Episode 9: Grubhub
June 10, 2021
Matt Maloney admits he had a bit of an ego when he entered the New Venture Challenge. He had already launched Grubhub, had a few customers, and had landed at a top business school.
But during his first presentation to the NVC judges, he fell on his face.
“You could tell mid-way through, the blank stares, people were expecting unit model economics,” Maloney, MBA ’10, recalls. “They’re expecting financial plan. What do you need to invest? What’s the runway? What’s the outcome? What’s the next round? What’s your marketing plan? What’s your hiring plan? We weren’t even doing a good job of explaining the technology and the product itself.”
Maloney followed the advice to speak to all of the Booth advisors he could in order to gain insights on everything from marketing to quantifying the opportunity. Grubhub ended up tying for first-place in the 2006 NVC and the following year secured a $1.1 million Series A.
“We didn’t change the product. The opportunity didn’t change. The solution didn’t change. It was completely about how did I go about communicating to potential investors the opportunity, the solution, and the potential payout,” Maloney said.
Chicago-based Grubhub, which went public in 2014, has since become a mammoth food delivery company. A deal to be acquired by Amsterdam-based Just Eat Takeaway for $7.3 billion is set to close June 15.
In this episode, Maloney, who continues as Grubhub’s CEO, speaks with Mark Tebbe, an adjunct professor of entrepreneurship at Booth who calls Maloney the “poster child” for the NVC.
They discuss the leadership challenges at a fast-growing company, why some markets were not successful for Grubhub, and the difficulty of learning how to sell.
Listen now on Apple, Spotify, Overcast, or wherever you get your podcasts.
Transcript
Transcript:
Matt Maloney:
The biggest learning curve I had doing Grubhub was how to sell. How do you get to the restaurateur? How do you manage a lead pipeline? How do you consistently execute the same pitch over and over and then iterate on that pitch? Because to me, I wanted to have a conversation with someone, and it felt awkward to have the same series of words coming out of my mouth.
Matt Maloney:
But when that’s the optimal series of words to close a sale, you’ve got to do that day in and day out, on the phone a hundred times a day, not just to sell independent restaurants, but in a boardroom. You’re pitching your directors. Every time you’re proposing a new investment to raising capital, you’re selling. It’s the definition of selling. That’s business.
Colin Keeley:
Hello and welcome to the Polsky Center’s Where Are They Now podcast. I’m Colin Keeley, and we catch up with founders from Chicago Booth’s New Venture Challenge on the show. Join us as we dive into their entrepreneurial journeys, get a look at the stories and struggles behind their success.
Colin Keeley:
This week we have Matt Maloney interviewed by Mark Tebbe. Matt is a cofounder and CEO of Grubhub, which pioneered online ordering for restaurants for pickup and delivery. Matt has taken Grubhub from not initially making it into the New Venture Challenge to the multi-billion dollar public company that it is today.
Colin Keeley:
Mark Tebbe is a professor of entrepreneurship at Chicago Booth, has been a longtime judge and mentor to the New Venture Challenge. Without further ado, here’s Matt Maloney and Mark Tebbe.
Mark Tebbe:
Thanks for coming everyone. My name is Mark Tebbe, professor of entrepreneurship over at Booth. I’m here today with Matt Maloney, the founder and CEO of Grubhub and winner of the 2006 NVC. He’s basically become the poster boy of NVC. It’s hard to talk about NVC without talking about Matt Maloney of Grubhub. Matt, thank you very much.
Matt Maloney:
Thank you, Mark. I appreciate the accolades.
Mark Tebbe:
So what I’d love to talk about, I mean your path into the NVC was an interesting one. But let’s set the text. Let’s go back a little bit on the background and stuff. Let’s talk about, you’re not originally from Chicago. You actually grew up in, I think, Michigan. What did you do before you ever got to Booth? Tell us a little bit about your early days.
Matt Maloney:
Yeah, absolutely. I moved to Chicago actually after graduating from Michigan State. I got a job. I was actually working at the University of Chicago, interestingly in the hospital group. I was doing computerized detection and diagnosis of cancer at the Kurt Rossmann Laboratories, which is a deep track that most people don’t know about. But that was, call it, ’98.
Matt Maloney:
Then ’99, when the first internet bubble was really hitting hard, I happened to walk to work through a job fair, which I think was held at Ida Noyes at the time, before the renovation. Then I walked past the apartments.com booth and the guy there, I learned later he was one of the sales guys, but he hooked me in with the … He started talking about the internet and what all it could do, and I was already in computers. I was actually getting my master’s in Comp Sci at the time at the university. I said, “This sounds pretty fun.”
Matt Maloney:
So I jumped over to apartments.com and I started building the technology group, went through the bubble. That’s where I met my Grubhub cofounder, Mike Evans. We both worked there together. Then, in that experience, basically we came up with Grub. And so, we were playing around, building the MVP, as we’d call it now, really kind of iterating on different concepts.
