5/26/2015 The Denver Post
Not too long ago, the only places that delivered food were pizzerias, Chinese restaurants and pizzerias.
But in the past year, at least a half-dozen delivery startups converged on Denver promising home delivery of organic groceries, sashimi, gourmet doughnuts and, yes, pizza. Bolstered by software, mobile apps and lots of money — $434 million was invested last year, according to one count — home delivery is just a swipe away.
"A lot of traditional delivery services, they're not built by tech startups like ourselves who can solve issues of handling lots of deliveries efficiently," said Zac Maurais, co-founder and chief marketing officer of Favor, the Austin, Texas-based startup that launched in Denver on Tuesday.
Using Favor's app, customers can communicate directly with the delivery driver. Favor, fresh from raising $13 million, promises to deliver anything from any local store or restaurant — for a $6 delivery fee, plus 5 percent of the total cost. Tip is not included.
Last month, Denver's MileHighMenus became a franchise of OrderUp, the Baltimore deliverer that hired the guy who created Domino's Pizza Tracker. Deliveries made through OrderUp's app can be tracked from the moment an order is placed to when the food is picked up and during the driver's entire route.
OrderUp's advantage? Local roots, said Corey Arenson, who, with brothers Michael and Daniel Rolland, co-owns the 4-year-old business.
"Being local is our biggest advantage and why we feel we can take over this market," Arenson said. "There's a lot of hyper-local things we do that GrubHub can't do because they don't have people on the ground." OrderUp, for example, hosts free pizza parties at local apartment buildings — and often gets orders from tenants that same night.
OrderUp, which raised $7 million last year, is part of this new boom, according to PitchBook, a research firm that tracks venture capital. Last year, 19 companies raised $434 million, compared with the $64 million raised by 21 companies the previous year.
"If you're taking a snapshot of the market right now, then yes, it's very crowded," said Alex Lykken, a PitchBook editor. "A lot of companies founded in 2010 or 2011 are getting more mature. Once you get into that Series B, the check sizes go up."
Last year, a good chunk of the money went to Insta cart, which attracted $264 million. It launched in Denver in June.
Alcohol delivery service Drizly, which has raised about $18 million, arrived in downtown Denver in July. Postmates, which debuted in Denver in September, has raised about $51 million over the past year. And GrubHub, which works with restaurants that deliver, went public last year, raising about $200 million on the first day.
PitchBook expects food-delivery services investments to be about the same as last year as companies race to get to a bigger slice of the pie. Of the $70 billion spent on food takeout each year, about $9 billion is spent ordering online. And with GrubHub at 20 percent of the market, Lykken said, "That leaves $7.1 billion out there of market share for companies to capture."
But not every delivery company is going for the aggressive approach. Door to Door Organics in Lafayette, which raised $25.5 million in November for its organic grocery delivery, limits unprofitable growth, said CEO Chad Arnold.
"The models associated with tech capital are all about finding unicorns, finding these big home-run companies that can grow incredibly quickly, abnormally quickly," he said.
His investors are different. They understand that the quality Door to Door wants to achieve takes time, he said.
"Generally speaking, we have been very disciplined about how we think about growth and limiting our customer interaction in a way that while it may shrink our market, it helps us shrink our costs and grow," he said.
Door to Door delivers groceries every weekday in Denver, but only three days in Boulder — even though there is demand for other days.
"If I don't have the density, we can't be profitable," Arnold said.
Door to Door is using the money to invest in employees, expansion and technology. Soon, customers will not only be able to order on a mobile app, but they will see what local farm their food came from. If they liked it, it might pop up on their shopping list when it's next in season.
"Hyper-innovation is really good for the consumer at the end of the day," Arnold said.
And the craze is far from over, as some companies are already finding a big payoff for investors. In February, Yelp acquired Eat24 for $134 million. In August, payment company Square bought curated food-delivery service Caviar for $90 million. As big exits increase, Lykken said, momentum in the market will grow.
"Ultimately, it comes down to how feasible this whole concept is. Are people going to start ordering food on their phones? Will this catch on?" Arnold said. "If you talk to anyone in Silicon Valley or in a (venture capital) firm, that's their vision. That's why they make these big investments. It's hard to see now, but 10 years ago, we didn't even imagine an iPhone, let alone ordering food off it."
Want something delivered? Here are some companies that deliver snacks, groceries and restaurant food in the metro Denver area:
Launches this week in Denver. The Austin, Tex. company raised $13 million in funding.
Delivery area: Five Points, Capitol Hill, Ballpark, Auraria, North, River North Art District, Washington Park, Baker, and Cherry Creek.
Fees: $6 plus 5 percent of total sale
Originally launched in Denver in late 2011, MileHighMenus became Order Up franchise earlier this month. Also operates Hungry Buffs in Boulder.
Delivery area: Boulder, Denver, Fort Collins, Greeley, Loveland
Delivery fee: $4.99 flat
Door to Door Organics
Delivers boxes of fresh vegetables and fruit in 13 states. Raised $25.5 million last fall.
Delivery area: Boulder, Denver
Delivery fee: Included
GrubHub, which acquired Dining In and Restaurants on the Run, connects customers with restaurants that offer delivery. Merged with Seamless in August 2013 and went public last year.
Delivery area: Denver and Boulder.
Delivery fee: Varies by restaurant
Hires shoppers to aid online customer order for select retailers. Raised $210 million in funding in 2014, launched in Denver in June 2014.
Delivery area: Metro area
Delivery fee: Starts at $3.99
Raised $58 million total, launched in Denver in September 2014.
Delivery area: Denver, Glendale
Delivery fee: Starts at $5 plus 9 percent service fee
Connects consumers to restaurant menus and eateries that offer delivery. Acquired by Yelp in February 2015 for $134 million
Delivery area: Nationwide
Delivery fee: Varies
Handles food delivery for many chains, including Chili's and Olive Garden, but also small shops like Voodoo Doughnut
Delivery area: Denver
Delivery fee: Starts at $3.99
Focuses on alcohol beverage delivery, launched in Denver in July.
Delivery area: Metro Denver
Delivery fee: $5
Restaurant Runners Boulder
Order directly from the restaurant and the restaurant calls this company to deliver your order.
Delivery area: Boulder city limits
Delivery fee: $4 per order ($1/mile outside of city limits)See Original Article