WEBVTT - GrubHub’s Journey from Pizza Craving to Wall Street

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<v Speaker 1>You're listening to Bloomberg Business Week with Carol Messer and

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<v Speaker 1>Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio. Very pleased

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<v Speaker 1>right now to be joined by Mike Evans. He's the

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<v Speaker 1>founder of grub Hub. He's got a brand new book out.

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<v Speaker 1>It's a memoir. It's called Hungry, a Startup Journey. Mike.

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<v Speaker 1>Good to have you with us. How are you? I'm great?

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<v Speaker 1>How are you? We're doing well? Thanks. Really like to

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<v Speaker 1>go with the startup theme that we have at the

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<v Speaker 1>NFL program today. Just speaking with a venture capitalist who

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<v Speaker 1>raise more than one million dollars to deploy and now

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<v Speaker 1>we got you who has some real experience, uh, founding

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<v Speaker 1>a company, which we're gonna talk about in just a second.

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<v Speaker 1>How did you turn a pizza craving into a hobby

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<v Speaker 1>and then a business? Yeah, you know, it started out

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<v Speaker 1>like you said, it was a craving and I ended

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<v Speaker 1>up quitting my job just after the first restaurant was sold,

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<v Speaker 1>and I really had to sign up restaurants so that

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<v Speaker 1>I could eat because I wasn't making any income. And

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<v Speaker 1>so it very quickly developed from an online or from

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<v Speaker 1>a delivery guide to an online ordering platform. Uh. And

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<v Speaker 1>I was trying to pay off my school debt and

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<v Speaker 1>I overshot. It got a lot bigger than that. The

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<v Speaker 1>debt got a lot bigger. That is everything, everything got bigger, Mike, No,

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<v Speaker 1>the no, I'm sorry, I overshot. The business got a

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<v Speaker 1>lot bigger. Uh. And then I was able to pay

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<v Speaker 1>off my student loans obviously, and then ran the company

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<v Speaker 1>up through the I p O UM And there was

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<v Speaker 1>a lot of twist and turns as it happened. I

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<v Speaker 1>mean it was it's the nature of innovation. Let's get

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<v Speaker 1>into the twists and turns the time before the I

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<v Speaker 1>p O tell us about uh, just getting from start

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<v Speaker 1>A to that ultimate point B. Yeah, you know it was.

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<v Speaker 1>It was not a straight line from A to B.

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<v Speaker 1>And that's the nature of startups, you know, every time

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<v Speaker 1>that you you innovate something and you create something new.

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<v Speaker 1>So at start, it was just finding all the restaurants

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<v Speaker 1>that delivered to you. And then it became online ordering,

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<v Speaker 1>and every time we did that, there was all sorts

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<v Speaker 1>of other companies that copied us, and so we the

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<v Speaker 1>only true competitive differentiator is to keep innovating, to sort

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<v Speaker 1>of stay ahead of that curve. And so ultimately we've

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<v Speaker 1>really doubled down on customer service, and by the time

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<v Speaker 1>of the I p O, we had eighty thousand restaurants

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<v Speaker 1>on the platform, and uh, and it was it was

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<v Speaker 1>homming along. Mike. You're no longer involved in grubhub. You

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<v Speaker 1>started another business since then. But I want to talk

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<v Speaker 1>about the food delivery food delivery as a business because

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<v Speaker 1>with the likes of Uber Eat, with the lights likes

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<v Speaker 1>of you know, so many platforms that restaurants can choose

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<v Speaker 1>from right now, um, and also the way how much

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<v Speaker 1>it cost restaurants to actually make food. I'm wondering looking

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<v Speaker 1>back about the business if if there is a chance

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<v Speaker 1>for this type of thing to become profitable on a

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<v Speaker 1>wide scale. Yeah, I think so. Grohub was profitable before

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<v Speaker 1>every financing we took. We started it without investment money

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<v Speaker 1>and bootstrapped. It was profitable at the I p O

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<v Speaker 1>and for eight quarters before and after the I p O.

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<v Speaker 1>And that was at scale. And so I absolutely think

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<v Speaker 1>that it's possible to run these companies at at problem.