Matt Maloney:
Then, to condense a very long story, we realized we had something. I recognized my faults and I knew I didn’t know how to run a business. I was very naive, I would say now, and I thought, “Well, I should go to B school, because isn’t that where you learn how to run a business?”
Matt Maloney:
And so, that was my path to Booth. Once I was at Booth, obviously I found out about the New Venture Challenge, entered that. Obviously it was a straight shot, won that, and then the rest of the story was easy.
Matt Maloney:
So, yeah, it was really interesting. My path to B school really was because of Grub and trying to better understand how to build, grow, and manage a business that I thought had a lot of potential.
Mark Tebbe:
All right. So let’s dig into this a little bit, because you summarized it in a very nice way. But let’s dig a little deeper, because I mean when we talk about Grub and the growth story of Grub, everywhere we see, whether it’s written up in magazines or on CNBC or whatever, you’re like the proverbial entrepreneur. Got an idea, rolled up his sleeves, built a business, taken it public, and just everything’s up and to the right. But when you were growing up, did you think you wanted to be an entrepreneur?
Matt Maloney:
No. No, I think I wanted to be a doctor. In fact, I was denied admission to medical school multiple years in a row. So there’s a long history of failure in my past before this actually hit.
Mark Tebbe:
But you ended up going to Michigan State getting a computer science degree, coming to Chicago, and working in the hospital while getting your master’s in Computer Science.
Matt Maloney:
Right. Yeah, exactly.
Mark Tebbe:
So you saw yourself more as a technology guy who just wanted to get stuff done. So how does a technology guy get the idea to do something like Grubhub? I mean, you were working at apartments.com at the time. How did it come to you?
Matt Maloney:
So, I was really deep in geographic algorithms trying to find rental apartments. So at the time, I was in the rental real estate business, we had branched off and we were doing more resale, a precursor to ultimately an industry that would be dominated by Zillow. And so, I was thinking a lot about algorithms that categorize data and was able to do data look-ups based on proximity.
Matt Maloney:
And so, there was a few ideas we were bouncing around. This was Mike and I, because Mike was a supreme technologist, came out of MIT in the middle of the bubble. We hired him on at Apartments. Just an awesome all-around co-founder.
Matt Maloney:
Then we were bouncing a couple of ideas, and I just said one day, I’m like, no, the data that we’re working on has to be permanent. It has to be concrete. It can’t be flexible data. It has to be consistent. It has to have a way to algorithmically look it up and it needs to be something that hasn’t been categorized before. And it has to be something that’s important to a normal person multiple times a week.
Matt Maloney:
That was the eureka moment when those levers just all lined up. I said, like, pickup/delivery boundaries. I mean you’ve got to remember, this is 2003, 2004. Back then, I mean I vividly remember opening the telephone book to the restaurant section. I remember it had a red rim on the pages. You’d open up to a pizza shop and you’d look at a map of the streets it delivered to, and you’d say, “Oh, I’m in their delivery area,” and you’d call them. That was what delivery was.
Matt Maloney:
And so, I thought, well, wait. I can do that. I can polygon the delivery boundaries. I can put it in a database. I know how to dynamically look that up. I can actually present a Google-like search results form to any consumer looking to get delivery food.
Matt Maloney:
That was where this all came from. In 2003, Google had recently had their AdWords hit. They were making a ton of money. I thought, well, a subscription SaaS model on a delivery boundary advertising service. Well, that makes a lot of sense. I lived in Lakeview at the time. That would surely work in Lakeview. So where else would it work?
Matt Maloney:
And so, that was the moment where we thought, “Wow! This could be cool,” because consumers like me would use it and restaurants would probably be willing to pay for it if it would build their business. And so, that’s when we started focusing in on the idea and started building out.
Matt Maloney:
Mike was … We were both working at the time. Mike was building at nights and weekends. He was a way better programmer than I was. And so, I let him do that. I was the one collecting data, calling the restaurants, trying to get their information, trying to organize unorganized information from people who don’t really want to be organized. It was definitely a challenge.
Matt Maloney:
And so, I was calling restaurants, hours and hours, like, “Hey, where do you deliver to?” “Oh, where are you?” “Well, yeah, I just want to know where you deliver to.” “Well, why? Are you the city? Are you trying to tax me?” “No, no, no. I’m trying to help you out. I’m trying to sell more pizza for you.” “Oh, I don’t know about that.” So you’d call and you’d be like, “Hey, I’m up on Foster. You can deliver to me?” “No, we only delivered to Armitage.” “Oh, OK. OK, perfect. Thanks, man.” It’s just a lot of trial and error figuring that out.
Matt Maloney:
So, yeah, that’s how we built the initial database, literally focused on Lakeview. That was where the initial Grubhub was. Then we expanded down to The Loop, farther up north, farther west, and then down obviously to Hyde Park when this thing started moving and I was in the New Venture Challenge.
Mark Tebbe:
For people who weren’t that rolled up in technology at the time, back in 2003, 2004, Google Maps didn’t even exist yet. So you were creating this whole mapping kind of layer for yourself. And so, someone would just type in their address and find out what food they could eat?
