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Today, thanks to the maturation of the web, digital tech, and smartphones now in seemingly every pocket, startups are finding it easier than ever before to build scalable solutions to finally address the many inefficiencies in our food manufacturing, production and distribution systems.
As interest in food tech balloons, one area in particular appears to already be at the tipping point: Online and mobile food delivery. Over the last few days, we’ve hearing about a merger between two of the largest companies in the space. Rumor has it that “arch rivals” GrubHub and Seamless are in talks which could see them join forces as part of a merger. While our sources tell us that the talks are serious, the terms of the merger are not yet clear and, of course, any potential deal could fall through.
Furthermore, it’s not yet clear what kind of synergies would take place, how management of the new entity would be structured or even what the new business will be called. The two companies would not confirm on the record on any of the above. But as far as the name goes, we’re hoping for Grubless. Or Hubless GrubSeam. But they have a nice ring to them, don’t they?
If these rumors are true, the merger comes at a good time for the arch rivals, who have been seeing mounting competition of late from a laundry list of new startups entering the space, including increasingly popular alternatives like Delivery.com, ChowNow, Munchery (meals from local chefs), Campus Special, eat24 or the bigs of Europe, like Food Hero and Just-Eat.
If the online food-ordering and delivery market is roughly where daily deals were three-plus years ago, then the deal essentially creates the Groupon of food delivery. Like the daily deals market, food ordering has traditionally had a fairly low barrier to entry, which helps explain why we seem to see a new startup pop up every week.
Plus, the business model isn’t particularly complicated, making it replicable. That being said, innovation and tech adoption have been slow to come to the food industry, and, at scale, this model (taking a slice of transactions) has the potential to be able to generate a lot of cash.
This is just one part of why the “food tech” business has been so hot lately. Just ask venture capitalists who collectively poured $350 million into food startups over the last year. (Compare that to 2008, when it was less than $50 million.) Plus, when you get right down to it: People need to eat. And, as it turns out, people are pretty busy. Uh, and lazy.
Of course, for those who remember the spectacular failure of online food companies like Webvan, Kozmo and HomeRuns, this whole “tech in your kitchen” and online ordering jibber-jabber probably sounds familiar — and not in a good way. But this time it’s different. Research from Cornell University recently found, for example, that over 40 percent of adults in the U.S. have ordered food online, and 10 percent of restaurant orders now originate online — and these numbers continue to head north. GrubHub and Seamless have built successful businesses on this very idea.
Both GrubHub and Seamless have been around for some time: The New York City-based Seamless was founded in 1999, while the Chicago-based GrubHub got its start in 2004. And for the most part, the two companies have catered to two different markets geographically. While both now have fairly expansive coverage, GrubHub has naturally developed a firm foothold in the Midwest, while Seamless focused its early attention on NYC, before moving into cities like Los Angeles and San Francisco. From that perspective, a merger would make sense, allowing the new, consolidated entity to gain penetration into markets where they lacked a major presence.
Writ large, the companies, while having some fundamental differences, do seem to have a lot of synergies on paper — at least “nominally,” depending on who you ask — likely why they’ve increasingly become rivals over the years. Both are of fairly comparable size, as GrubHub has more than 18,000 restaurant partners across more than 500 cities, while Seamless has over 12,000 restaurants and serves nearly 5,000 businesses and more than 2 million users. As of February, Reuters reported that Seamless was on track to generate more than $100 million in revenue this year as it expands into new cities and focuses more aggressively on mobile.
The company reportedly generated $85 million in revenue last year, growing its consumer business by 60 percent year-over-year and “will soon be processing $1 billion worth of food orders a year,” Seamless CEO Jonathan Zabusky told Reuters at the time. For the majority of its history, the company focused primarily on New York, but launched a major expansion effort last year, bringing its service to 10 new cities. According to the report, Seamless saw its transaction volume quadruple in Los Angeles during 2012, with transactions tripling in San Francisco.