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<v Speaker 1>Why isn't that happening now? Really? Two reasons. One is

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<v Speaker 1>there's certainly there's there has been pressure from public markets

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<v Speaker 1>for companies to show growth as opposed to profitability. And

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<v Speaker 1>so when everybody's banging that banging that drum as loudly

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<v Speaker 1>as possible, eventually companies listen and uh. And so there's

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<v Speaker 1>there's certainly no motivation to drive for profitability within within

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<v Speaker 1>pull market markets for startups, they don't get a market

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<v Speaker 1>cap as a result of being profitable. But maybe more importantly,

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<v Speaker 1>as competition has entered the space, the differentiation between the

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<v Speaker 1>different entities has really decreased. And so because of that, um,

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<v Speaker 1>the companies have to spend a lot more on marketing

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<v Speaker 1>and re marketing back to customers that they already had

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<v Speaker 1>instead of enjoying loyalty and frequency um like you do

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<v Speaker 1>when you really have a differentiated product. So well, I'm

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<v Speaker 1>just gonna say, taking an outside view of from where

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<v Speaker 1>you're sitting today, and you look at the different business

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<v Speaker 1>models that are out there when it comes to delivery,

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<v Speaker 1>which one is the best in your opinion? I mean,

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<v Speaker 1>is it the ones that take a portion of the

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<v Speaker 1>order price and in charge the restaurants? Is it ones

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<v Speaker 1>that uh have an additional fee for the person who

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<v Speaker 1>orders it, like that delivery fee that goes on there,

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<v Speaker 1>Like we see with with some of the platforms now,

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<v Speaker 1>which one is. I think that the models as they

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<v Speaker 1>exist right now are not all that dissimilar from each other,

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<v Speaker 1>and I think the one that really is going to

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<v Speaker 1>stand out is going to be the one that gets

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<v Speaker 1>customers diners to repeat purchase frequently because it's a better product.

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<v Speaker 1>And that means that the product that actually those companies

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<v Speaker 1>delivered to the drivers and to the restaurants has to

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<v Speaker 1>be the best, and that drives differentiation, and then you're

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<v Speaker 1>not wasting as much money on marketing and those things

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<v Speaker 1>become profitable. I don't think that charging like crazy to

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<v Speaker 1>the customer or to the restaurant is the solution. It's

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<v Speaker 1>about differentiation. Yeah, it's incredible because you were so early

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<v Speaker 1>in on this business and it's it's changed quite a

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<v Speaker 1>bit too, and investors have certainly treated it differently in

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<v Speaker 1>the past couple of years. We're talking with Mike Evans.

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<v Speaker 1>He's the founder of grub Hub. He's got a new

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<v Speaker 1>book out. It's a memoir. It's called Hungry, a Startup Journey.

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<v Speaker 1>We talked a lot about the business models of the

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<v Speaker 1>different delivery services that exist out there. Now. When we

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<v Speaker 1>come back, we're gonna talk more about the journey of

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<v Speaker 1>getting Grubhub from a startup to an I p O

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<v Speaker 1>that valued it at about two billion dollars. I want

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<v Speaker 1>to get right back to Mike Evans. He's the founder

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<v Speaker 1>of grub hub and also the author of a new memoir, Angry,

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<v Speaker 1>a startup Journey. Mike, Um, I want to go back

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<v Speaker 1>to the early days of grub hub and the idea

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<v Speaker 1>of toiling away for eighty hour weeks and the startup

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<v Speaker 1>story there. Um, when you look around the landscape today

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<v Speaker 1>and you see so many the idea that like, so

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<v Speaker 1>many people are interested in doing startups unless it's you know,

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<v Speaker 1>it's it's fewer than there were. I don't want to

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<v Speaker 1>say a fewer because I don't know the actual data here.

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<v Speaker 1>But it's not getting as much fun. They're not getting

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<v Speaker 1>as much funding as they did last year because of

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<v Speaker 1>the way that the economy has been this year and

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<v Speaker 1>the way that we've seen ventures spend come down. But

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<v Speaker 1>I'm wondering when you look at the landscape this year,

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<v Speaker 1>like what you're optimistic about, what you're excited about in

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<v Speaker 1>terms of startups. Yeah, you know, there's this narrative that

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<v Speaker 1>people have this go to go and get a business

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<v Speaker 1>plan and they um. Then they get this friends and

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<v Speaker 1>family money, and then venture capitalists throw millions of dollars

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<v Speaker 1>at them, and then suddenly their idea is a real company.