Matt Maloney:
So I remember the day that Google Maps launched, because it was so much better for my business. It sucked because they eventually put a pricing model around it. But initially it was free. But before that, we’d use a geographic mapping software that you’d buy off the shelf and you have to cut maps. You have different maps for different areas. It was a complete pain.
Matt Maloney:
But then when we got Google Maps, actually it wasn’t just the lookup that was easier. It was the data entry on the backend that was tons easier. I mean, I used to have to do an unlimited string of street names to define the polygon and then import that into a database, because you had to overlay on a traffic map because there’s no other geosystem to underpin.
Matt Maloney:
So when Google Maps came out, you could click to get a polygon and they would enter in the area inside the curve. It was game-changing for data entry for Grubhub. It was fantastic.
Mark Tebbe:
So it comes along, you basically start building out this business and you’re calling around the restaurants, building out their polygons even if they didn’t have them. You’ve got this database and you start saying, “Now I need to basically start making some money.” So how do you find your first customer?
Matt Maloney:
Yeah. Yeah. I mean it’s just pounding on doors. I mean it’s amazing how much work it was. It’s not shocking that restaurants were the last holdout of technology. When we were doing this in 2004, think about it. The first bubble had came and gone. By 2007, you were doing all the social media stuff. Locally, in Chicago, FeedBurner was a big deal and it was all RSS feeds.
Matt Maloney:
It took a long time for restaurants to really get online. Even now, it’s not a walk in the park. There are multiple layers in restaurants that they put in place on purpose to block sales. They get hit up every single day for linens, for plates, for soaps, for new distributors, new suppliers.
Matt Maloney:
And so, to figure out how to walk into a restaurant and sell a restaurateur, we learned quickly you have to walk in the back door. You got to go talk to the cooks who are actually working because no other salespeople were doing that. You had to walk in the back door and say, “Hey, I want to talk to whoever’s here about selling more food. I got this whole thing. I’m selling a lot of food online. I want to see if you guys are interested in it.”
Matt Maloney:
The pitch of $100 a month for an enhanced listing, it was awful. It just didn’t work at all. And so, this is why we changed to online ordering. So we innovated online ordering as a way to justify the sale to restaurants. Which is weird if you think about it now because now all of our orders are online, digital orders are like that’s what you think about with third-party platforms. Back then, it was phone numbers.
Matt Maloney:
So there was a whole bunch of justification in order to say you only pay me a dime when I make you a dollar. That became like the sales pitch. The whole $100 a month for an enhanced listing, nobody cared about that. But to be able to say you pay me a dime when I make you a dollar and I can justify every order, that was a big deal. That’s when restaurants started saying, “Yeah, I’ll totally do that.” Then you start getting a bunch of yeses.
Matt Maloney:
The other thing that does, which is nuanced but it’s really important, it changes the speed at which you can grow. You’re not limited by the number of restaurants you sign up. Because on a SaaS model, at $100 a month, their revenue’s bound by the number of restaurants you have paying you in any given month. By taking a percent commission, you’re pivoting your business model to be capturing a percentage of the sales driven by consumers.
Matt Maloney:
So then you can really focus on your advertising to consumers and trying to increase the basket size and increasing the repeat rate and increasing the new customers and not necessarily the number of restaurants. You clearly need more restaurants to have a better platform, but your revenue is only limited by the amount you can sell. That unlock to go from phone orders to online orders released us to grow both from revenue and also a supply network perspective.
Mark Tebbe:
So you were constantly tweaking and pivoting your model along the way. You’re, at the time, the primary salesperson. You’re still working at Apartments. Were you selling or, at this point, had you decided, “I’m done. I’m going to just focus on Grubhub”?
Matt Maloney:
I was definitely still working when I was collecting data. I was definitely still working when we got our first check. I’ve told this story a few times. It was a charming walk over, I think it was on Wabash behind the Hilton downtown, which has since burned down and I believe rebranded as Tamarind. Although I’m not sure if that’s still there either, if anyone wants to go there. That was it.
Matt Maloney:
I sold the bartender who happened to be … Well, I thought he was the decision maker. So I clearly had to have a beer in order to address his attention. I finished that beer and he was looking at me like, “You’re not done, are you?” So I had to get another beer.
Matt Maloney:
This isn’t even a funny justification for drinking during the day. He’s looking at me like, “I’m not listening to you unless you’re going to keep ordering a beer. You’re sitting at my bar taking a spot.” I was like, “Fine.”
Matt Maloney:
So I got through the whole thing and he’s like, “You know what? This is a pretty good idea, but we’re going to have to go talk to my mom because she makes the decisions.” I was like, “Oh my god. Come on. I just spent an hour pitching you. This is our first sale.” I ended up convincing his mom as well, who gave us our first check. Shortly thereafter is when we really started to accelerate. I think Mike quit first, but I was a little bit later.