Another interesting point to note: GrubHub was reported to be considering an IPO last fall. The company denied the rumors at the time, and if this merger is true, then they’ve been given the proper perspective. Certainly, it would seem that this wouldn’t take a potential IPO off the table, instead, likely making an opening price that much higher.
The IPO rumors for GrubHub came at a time when the company was reportedly doing about $60 million in revenue (this was in 2012) — a little less than half that of Seamless. Furthermore, Crain’s reported in December that GrubHub’s revenue has been doubling every year and, as the company reported $30 million in revenue in 2011, that revenue estimate would make sense and put the company on the path to crossing $100 million well before the end of this year.
That is all to say that, although the terms of the potential deal are unclear, these are two sizable businesses that are growing relatively fast, so any potential valuation has got to be fairly high. After all: The two companies were fairly comparably capitalized and staffed, with GrubHub growing to over 250 employees and Seamless over 300, while GrubHub raised about $84 million from a mix of venture and growth equity firms (including Benchmark) and Seamless raised $51 million, $50 million of which came from private equity firm Spectrum Equity.
While both companies have made a couple of acquisitions, this would be the second big M&A deal for Seamless, as the company was acquired by food services giant, ARAMARK, in 2006. Five years later, Spectrum bought a minority stake in Seamless from ARAMARK, and about a year later, the food services company spun-off its remaining interest in Seamless to its shareholders. Free from its corporate ownership, Seamless proceeded to go out and buy MenuPages for $15 million, showing up GrubHub, which MenuPages had initially targeted as its acquirer. When GrubHub and MenuPages couldn’t agree to a deal, and it seems that GrubHub was instead in the process of buying Dotmenu/Allmenus, Seamless swooped in — according to BetaBeat.
So, as you can see, the companies have a long history of jostling. While GrubHub had been out acquiring restaurant partners fast and furiously, Seamless stagnated a bit under ARAMARK, but since becoming an independent company (again) and with a new board/investors, the company seems to have been compounding its growth. Together, that growth could be exponentially higher.
Finally, if this deal is in fact a go, it’s worth looking at this quote from GrubHub co-founder and CEO Matt Maloney from back in 2011. In it, he shares his opinion on GrubHub’s top competitor, a little company called Seamless. He told BetaBeat:
I typically don’t talk this much about Seamless because we don’t view them as incredibly strong competition for what we’re doing … Seamless fundamentally is a corporate catering business. They were founded years and years and years ago to do just that. And they’re still best in the business for corporate. They recently got into the consumer and residential pick-up and delivery. And they do it well in New York, but they really have zero business anywhere else. We don’t even consider them competition anywhere other than Manhattan specifically.
So, there you go. A match potentially made in heaven, and one that’s sure to shake up online and mobile food ordering if it happens.
Find Seamless at home here and GrubHub here.
Twitter co-founder Biz Stone’s new and mysterious startup called Jelly still isn’t saying what it’s up to, but it has announced funding. According to details posted to the official company blog this morning, the team has raised a Series A from a notable lineup of investors in a round led by Spark Capital, with additional investment from SV Angel, and a group of angels that includes Square CEO Jack Dorsey;Reid Hoffman; Bono (what!), Evan Williams and Jason Goldman via Obvious; Al Gore; Emmy-winning director Greg Yaitanes; and Afghan entrepreneur Roya Mahboob.
As a part of the funding, Spark General Partner Bijan Sabet now joins Jelly’s board of directors.
The company explains that it chose the angels for their diversity of experience, something that’s important to Jelly’s team as well as to its product, whatever that may be:
“We chose angels like Al Gore, a Partner at KPCB and Chairman and Co-founder of Generation Investment Management, Greg Yaitanes, a Hollywood director, and Roya Mahboob, an entrepreneur doing amazing work for women in Afghanistan partly because they work in divergent fields. Knowledge diversity is something we prize highly and is also something that will be represented in our product.”
The post also revealed that the Jelly product is only in the early prototyping phases right now, which is one reason why the company has yet to reveal product details to the general public.
The additional funding – no amount was provided – will be used for hiring and development, as is par for the course.