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<v Speaker 1>And that is the extraordinarily like small percentage of businesses

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<v Speaker 1>that are started in the United States. Um grub hub

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<v Speaker 1>was started. We bootstrapped. We we had no investment for

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<v Speaker 1>the first four years, and we got all the way

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<v Speaker 1>up to just just about half a million dollars in

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<v Speaker 1>revenue before we took investment. And so, you know, I

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<v Speaker 1>always suggest to other entrepreneurs just start like you don't

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<v Speaker 1>need a ton of investment. You can. You can learn

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<v Speaker 1>almost every skill that you need to know to do

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<v Speaker 1>is start up and do it yourself, which does take

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<v Speaker 1>a lot of work. It does take. It is a

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<v Speaker 1>bit of a grind, um, but it's a lot more uh,

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<v Speaker 1>it's a lot more controllable output than sort of hoping

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<v Speaker 1>that a VC will invest in you. And so I

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<v Speaker 1>think there's still plenty of UM start up activity, entrepreneurial

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<v Speaker 1>activity happening in the very early seed stages right now

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<v Speaker 1>that doesn't necessarily have to depend on venture capital investment. Mike,

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<v Speaker 1>you touch on something I actually think about a lot

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<v Speaker 1>because obviously on Bloomberg Radio we off to a lot

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<v Speaker 1>of the successful founders, the successful entrepreneurs. We don't talk

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<v Speaker 1>to a lot of people, you know, who have tried

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<v Speaker 1>to start something new, to create a business and it

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<v Speaker 1>ultimately didn't work out. And I'm curious. I mean, in

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<v Speaker 1>those four years, for example, where you didn't have necessarily

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<v Speaker 1>investor funding, I mean, did you know that grub hub

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<v Speaker 1>would be a success? Talk us through some of the

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<v Speaker 1>self reflection that you went on. Yeah, I was pretty

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<v Speaker 1>clear with my goals. Early on, I wanted to make

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<v Speaker 1>it a puny to pay up my school det and

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<v Speaker 1>then later on I wanted to create a business that

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<v Speaker 1>really leveled the playing field for independent restaurants and its like.

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<v Speaker 1>As I was going through that, I tried things that

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<v Speaker 1>didn't work right, I tried things that did work, and

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<v Speaker 1>I tried things that it didn't. And because of that,

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<v Speaker 1>because it's the nature of innovation is experimental, you have

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<v Speaker 1>to be willing to quit the things that aren't working.

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<v Speaker 1>You have to put the work in on the things

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<v Speaker 1>that might work and that are working. But it's really

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<v Speaker 1>important to not get a blind spot and just get

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<v Speaker 1>stuck in beating your head against something where it's it's

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<v Speaker 1>just not working out, and and that like that was

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<v Speaker 1>the nature of the thing that I really learned in

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<v Speaker 1>those first few years. Um and in venture capital can

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<v Speaker 1>hide that if you have enough cash to not make

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<v Speaker 1>tough choices, then you don't you don't necessarily have as

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<v Speaker 1>much motivation to stop the things that aren't working well.

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<v Speaker 1>You write in towards the end of the book about

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<v Speaker 1>how in the later years when you were with the company,

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<v Speaker 1>how you engineered yourself out of a job knowing that

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<v Speaker 1>you'd be leaving at the I p O. What happened then?

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<v Speaker 1>So uh, I then rode off into the sunset. I

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<v Speaker 1>took I took a bike ride, a bicycle ride from

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<v Speaker 1>Virginia to Oregon. I literally rode off into the sunset

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<v Speaker 1>to sort of reflect on what I was gonna do

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<v Speaker 1>and then think about what came next. And ultimately what

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<v Speaker 1>came next is my my new business, which is an

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<v Speaker 1>on demand handy person service called fixer dot com. And

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<v Speaker 1>it's a lot like any of those other businesses you

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<v Speaker 1>see thumb tack, Range's List or home Advisor, with the

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<v Speaker 1>very significant difference that we employ the workers because we

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<v Speaker 1>don't think there are enough skilled workers around to go around.