Mark Tebbe:
Well, when you got that first check, had you even incorporated yet? What’d you do with your first check?
Matt Maloney:
We definitely weren’t legal for a while. I don’t think we actually formally incorporated until after we won the New Venture Challenge and we had to deposit that check is what actually did it. Although we did have to have a bank account for that first check. Although I think I might’ve just cashed that check and put it into my own account. I’m not sure. Everything’s so squishy back then at the very beginning, because you’ve been working a lot, you’re really invested personally, but there’s no cash going through and there’s no employees. You don’t have to do payroll, you don’t have insurance, you don’t have to have an office.
Matt Maloney:
It’s all of those aspects of running a business that you’re not expecting. You think, “Hey, I have a good idea, I execute on it, success is next”. It’s like there are a million roadblocks to even like a modest small business.
Matt Maloney:
I have a lot of empathy for restaurants because they deal with all this shit. They don’t have this infinitely scalable global internet business. They’re addressing the needs of their neighbors, and it just really is challenging.
Matt Maloney:
So I’m not sure what we do with that first check, but I remember the check. It was a very big deal. I think that’s when I filled out my Booth application actually.
Mark Tebbe:
Well, all right. So, yeah, I mean you shifted at that point from subscriptions to transactions, started getting more opportunities with the restaurants, and you realized, “I got to learn how to run a business.” So you applied to Booth. Why?
Matt Maloney:
To learn how to run a business. I mean, isn’t it obvious? That’s what business school is for. It’s called business school, Mark. This is where you learn to run a business. I went to business school. Remember, I took no business classes in undergrad. I had no idea what I was doing. My first three classes, and you should look this up, I think it was … Well, besides the ones you have to take. I think you just take Economics, but I took Managerial Accounting way sooner than I should have. I took Corporate Tax Strategy.
Matt Maloney:
I mean I’m a pragmatist. I was trying to understand how to literally run the business. I thought with tax strategy, I would be able to understand how to do my taxes for Grub, because that’s what I needed to do. That’s what I was there for.
Matt Maloney:
Ironically — which, by the way, that is not a class for a small business owner. That is a very detailed consultant/legal level class. However, I did learn about reverse triangle mergers, which I thus executed in the Seamless transaction. Now we’re executing it again, being acquired by Just Eat Takeaway. It’s the exact same model. So I understand that stuff perfectly. So I’m super helpful there.
Mark Tebbe:
So you’re in Booth. You’re taking these tax and accounting classes, but yet you’re running a business on the side. You came to Booth to run this business. How’d you end up at the NVC?
Matt Maloney:
I’m pretty sure that Kaplan suggested I did.
Mark Tebbe:
Kaplan, Steve Kaplan.
Matt Maloney:
I love Steve. He’s fantastic. But I remember he was the head of the … I think it was the Polsky Entrepreneurship Center back then. This would have been like ’05, ’06. I went to see him because here I was a new student taking all the appropriate learning to run the business classes.
Matt Maloney:
I went to him as the head of the entrepreneurial program. I said, “Hey, I’ve got this idea. I’m running it.” In my head, this was a big deal. I mean we had quit our jobs. I was going to business school. This is the next big thing. I went to ask his advice on how to run this business.
Matt Maloney:
He said, “Well, you should enter in the New Venture Challenge. This is what you do with business ideas.” I said, “Great.” So I entered the New Venture Challenge, and he promptly rejected my submission, unceremoniously. So I went back to him, like, “Dude, come on. This is an actual business. This is called a business plan competition, but I’m running the business. We have real revenues.” I mean I’m sure it was, I don’t remember, $100 a month or so. We probably had one customer at the time. Then I think he just appreciated my passion. I was just, like, “You’ve got to be kidding me. Come on.”
Matt Maloney:
And so, through my groveling and begging, he did ultimately let me in the program. So the program was the best thing for Grubhub, for sure, like no question.
Mark Tebbe:
And so, you get into NVC, and a lot of students have said it’s transformational. I mean you just acknowledged it’s the best thing ever. When you got in there, how did you sum up this super-technical, doing polygons menu mapping system and explain it to the judges in the NVC? How’d your first presentation go?
Matt Maloney:
Yeah, not well. I think this is why it was so valuable. I think after a lot of reflection on the New Venture Challenge, I think it means something different to everyone. It brings something sharpening to every business plan that goes through the process, because it really is a thorough vetting of the idea of the execution.
Matt Maloney:
It’s not just like a technical review or a marketing review or a finance review. I mean it really emulates a venture process. It emulates raising money. When you’re raising money, you’re pitching investors, you’re asking them to put their name and their dollars behind you, and they poke all kinds of holes in this. And so, I think the process of getting real investors and entrepreneurs to vet and poke holes in these models, I think it’s really effective.
Matt Maloney:
And so, for us, you’re exactly right. We had the technology down. We had a working prototype, we had paying customers. We had no idea how to talk about it at all. I mean I’ve said it a couple of times, no business experience. None. It took me an hour and a half to pitch a bartender to give me $100 a month. I mean talk about ineffective use of time.