Jelly has already been busy on the hiring front as of late however, having recently hired former Twitter engineering manager and Fluther co-founder Ben Finkel as Jelly’s co-founder and CTO, as well as Kevin Thau, the man responsible for Twitter’s new app, Twitter music.
Though details as to what Jelly is up to are scarce, earlier hints seem to point to some sort of “social good” intention with the service, like perhaps offering a way for users to connect to social causes and show off their contributions. Stone recently explained that “People are basically good—when provided a tool that helps them do good in the world, they prove it.”
Philanthropy and volunteering don’t have many central homes on today’s web, as TechCrunch previously noted in a discussion about Jelly’s possible plans – save for something like Causes, which works on top of Facebook’s open graph, having never taken off as a standalone service of its own. In fact, social media-based activism has been under fire for years as being a poor substitute for real-world action. Liking and sharing and posting and re-tweeting does not necessarily have the desired impact on effecting change, though it may raise awareness.
Today’s announcement from Jelly still gives no hints as to how it plans to help people “do good in the world,” only noting that the proliferation of mobile devices is a big factor in its plans. “As mobile devices have taken an increasingly central role in our lives, humanity has grown more connected than ever—herein lies massive opportunity.”
Wearable computing looks more and more like the inevitable future, so today Stained Glass Labs launches to help entrepreneurs develop apps and businesses around Google Glass and similar devices. The incubator and accelerator will offer mentorship and office space and, one day, maybe funding.
Stained Glass Labs is spearheaded by Redg Snodgrass, who formerly supported innovation and developers at Alcatel-Lucent, and worked at startups Skout and Taploid. The group aims to give entrepreneurs “the tools, the technology, the connections, and the support to take [wearable computing] products to a mainstream market.” Those hoping to join Stained Glass Labs can apply now. It’s looking for both idea-stage companies to incubate, and funded startup with a product in the works to accelerate.
To aid those admitted, Stained Glass Labs will provide office space plus inroads to PR. It has also assembled a team of mentors “who have been successful entrepreneurs from all sides of the industry to be a sounding board and helping hand.” The mentors include Charles Hudson of SoftTech VC, Jacob Mullins of Exitround (and formerly Shasta Ventures), Greg Gopman of AngelHack, Ashwin Navin of BitTorrent, Julie Mossler of Waze, and Andy McLoughlin of Huddle.
Though the organization has no equity investment component, so those admitted don’t have to give up a stake, Stained Glass Labs wouldn’t legally be able to talk about it if they were raising a fund. One interesting quirk is that the incubator has a preference for second-time entrepreneurs rather than rookies.
Stained Glass Labs will operate in a similar space as the better-established powerhouse partnership Glass Collective, which will see Andreessen Horowitz, Kleiner Perkins, and Google Ventures sharing wearable computing startup funding deal flow.
Right now, Stained Glass Labs seems a bit half-baked, but it has a lot of potential. Wearable computing will spawn a huge ecosystem of startups. If Snodgrass and his incubator can forge relationships with these companies early on, they could gain power as the startups grow alongside the wearable wave.
SeedAsia, an equity crowd-funding site based in China, has just launched. The company is offering stakes in selected early-stage startups to people.
“It’s kind of a hybrid between Kickstarter and private investment,” said co-founder Tom Russell. The startups to be listed would have ideally gone through some some sort of incubation program and would have shown promise. They can apply offer between $50,000 and $1.5 million in equity through SeedAsia’s platform.
SeedAsia takes a 5 percent “administration fee” and another 5 percent “distribution fee” from the investor.
Potential investors need to apply and be screened, and SeedAsia has set the minimum investment commitment at $2,000 per member. “It costs about $20,000 to $30,000 at minimum to be an angel investor, so this lowers the entry barrier for people,” he said.
SeedAsia is the first equity crowd-funding site to launch in the region, although the equity funding trend has been taking off in the US, where there are apparently over 200 such sites. One of them, FundersClub, recently cleared US regulators, paving the way for more such sites to flourish.