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<v Speaker 1>That's very different. It's very different. That's not gig work, No,

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<v Speaker 1>it's it's about as far away from big work as

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<v Speaker 1>you get. It's a it's a very uh. It's it's

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<v Speaker 1>a high income career with economic mobility. But it creates

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<v Speaker 1>great experiences for customers in the home. And so ultimately,

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<v Speaker 1>since we're providing great experience, we can charge a premium

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<v Speaker 1>for it. Uh. And we can pair pair workers a

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<v Speaker 1>great living wage. Um. And so it's both creating impacts,

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<v Speaker 1>but it's also a profit. It's a profitable business. Well,

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<v Speaker 1>let's talk about scaling that, Mike, because and and maybe

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<v Speaker 1>this is maybe maybe you're onto something with you know,

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<v Speaker 1>because gig work is so hard to to scale and

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<v Speaker 1>actually make profitable, as we've learned. When I'm talking real

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<v Speaker 1>profits here, not you know, adjusted eve profits. Um. When

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<v Speaker 1>we talk about uber and left and other services that

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<v Speaker 1>employ gig workers, how much do you have to pay

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<v Speaker 1>uh the workers you employ that end up being handy people.

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<v Speaker 1>You know. What blows my mind about this debate is

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<v Speaker 1>that everybody says that it's hard to scale a W

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<v Speaker 1>two workforce, and for like what five six thousand years

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<v Speaker 1>of human history. It's like ten of it that we

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<v Speaker 1>had gig work, and suddenly everybody's well, that's the only

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<v Speaker 1>way you can do it. Uh. Yes, there are plenty

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<v Speaker 1>of businesses have ten fifty employees and are doing just

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<v Speaker 1>fine for both growth and margin. And so we think

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<v Speaker 1>that we can do that by by virtue of the

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<v Speaker 1>fact that we're hiring people who are who we're in

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<v Speaker 1>retail or work at a grocery store or something like that,

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<v Speaker 1>and then we're giving them a career path. The economic

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<v Speaker 1>mobility is so so fast that um that people people

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<v Speaker 1>sign up for opportunity. You don't have to outpay those

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<v Speaker 1>other roles. You just have to give people the training

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<v Speaker 1>so that they can ladder themselves up into uh those

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<v Speaker 1>higher income roles. I didn't hear a number though, Mike,

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<v Speaker 1>eighteen fifteen an hour. Uh No, we paid thirty. We

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<v Speaker 1>paid thirty an hour. So much, especially when you think

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<v Speaker 1>about it from the context of gig work. Yeah, with benefits,

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<v Speaker 1>by the way, and and and to be clear, it's

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<v Speaker 1>still a great, great experience in the home and you

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<v Speaker 1>and and it's not like it's crazy expensive for the

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<v Speaker 1>for the homeowner, especially when you consider it. You know,

0:11:07.040 --> 0:11:08.720
<v Speaker 1>we clean up after ourselves. The quality of the work

0:11:08.800 --> 0:11:10.560
<v Speaker 1>is good. We show up and we say we're gonna work.

0:11:10.679 --> 0:11:12.840
<v Speaker 1>Show up. You know, when we're all working from home,

0:11:13.280 --> 0:11:15.760
<v Speaker 1>it's so hard when somebody doesn't actually show up at

0:11:15.760 --> 0:11:16.920
<v Speaker 1>the right time, and then you have to leave it

0:11:16.960 --> 0:11:19.200
<v Speaker 1>like a zoom call to like go, uh, you know,

0:11:19.280 --> 0:11:22.040
<v Speaker 1>go work with Go work with somebody who showed up

0:11:22.040 --> 0:11:24.240
<v Speaker 1>at the wrong time. And so ultimately we're creating such

0:11:24.280 --> 0:11:27.680
<v Speaker 1>a good experience in the home um that the economics work. Yeah,

0:11:27.800 --> 0:11:30.439
<v Speaker 1>I've definitely had a few zoom calls over the past

0:11:30.440 --> 0:11:33.080
<v Speaker 1>three years where I've had to evacuate to a bathroom

0:11:33.200 --> 0:11:36.280
<v Speaker 1>or something because there's someone in my apartment. But in

0:11:36.320 --> 0:11:38.839
<v Speaker 1>any case, I want to go back to the current landscape.