Matt Maloney:
I’m not ashamed to admit I had a bit of an ego at the time also. I mean, I was with the greatest business school in the country. I think it was rated number one in the country the year before. I had a real business. I was running a business. I was technically the CEO of a company in business school, like, come on. So we got up and it was like, look at our business. It’s the next evolution of the internet. Crown me now. Like come on.
Matt Maloney:
And so, it fell flat. You could tell midway through, the blank stares, people were expecting unit model economics. They’re expecting financial plan. What do you need to invest? What’s the runway? What’s the outcome? What’s the next round? What’s your marketing plan? What’s your hiring plan? We weren’t even doing a good job of explaining the technology and the product itself.
Matt Maloney:
And so, I think, afterwards, the advisors were like, “All right, Matt. I see what you’re saying, but you blew it. You didn’t communicate anything.” And so, somebody … I’m not sure. I’m not sure who it was. I think it might’ve been Brent Hill who was NVC advisor that year. He’s now with Origin Ventures actually, who ended up running our A round in 2007.
Matt Maloney:
But Brent was like, “This is actually something.” He was at FeedBurner at the time, by the way. Brent said, “This is actually something. You’re onto something real here. You need to go talk to every single one of these advisors because these are all smart people and you needed to have a conversation, ask them their advice on how to do better next time.”
Matt Maloney:
And so, I started that process talking to every single person. It was really helpful talking to a marketer. I talked to JP Dube for a while. He was a great help thinking through the data aspects of marketing. And so, I had access to these monstrous brains and they would focus for an hour.
Matt Maloney:
I actually talked to Austan Goolsbee for a while about this, too. I know he’s an economist, but different perspectives on the problem I’m solving. How do I quantify the opportunity? How do I pitch an actual solution? How do I sell people on an outcome?
Matt Maloney:
So I was able to put together a much better presentation of what we’re trying to communicate, and that’s what the New Venture Challenge was for us. Then I literally took that deck and pitched our series A round.
Mark Tebbe:
So you get in, you do the second presentation, you make it to the finals. But it seemed like from the first presentation, second presentation, you totally simplified and clarified what Grub was. Not so much enamored with what it could be or what it … But you really got into saying … It seems like you simplified the message a lot.
Matt Maloney:
I mean that’s all it was. We didn’t change the product. The opportunity didn’t change. The solution didn’t change. It was completely about how did I go about communicating to potential investors the opportunity, the solution, and the potential payout? By doing that, it was a translation exercise from non-structured information in my brain to something that others who were super smart were expecting to hear.
Mark Tebbe:
So you make it to the finals. Back then, I think we were giving away $50,000 or $75,000 of prize bonding to the teams, and you crushed the presentation. But a lot of people don’t recognize, did you win the NVC or did you co-win the NVC?
Matt Maloney:
Why do you have to bring that up? You know that’s still a sore subject. We co-won the New Venture Challenge that year. It was a very weird dynamic because we had the clearly superior opportunity and presentation. And they brought in an outside CEO to actually do the pitch. Which was highly irritating to me. And then they ended up co-winning.
Matt Maloney:
So, yeah, I think the prize money was $50,000. And so, we got $25,000 of that. But that was a lot of money. I mean I’m not complaining about it. It was a big deal and it allowed us to run the summer of 2006 and start to buy CTA ads. And so, then we really saw our traffic start to spike.
Matt Maloney:
By the summer of 2006, we were back to breakeven, making our own money with myself on payroll, Mike was on payroll. I think we had two other, maybe three other employees at that time. So it really helped us bootstrap into the next stage. We continued to execute, really building out Chicago. We closed our A round in the fall of 2007 after expanding to San Francisco.
Mark Tebbe:
I remember one of the things out of your presentation, you were convinced that you basically, you were looking at your financials, you were going to go from like $350 of marketing to like $10,000 of marketing in the next month. But you early on thought you only needed about $1.7 million to actually build the business and be profitable. But you went on and you looked for a series A. You come out and you win the NVC in June of ’06. When did you close your series A?
Matt Maloney:
It was November of ’07. I had to lay off probably 50, maybe 75 people in ’99 at Apartments. So we had experienced this whole bubble economy where … It was really funny. At Apartments, I remember meeting this guy who is taking a hiatus from his PhD in Mathematics, just theoretical math, at U of C. I don’t think he even knew how to code, but they hired him because you were hiring anyone that had an advanced degree, especially in any STEM-related field. Then when the carpet’s pulled out from under you, you got to lay everyone off.
Matt Maloney:
So we were religious about covering our costs and not having to lay anyone off. We would spend only the excess of what we made the month before after paying payroll. And so, we were trading speed of growth for security of team because we really didn’t know anything. We didn’t know what to expect. We were in Chicago. It wasn’t the Valley. It didn’t have this culture of raise as much money as possible and throw it all against the wall.