Hong Kong-headquartered Decision Fuel is the first fund to be listed on SeedAsia. The company offers a mobile platform to deliver short consumer surveys. It had $1.25 million in seed funding in 2011, according to AngelList, and counts clients such as P&G, Nike, Colgate. It has already gathered more than 14 million survey responses for its clients, it said.
Russell said the crowd-funding scene is a lot less developed in Asia than it is in the West. The culture is such that potential investors are still more keen on property than in an online startup, he said. Cultural differences also persist. “The local Chinese developers don’t like being transparent with their ideas and sharing, while Westerners don’t understand why the Chinese aren’t as transparent. The truth is, you have big players like Tencent that can copy you easily, which is why people aren’t as open with sharing here.”
SeedAsia has taken on some advisors to raise investor confidence in its portfolio clients. Inporia and Hive7 founder, Max Skibinsky, is one, and Oscar Ramos has been brought in too. Ramos founded Chinese seed fund, DaD Asia.
Walmart, via its Silicon Valley innovation lab @WalmartLabs, today announced the acquisition of two startups: cloud computing newcomer OneOps and the software development shop Tasty Labs, from Delicious founder Joshua Schachter. Tasty Labs offered two services Jig.com and Human.io – both domains which are now redirecting to Walmart’s acquisition announcement, along with that of their corporate parent.
Walmart declined to disclose deal terms.
OneOps developed a Platform-as-a-Service (PaaS) capability that Walmart explains will enable it to “significantly accelerate” its PaaS and Private Cloud Infrastructure-as-a-Service (IaaS) strategies. The company offered developer tools built from the ground up for those who host their applications on cloud services like Amazon Web Services, for example, as well as Rackspace and HP Cloud. Developers could publish to any cloud and seamlessly port their apps elsewhere as needed, eliminating lock-in.
The company offered a library of predefined building blocks to quickly bootstrap an application, which could be visually assembled in its interface. A variety of categories such as content management (ex. Drupal, WordPress), e-commerce (ex. Magento), enterprise portals (ex. Liferay) and more were available.
OneOps was named one of the 12 Hot Cloud Computing Companies Worth Watching by Network World, and was a finalist at the GigaOM LaunchPad Competition.
“Walmart is looking to create a best-in-class global e-commerce platform to power ‘anytime, anywhere’ shopping for our customers. The Platform team has been working tirelessly to build the tools to help our developers deliver big site changes faster,” explains Walmart Public Relations Director Ravi Jariwala in a statement. “We are innovating on a very large scale, and OneOps brings us tools that will allow us to move even faster toward a global platform.”
Meanwhile, Tasty Labs was founded in 2010 by a team that includes ex-Mozillian Nick Nguyen, HousingMaps creator Paul Rademacher, and Joshua Schachter, who was best known for founding of of “web 2.0″‘s finest: the social bookmarking service Delicious. The company had raised $3 million in Series A funding from Union Square Ventures, Andreessen Horowitz, and other unnamed angel investors.
The startup launched its first product Jig.com in 2011, which was described as a “marketplace for needs” — meaning users would post “I need…” and others would respond to help them. The following year, it debuted Human.io, a micro-task service operating in the same general space. This application targeted businesses with small requests – like wanting to know how many people were in line at a store, for example, or getting people to take short surveys on their phone.
Schachter once described Human.io as a way to “build tiny little microapps and distribute them to a mobile client.” He said it was a combination of things the team loved: “Mobile, Mechanical Turk, MapReduce, and Twilio.”
Going forward, Tasty Labs staff will join Walmart’s Product and Mobile teams, Walmart says, in an effort to build out the company’s e-commerce platform.
Walmart Labs is known for snapping up early-stage startups to test new ideas in e-commerce some of which eventually get folded into the company’s e-commerce site and other online operations. In the past, it has acquired startups like Kosmix, OneRiot, Grabble, Small Society and others. Kosmix’s Social Genome technology was used in an earlier @WalmartLabs creation known as “Shopycat,” a social-gifting platform that debuted just before the 2011 holiday season, and Kosmix later formed the basis of a new search engine named “Polaris,” which now powers Walmart.com.