0:11:39.600 --> 0:11:41.079
<v Speaker 1>I want to talk about the I P. O market

0:11:41.080 --> 0:11:45.200
<v Speaker 1>because obviously that has just fallen off a cliff. Maybe

0:11:45.200 --> 0:11:47.880
<v Speaker 1>there's a lot of companies in the pipeline, but they're

0:11:47.880 --> 0:11:52.200
<v Speaker 1>not leaving the pipeline. What would you say to a

0:11:52.280 --> 0:11:55.920
<v Speaker 1>company that's considering going public right now? Would you ride

0:11:55.920 --> 0:11:57.640
<v Speaker 1>it out or do you think they should just you know,

0:11:57.720 --> 0:12:00.480
<v Speaker 1>come out of the pipeline, let's go. I would say

0:12:00.520 --> 0:12:04.320
<v Speaker 1>that financing finance doesn't drive strategy, and timing drive strategy

0:12:04.400 --> 0:12:07.319
<v Speaker 1>even less. If you're building a company that has great fundamentals,

0:12:07.360 --> 0:12:10.600
<v Speaker 1>that's growing and isn't burning cash like crazy, it doesn't

0:12:10.640 --> 0:12:12.840
<v Speaker 1>matter if there's a slow spot or a slow time

0:12:13.200 --> 0:12:14.720
<v Speaker 1>in the middle of the I p O market, You

0:12:14.760 --> 0:12:16.880
<v Speaker 1>just ride it out. If you're building a company that's

0:12:16.880 --> 0:12:18.640
<v Speaker 1>trying to get rich quick and just trying to like

0:12:18.880 --> 0:12:22.079
<v Speaker 1>fleece investors by being high growth, but can never be profitable,

0:12:22.360 --> 0:12:25.000
<v Speaker 1>then the timing really hurts you. And so I would

0:12:25.040 --> 0:12:28.040
<v Speaker 1>just suggest build a company that has good fundamentals. What

0:12:28.120 --> 0:12:29.839
<v Speaker 1>are some of those companies with good fundamentals that you

0:12:29.880 --> 0:12:35.280
<v Speaker 1>see out there? Um? Oh man, I'm stumped. Well, Fixer

0:12:35.520 --> 0:12:37.920
<v Speaker 1>in the company I'm running right now. Well that's okay,

0:12:37.920 --> 0:12:39.679
<v Speaker 1>So we only have a minute left, or actually thirty

0:12:39.679 --> 0:12:42.120
<v Speaker 1>seconds left, but talk about scale there, I mean, how

0:12:42.160 --> 0:12:44.120
<v Speaker 1>how where are you available with Fixer and what's your

0:12:44.120 --> 0:12:48.600
<v Speaker 1>growth plan? Just thirty seconds left. Yeah, we're in Chicago, Phoenix, Denver, Dallas,

0:12:48.640 --> 0:12:51.520
<v Speaker 1>and Seattle. We planned to launch anywhere from two to

0:12:51.600 --> 0:12:54.640
<v Speaker 1>ten more cities next year. New York on that list. Yeah,

0:12:54.679 --> 0:12:58.439
<v Speaker 1>hopefully the regulatory situation in New York makes it's a

0:12:58.440 --> 0:12:59.880
<v Speaker 1>big investment to do it, and so when we do,

0:13:00.000 --> 0:13:01.480
<v Speaker 1>we want to do it right. All right, Well, I

0:13:01.520 --> 0:13:03.360
<v Speaker 1>mean there's no there's a demand for that, at least

0:13:03.480 --> 0:13:05.840
<v Speaker 1>in my apartment building. Hey Mike, it's really great to

0:13:05.840 --> 0:13:07.480
<v Speaker 1>have you. Got to get you back on the program.

0:13:07.520 --> 0:13:09.880
<v Speaker 1>Really appreciate you taking the time this afternoon and joining

0:13:09.960 --> 0:13:12.440
<v Speaker 1>us on a Bloomberg Business Week. Mike Evans is the

0:13:12.440 --> 0:13:15.040
<v Speaker 1>founder of grub Hub. He's also got Fixer as well.

0:13:15.080 --> 0:13:17.520
<v Speaker 1>He joined us this afternoon via zoom from Chicago. He's

0:13:17.520 --> 0:13:19.640
<v Speaker 1>got a brand new book out. It's a memoir about

0:13:19.679 --> 0:13:24.239
<v Speaker 1>his time building grub Hub. It's called Henry A Startup Journey.

0:13:24.320 --> 0:13:25.920
<v Speaker 1>I really appreciate you taking the time, Mike,