Matt Maloney:
I’m glad, in hindsight, we didn’t do that because it allowed us to iterate on multiple different ways of doing the business. Online ordering is one way. There’s a lot of products that we tested that didn’t work, or we needed more time to figure out how to make this business work. Even now we’re really the only ones that have consistently been profitable for the whole time.
Matt Maloney:
We went negative whenever we took money. So after the A round, we were negative for probably nine months or so, which was well planned out. But, yeah, that’s how we grew.
Mark Tebbe:
But yet while you were building the business, even after winning the NVC, you’re still going to Booth. When did you actually get your MBA?
Matt Maloney:
Yeah, I took the long course. So I think I read somewhere that they allowed you five years in the part-time program. And so, I took the entire time. Of course, afterwards, I think Steve or somebody told me that, “Oh, for you, we would have made an exception.” But whatever. I jammed in that last quarter just to make sure I get out.
Matt Maloney:
But it was great. I loved going to school for business while running a business, especially running a business that really had no idea what it was doing from a business perspective. So I mean I learned marketing at Booth and I applied it every single day.
Matt Maloney:
So I remember being in Ann McGill’s class learning that it was far cheaper to reactivate past users, past customers, than gain a new customer. On the train on the way home, I was like, “Oh my God, this makes so much sense.” I had never thought about that before.
Matt Maloney:
And so, I called the team. I’m like, “All right, we’re going to start emailing everyone who’s ever placed an order on Grub.” That was literally the beginning of our CRM programs, which now is industry standard. So just things like that. We didn’t have business people. We didn’t bring in business people. I mean I was clearly the business person. We didn’t bring anyone in for a long time. We didn’t bring a CMO or anything in.
Matt Maloney:
So it was great. The accounting classes weren’t as applicable. We did have actual accountants by this time. But the rest of it was really kind of, figure it out and use Booth as a source of ideas.
Mark Tebbe:
All right. So in November of ’07, you basically get your A round then. You’re doing great in Chicago and you decided you want to move to the next city. The next city you opened up in was, where?
Matt Maloney:
So we opened up in San Francisco the fall of ’07.
Mark Tebbe:
Why?
Matt Maloney:
Well, we thought that San Francisco was this super tech-forward city and they would embrace this new idea with open arms. It would be the easiest second market. Well, 13 years later now, San Francisco was never a good market for us. It just was never a good delivery market in general. In markets like Chicago and New York and Boston, there were robust delivery ecosystems.
Matt Maloney:
Now you’ve got to remember back before 2014, we didn’t do any delivery. So we were an advertising marketplace for restaurants that did delivery for themselves. We would take the order, place the order, they would prepare and deliver. And so, in San Francisco, and specifically in Silicon Valley, there was no delivery. I think you could get the big enterprise pizza chains and that’s it.
Matt Maloney:
And so, going to San Francisco, it was pretty frustrating. We went to Boston third. Boston was a much more receptive market. Huge delivery ecosystem and a super tech-savvy community. And so, that worked really well. Then we went to New York.
Matt Maloney:
I was nervous about going to New York. New York is a different beast. It’s a giant market and it’s an ecosystem all to its own. But in hindsight, and I’ve said this before, we should have gone to New York first, even before Chicago, because if you figure it out there, it really was helpful. Frankly, the longer you’re in a market, the stronger the marketplace dynamic is.
Matt Maloney:
And so, we went to New York fourth, I guess it is, in the spring of 2008. From there, we really just started cranking out. I think that was about the time we took the Benchmark money, or maybe that was the B round. I’m not sure which. But that’s about the time we really started the national expansion.
Mark Tebbe:
So then your business plan said you needed a $1.7 million to be profitable. You ended up raising how much before you went public?
Matt Maloney:
I think we were at like 85 roughly. Yeah, I mean you’re totally right. Your initial models are generally way, way off. I think, for us, we were definitely projecting conservatively and I think we used less than $1 million to become profitable and actually launch New York. I think what you get with the extra money is you accelerate the outcome.
Matt Maloney:
So if you continue to grow and you see the opportunity expand, what we saw consistently was our addressable market, say it was X, and we raised a bunch of money and we put that money to work, and then the addressable market became 3X. That’s what we kept seeing. Every round, the addressable market increased.
Matt Maloney:
That’s part of why in 2021, with two public competitors, three public companies in this space, as all the competition came, our growth rate really wasn’t impacted because the addressable market itself continued to grow way beyond anything I could’ve ever projected.
Matt Maloney:
I think if you go back to that initial New Venture Challenge, I mean I was calibrating on the amount of known pickup and delivery from non-enterprise restaurants domestically. And even that, I think, has gone up more than 20X post-COVID. It’s just incredible, the amount of industry growth.
Matt Maloney:
So a lot of people say pick an industry where you have a lot of elbow room to make mistakes. Well, we nailed that one. That’s no question.
Mark Tebbe:
So I mean you’re talking about how the NVC helped a business. If you could come back and teach a class at Booth, what would you teach?
