GrubHub's Second Course: CEO Opens Up About Life After Its IPO


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GrubhubGrubHub CEO Matthew Maloney, third from right, is applauded as he rings the New York Stock Exchange opening bell, Friday, April 4, 2014.

Image: Richard Drew/Associated Press



Matt Maloney thought the day his company went public would be one big celebration, but that didn't turn out to be the case.


He walked into the New York Stock Exchange on the morning of April 4 to ring the bell and watch as GrubHub, the online food delivery business he cofounded a decade earlier, officially became a public company. There were some festivities put on for the company by the stock exchange, but soon enough he flew back to Chicago where GrubHub is based to return to the work of growing a company.



"If you’d asked me three months prior to the IPO or a year prior to the IPO, I probably would have had a different set of expectations post bell ringing," Maloney, CEO of GrubHub, told Mashable in a recent interview. "But when it actually comes around, you’re tired and you want to move onto the next challenge."


Several big name consumer tech companies have stumbled out of the gate after their IPOs in recent years. It took Facebook more than a year to trade above its IPO price after its first day on the public market due largely to investor concerns about its ability to transition to mobile. Groupon's stock plummeted post-IPO as investors questioned the viability of daily deals, the original cornerstone of its business. It eventually was forced to fire CEO Andrew Mason, who once expressed his discomfort with the burdens of running a public company.


Of the two, Groupon's struggles hit a bit closer to home for Maloney given that both companies are based in Chicago. "I know it well," Maloney says of the Groupon story. "I know the team. I know what they did right and wrong." But, he adds, "I was never intimidated by the experience they had."


To some extent, he believes the problems tech companies have faced going public boils down to the difficulty of explaining their businesses to investors. "You have some companies that have a very complicated model and it takes half of the hour meeting [during the IPO road show] to get through what the value itself is, and then the other half to get through the rest of the details," Maloney says.


With GrubHub, he says, it takes all of "30 seconds" to explain how the business works. In a nutshell: It works to create value for both local restaurants and diners, and operates at a larger scale than any other company in the online food delivery space.


That pitch was attractive enough to Wall Street. GrubHub shares climbed more than 30% on the day of its IPO and proved to be the one of the best performing stocks of the tech companies that went public in the first half of 2014.



On Thursday, the company reported that it generated revenue of $60 million for the June quarter, up 48% from the same period a year earlier and coming in ahead of Wall Street estimates. However, the company's profits came in below estimates as GrubHub invested more in advertising and hiring, particularly on the technology side.


GrubHub was fairly early in embracing the shift to mobile and continues to invest in those efforts. "I think that mobile is still accelerating," Maloney says. "I don’t think its the be all and end all, but I think it will be the fastest growing platform for computing for years to come." When asked whether he sees potential for GrubHub on the growing number of wearable devices, Maloney said there are "significant user interface issues" that make it an unlikely food ordering platform for now. "Maybe in the future that changes."


In previous interviews, Maloney has said that GrubHub was originally created because "we were hungry." He and cofounder Mike Evans were working as web developers for Apartments.com when they decided to create a basic restaurant listings website in Chicago that would make it easier for users to discover new places to eat.


"We knew we were onto something in late 2004 when Chicago's Charming Wok agreed to pay $140 to have its menu highlighted in our online delivery guide for six months," Maloney wrote in a 2012 article for The Wall Street Journal . "Soon, more restaurants began emailing and calling us, asking to be listed—and often inquiring about a potential online ordering functionality."


Ten years later, GrubHub has more than four million active diners and is valued at nearly $2 billion. Some of that is thanks to a high-profile merger with Seamless, an online food delivery service that was founded five years before GrubHub. That move knocked out a major potential competitor and broadened its presence to new areas.


Since GrubHub went public, however, a new crop of food delivery startups like Blue Apron, Munchery and Kitchensurfing have raised eye-popping amounts of funding — at least some of which may have been fueled by Wall Street's positive reception to GrubHub's IPO. Maloney shrugs off the idea that these startups pose any serious competition to GrubHub.


"What a lot of companies don’t understand, especially the companies that are just operating in San Francisco or maybe two markets, is we have a significant investment in customer service and customer care," he says. "It's trickier than most people think... There's a lot of buzz about same-day delivery, but we do same hour delivery and we don’t get any credit for that."


Once the merger and the IPO were completed, Evans, Maloney's good friend and cofounder, left the company to bike around the country. Maloney says the decision "was a long time coming" as Evans prefers dealing with earlier stage companies. "He felt it was time to move on. We all parted as friends."


Unlike Groupon's ousted CEO, Maloney has found a kind of relief from going public.


"Honestly, I’ve been able to focus a lot more on the actual product and operations of the business," he says. "Prior to going public, there was obviously the merger and that took up a lot of 2013. And then the beginning of 2014 was going public. I think once I finally rang the bell, I flew home to Chicago and was relieved."


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