Like a burger and fries or apple pie à la mode, Foodspotting and GrubHub are two mobile apps that go really well together.
Foodspotting, which has more than three million downloads across multiple platforms including iOS and Android applications, is a visual guide for unique food dishes. For the uninitiated, the pioneering app locates interesting meals near you, and invites users to snap pictures and share their favorite “food porn” experiences with others. GrubHub, however, provides digital food delivery and takeout services to more than 15,000 restaurants across the United States. More than 30 percent of GrubHub’s orders come from mobile platforms, including iPhone and Android applications.
Earlier this month, San Francisco-based Foodspotting rolled out an update that enables users to order food from GrubHub within the application. Currently about one-third of GrubHub’s restaurants are linked to the app, said Foodspotting CEO Alexa Andrzejewski. When looking at Foodspotting locations in Chicago, where GrubHub is based, I was not able to find any participating restaurants at first check. Andrzejewski said a future update will make GrubHub’s offering more visible.
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Even with a partnership that is not yet fully baked, it’s easy to see how the integration will provide Foodspotting with more engagement. It will also increase transaction volume for GrubHub, which contemplated building its own Foodspotting-like service before going in on a partnership.
“While this is something that is not technically that hard to do,” explained GrubHub co-founder and CEO Matt Maloney, “it makes a lot more sense to work with a partner who has been doing it a while. They are a good group that is very passionate about what they’re doing.”
Choosing different entrepreneurial ingredients
Just as Foodspotting and GrubHub offer distinct services in food discovery and meal ordering, the two companies also have dramatically different approaches to how they do business.
GrubHub, founded in 2004, achieved profitability before going through a $7,000 seed investment from its co-founders. While the company has since raised more than $50 million in venture capital funding from the likes of Benchmark and others, GrubHub still has somewhat of a meat and potatoes approach to building a business with an intense focus on the bottom line. Conversely, Foodspotting, which raised nearly $4 million in funding from high profile investors in late 2010 and early 2011, is still in no rush to make money.
“We are still in the exploration and prototyping phase,” said Andrzejewski, adding that it would be impossible to generate significant revenue in her end of the restaurant sector without having a great product first.
“VC financing is important to get that experience off the ground,” she said. “You get it to a scale and you can then turn that into meaningful sources of revenue.”
Nearly a decade ago in Chicago, before Groupon and FeedBurner, it was nearly impossible for an upstart like GrubHub with first-time entrepreneurs to raise significant financing without revenue (much less a revenue model).
“It was a different time and different location,” explains Maloney, who worked alongside GrubHub co-founder Mike Evans at Apartments.com before they started their company. “We had restaurants that were willing to pay us for a transactional service.”
Maloney pointed out that industry game-changers like Instagram and Twitter “raised gobs of money before ever figuring out a revenue model”, and that there are many paths for startup success.
“If you think about a brand conceptually as real estate in a person’s brain that they are giving you a few minutes a day,” he said, “that is a very valuable asset to some companies. It’s a great business model if you can nail it… I have no idea how Foodspotting will make money, but it’s a cool service and people like it.”