Matt Maloney:
I’ve been telling Booth for a long time that they need a sales class. I think they have one now, right?
Mark Tebbe:
They have Entrepreneurial Selling. Yeah, Michael Alter teaches that.
Matt Maloney:
Oh, I love Michael. He’s great. When I graduated, I think it was 2010, I went to Steve Kaplan and I said, “You guys need a sales class.” I mean Booth is an outstanding program, but it’s not a tactical program, which is ironically what I was there for.
Matt Maloney:
But what I learned was when you’re doing your business, the biggest learning curve I had doing Grubhub was how to sell. How do you get to the restaurateur? How do you manage a lead pipeline? How do you consistently execute the same pitch over and over and then iterate on that pitch? How do you do it the same every time? Because to me, I wanted to have a conversation with someone, and it felt awkward to have the same series of words coming out of my mouth.
Matt Maloney:
But when that’s the optimal series of words to close a sale, you’ve got to do that day in and day out, on the phone a hundred times a day. That’s selling. That’s business.
Matt Maloney:
And so, that’s what Booth needed to do. I thought it was an extremely important skill, not just to sell independent restaurants, but in a boardroom. You’re pitching your directors. Every time you’re proposing a new investment to raising capital, you’re selling. It’s the definition of selling. So that, I think, was critical, and I was so excited when I heard that Booth started that program, because it really is … It’s a learnable skill, but it’s critically important.
Mark Tebbe:
Yeah. I remember back when you were still in Apartments and you were just going out and started selling, you thought it was a learnable skill. You went out and bought a book to really learn how to sell.
Matt Maloney:
Did I? I may have. “Sales for Dummies.” Yeah, that was in our office. I totally forgot about that. Yeah, actually, there’s been two books that I’ve kept on the desk, and they’re kind of tongue-in-cheek. But one is “Sales for Dummies” and the other is … I think it’s called “Managing with Power.” It was one of the assigned reading books at Booth. I just loved the title, and to have people walk up to your desk to chat about something and they see this like “Managing with Power” book on your desk. That’s great.
Mark Tebbe:
So basically, as you come out of NVC, you use a portion of your prize money to start buying ads, growing your market, going out and raising capital, going out and going to the West Coast, raising capital out there, and eventually going public. As you look back and think … I mean because you came in so aspirational when you came to Booth, wanting to learn on one hand and do on the other. What are some of the difficult challenges you faced since you started the company?
Matt Maloney:
Man, I think it’s all been difficult. It’s like a satellite reentering Earth’s atmosphere. It is this constant, in-your-face friction every step of the way, and that changes every single year. I’ve been doing this for 17 years-ish and people are like, “How are you still doing that?” People like to phase in, just the early part or the late part.
Mark Tebbe:
Well, it’s super rare. It’s super rare for someone to be the idea-sponsoring entrepreneur, take it through its growth stage, take it through its rapid growth stage, take it through its public stage and still be the CEO. But you have.
Matt Maloney:
No, I enjoy it because it’s always different. You’re constantly problem-solving, and there are different problems. You have to learn a new decision-making paradigm each time you do it. Going public was a complete education. I had no clue what was going on. You’re relying on your lawyers and your bankers and the smart people who’ve done it before, but you have to get up to speed because you have to do it. Then you get through that.
Matt Maloney:
So I mean the most challenging part of this has been just consistently re-innovating for different situations. I mean nobody knew of us. We had to build it, we had to sell it. We had to get investors. We had to expand it and we merged with Seamless. Then we had to go public.
Matt Maloney:
Then we had to figure out how to do delivery. I mean, for crying out loud, we’re an advertising company. You want us to do logistic delivery, on-demand basis, where someone can order and be furious if their food isn’t there an hour later anywhere in the country? Think about that challenge. You consistently innovate, and it’s just been fascinating. So it’s been really hard, but it’s been awesome to watch.
Mark Tebbe:
So you’ve been the CEO the whole time. What’s been your biggest leadership moment or test as a CEO?
Matt Maloney:
So I’m going to give you two answers, and they’re different. The first is more organizational, because when people think about startups and high growth stories, you think about the product market fit, you think about the expansion, you think about the innovation, the obvious stuff from the outside. But from the inside, the high growth is really difficult from an organizational management perspective.
Matt Maloney:
You’ve got to remember this is a team of people that work together, and it starts out really small. Five people expands to 10, 15, 50. By the time you’re 50 people, they don’t all know me. So when you’re in the same one or two rooms, you’re looking over your shoulder providing real-time answers. People understand the way you’re going to make decisions, and that is the company culture.
Matt Maloney:
And so, when you expand past 50, you have to start thinking of culture as an abstracted element that you have to codify and then propagate, because you can’t have that interpersonal relationship that you had prior and you can’t support the growth rate with less people.
Matt Maloney:
And so, it’s this really interesting process that happens to a company. You go from a tight band of people to an expanded group that continues to grow and that has less communication. It’s more siloed. That is just this constant tension the more success you have, the larger your organization.
