Since launching in 2010, the online food ordering service EatStreet has seen significant growth in revenue, users, and participating restaurants, all while sticking to its small-town roots.
Founded by three students in a college town—Madison, WI, where the startup continues to operate—EatStreet now serves 15,000 restaurants across 250 markets, many of them mid-size cities with large student populations.
“We go to what we call ‘tier-two’ markets,” meaning those with populations between 50,000 and 800,000, says co-founder and CEO Matt Howard. “Eventually, we’ll get to all tier-two markets, but we start with ones that have large universities.”
The company’s reach will soon grow, thanks to a big chunk of cash EatStreet just scooped up.
On Wednesday, the company announced it raised $15 million in Series C financing. Madison-based 4490 Ventures and Lumia Capital, based in San Francisco, co-led the round. Among the other groups who invested were GCI Capital, Math Venture Partners, the State of Wisconsin Investment Board, Cornerstone Angels, Gener8tor, and Independence Equity.
Howard says EatStreet, which has now raised nearly $30 million in total, will use the new money to move into more cities and expand its footprint in those where the service is already available. The latest financing will also support hiring efforts; the company plans to add 30 people to its support team in the next two months, according to a press release. Howard says EatStreet currently has about 110 employees. That’s nearly twice the headcount at this time last year, according to the release.
Howard declined to share the company’s most recent valuation. He says it has millions of users and revenue has “more than tripled” each year, but he would not give specific figures.
The $70 billion market for takeout and delivery food is crowded and competitive. Howard says in some of the cities it serves, EatStreet competes with Chicago-based GrubHub (NYSE: [[ticker:GRUB]]) and OrderUp, which was acquired by Chicago-based Groupon (NASDAQ: [[ticker:GRPN]]) in July.
However, EatStreet’s mid-market niche sets it apart, Howard argues. He says GrubHub is “very much still focused” on big cities like New York, Los Angeles, and Chicago. While EatStreet has a presence in all three of those places, Howard says large urban centers are not the company’s bread and butter.
Another distinguishing attribute of EatStreet—which is available on iOS and Android apps, in addition to its website—is that it concentrates on ordering and leaves delivery to others. That was also the case for GrubHub until February, when it announced plans to start its own delivery service.
Howard says some of the restaurants that have signed up for EatStreet have employees deliver orders, while others outsource it to third parties like Austin, TX-based Mr. Delivery, which operates in 22 U.S. cities. EatStreet is unlikely to move into delivery, Howard says, but he wouldn’t rule out the possibility.
“Having to worry about staffing drivers and making sure they’re staying busy enough with orders, it’s just a whole different business model than online ordering,” he says. “But you never know. I think if you had asked GrubHub five years ago if they were going to be doing delivery, they would’ve said no. I want to keep an open mind.”
Besides GrubHub, OrderUp, and a slew of other ordering services, tech giants such as Amazon (NASDAQ: [[ticker:AMZN]]), Uber, and Google are making forays into local delivery. The scope of those services is broader than just food, however, and Howard says they’re also focusing on larger cities.
The food ordering industry has witnessed numerous exits in recent years. In February, the review website Yelp (NYSE: [[ticker:YELP]]) bought Eat24 for $134 million. Last year, GrubHub went public and mobile payments service Square (NYSE: [[ticker:SQ]]) acquired Caviar. It’s no secret that EatStreet’s leaders are eyeing an exit, too, which Howard said could come in the form of a sale or an IPO.
“The goal of any company that’s raising [this] amount of financing is to eventually have an exit for our shareholders,” he says.
