely had a few zoom calls over the past three years where I've had to evacuate to a bathroom or something because there's someone in my apartment. But in any case, I want to go back to the current landscape. I want to talk about the I P. O market because obviously that has just fallen off a cliff. Maybe there's a lot of companies in the pipeline, but they're not leaving the pipeline. What would you say to a

company that's considering going public right now? Would you ride it out or do you think they should just you know, come out of the pipeline, let's go. I would say that financing finance doesn't drive strategy, and timing drive strategy even less. If you're building a company that has great fundamentals, that's growing and isn't burning cash like crazy, it doesn't matter if there's a slow spot or a slow time in the middle of the I p O market, You

just ride it out. If you're building a company that's trying to get rich quick and just trying to like fleece investors by being high growth, but can never be profitable, then the timing really hurts you. And so I would just suggest build a company that has good fundamentals. What are some of those companies with good fundamentals that you see out there? Um? Oh man, I'm stumped. Well, Fixer

in the company I'm running right now. Well that's okay, So we only have a minute left, or actually thirty seconds left, but talk about scale there, I mean, how how where are you available with Fixer and what's your growth plan? Just thirty seconds left. Yeah, we're in Chicago, Phoenix, Denver, Dallas, and Seattle. We planned to launch anywhere from two to

ten more cities next year. New York on that list. Yeah, hopefully the regulatory situation in New York makes it's a big investment to do it, and so when we do, we want to do it right. All right, Well, I mean there's no there's a demand for that, at least in my apartment building. Hey Mike, it's really great to have you. Got to get you back on the program. Really appreciate you taking the time this afternoon and joining us on a Bloomberg Business Week. Mike Evans is the

founder of grub Hub. He's also got Fixer as well. He joined us this afternoon via zoom from Chicago. He's got a brand new book out. It's a memoir about his time building grub Hub. It's called Henry A Startup Journey. I really appreciate you taking the time, Mike,