Matt Maloney:
So I think the hardest leadership moments for me were noticing during that trajectory, when people that I liked and relied upon were not the right people for the company at that time. And so, having those conversations are really, really hard, because they trust you, you like them, they like you, you go to each other’s family functions, you hang out.
Matt Maloney:
That is a very hard thing to deal with and you just have to abstract yourself and just say, “Look, you’re not the right person anymore. I’m really sorry. We’re going to have to go in a different direction.”
Matt Maloney:
It’s something that you aren’t going to do naturally, and so someone has to tell you as a leader. And so, when I learned that and I realized there was a lot of maintenance to do on the organization, it was really good for the company, but really hard as a leader.
Mark Tebbe:
That’s interesting. I’m trying to think about what it would be like. I mean you came to Booth very tech strong, with a great business that was just being founded, a few employees working for you, and, let’s say, with a certain swagger. Then you basically live the dream to be a CEO, from the founding CEO all the way to now the post-public, post-IPO CEO. Not many people have been able to do that. I mean we have a lot of students who come and say, “I’m going to be your next Grubhub. I want to be your next Matt Maloney.” As you’ve experienced that, how have you changed?
Matt Maloney:
I think I have recognized how many mistakes I’ve made along the way. I mean it’s funny, with 2020 hindsight, you’d do so many things different. No complaints at all. I think it’s been an incredible run, for sure, and it’s still going. I’m really excited for the next 17 years, at the top rung of a massive global delivery company.
Matt Maloney:
There are so many outstanding people that do things I could never do, even at the company that I currently lead. I think that’s the thing that’s most eye-opening. You enter it doing everything, wearing every hat at the same time, thinking you’re doing it pretty damn well because of your growth numbers and because of your investment. You’re buying into the whole narrative that you’re giving me right now, and I appreciate that.
Matt Maloney:
But you recognize when you hire really great people who do the same things so much better than you could ever do, you realize that you’re actually not that good at anything because there’s other people that are better than you at everything. And so your job becomes, how do I attract, coordinate, and retain all of these experts and how do I help them help me make this company even better? Instead of trying to do it all myself, it’s how do I recognize the opportunity and get the right person in the right spot? That’s really what this is about.
Mark Tebbe:
So every year, and as I’m involved with the NVC, I hear students come in and say, “I will be your next Grubhub.” I mean, let’s be clear, Grubhub is one of the poster childs of NVC. It’s hard for us to talk about NVC and not talk about Grubhub. Students come in and say, “I will be your next Grubhub. I will be the next Matt Maloney.” Having been that Grubhub and having been that Matt Maloney, what advice do you have for these founders as they’re young, just coming into the NVC. They’re at Booth. What advice do you have for them that they should walk away with before they even get into the NVC?
Matt Maloney:
I had some great advice early. I was describing Grubhub and I was really excited. The guy looked at me and said, “Just do it.” So just do it, because all this talking and all this nights and weekend, that’s a hobby. That’s what I call a hobby. If you don’t quit your job and do it, then you’re not an entrepreneur. It’s not happening.
Matt Maloney:
That was scary. That was very scary. But if you think about it, if you think about that, that is the right answer. Even if your idea is crummy, you have to do it, because if you don’t do it, you’re not going to know if it was successful at all. The act of doing it and removing the safety net of your job, that lights a fire like you would not believe.
Matt Maloney:
And so, if it’s not working, you feel it is not working, and you are going to struggle to make it work. That’s the difference between having an idea and doing it on nights and weekends and quitting your job and going all in and doing it.
Matt Maloney:
You will change your idea. There’s no chance the idea that you have is the right idea. Grub when I entered the NVC was a very different idea than Grub post-NVC, Grub post-public, and Grub now. Very different companies.
Matt Maloney:
But you spend every day thinking about the largest, most pressing problems that you’re addressing and you change your business ideas, you change your strategies, you change your tactics. You change everything over the course of a year. I mean people talk about, what is it? Changing the tires on the bus while it’s rolling down the road. Well, that happens constantly.
Matt Maloney:
And so, yeah, your idea sucks. It’s the best one you got. If you feel good about it, go for it. Then change it and don’t be afraid to change it. But constantly change it and constantly optimize it. It just starts with, Just do it. Stop talking about it.
Mark Tebbe:
Some sage advice from one of NVC’s best, who’s been able to show the world a great idea with tenacity and the ability to go do it, has really made an amazing business that as much as we talk about NVC, we always are talking about Grubhub. I’ve got to thank you for taking the time today to talk to us.
Matt Maloney:
Thank you, Mark. It’s been fun reliving the glory days, the scrappy startup stories. I mean those were a lot of fun. Those were scary and hard, but a lot of fun.
Colin Keeley:
All right. That is it for this episode. If you could do me a huge favor really quick, please go to your favorite podcasting app, often Apple Podcasts, and rate and review our show. This gets the show recommended to more folks and it also helps us get bigger and better guests for you to listen to. Take care.