Venture-Hungry German Website Takes On Grease-Stained Menus
By Ragnhild Kjetland
Fabian Siegel used to spar with his wife over which takeaway service to use for dinner. Now, they can order different genres from the food-ordering Internet site he’s running.
Lieferheld, or Delivery Hero, was founded by Berlin-based Team Europe Ventures last year and hired the 35-year-old Siegel in November. His task is to grab a share of an expanding 2.5 billion-euro ($3.6 billion) food-ordering market in Europe’s biggest economy by aggregating takeaway ordering services and organizing neighborhood restaurants on the Web.
Lieferheld, Just-Eat Holding Ltd. and U.S.-based GrubHub Inc. are betting on increasing use of the Internet and devices such as Apple Inc. (AAPL)’s iPhone to order food. GrubHub last month raised $20 million from DAG Ventures and Benchmark Capital. Greylock Partners, which owns with stakes in Facebook Inc., LinkedIn Corp. and Groupon Inc., invested $48 million in London- based Just-Eat with other venture capital companies.
“There’s a massive market opportunity,” Andrew Lipsman, a Chicago-based director of industry analysis at research firm ComScore, said in an interview. “E-commerce in general is growing, but online food ordering is still in the early phase.”
Lieferheld, whose logo is reminiscent of comic hero Superman’s, raised 5 million euros from the venture capital arms of publisher Georg von Holtzbrinck GmbH, German food retailer Tengelmann and Team Europe Ventures.
Ordering takeaway food through grease-stained to-go menus is inferior compared with using the Internet, Siegel said.
“It’s always a hassle to explain what you want, sometimes you’re misunderstood, you don’t know which restaurants deliver to you and then you have to find out which flyers you have,” he said in an interview.
More than 12 million Germans, out of a total population of 82 million, order food for delivery at least once a month with more than 5 million doing so more often, research data from publisher Hubert Burda Media Group shows.
The German takeaway market is fragmented, with 85 percent of outlets run by a single proprietor, Siegel said. By putting their menus online, Lieferheld saves businesses from printing flyers, putting them in hundreds of mail boxes and having someone staffing a phone to take orders. Clients can pay with a credit card, EBay Inc. (EBAY)’s PayPal service, or in cash.
Germans order Italian food and pizza 60 percent to 70 percent of the time, compared with less than 50 percent in the U.K. and even less in the U.S., said Siegel, who moved his family back to Germany from New York to run Lieferheld.
Some popular German fast foods don’t lend themselves to deliveries because customers prefer to consume, for example, sausage at a local Wurst stand, Siegel said. In the U.S., Chinese, Indian and Mexican food deliveries are more common because of the country’s demographics, he said.
The percentage of U.S. customers who have used the Web to place a food order has risen to 32 percent from 11 percent in the past five years, according to the National Restaurant Association in Washington. More than half of the $600 billion annual U.S. restaurant sales come from delivery, carryout or drive-through orders.
Lieferheld, which is adding 200 restaurants a week, said an advertising agreement with Germany’s largest private broadcaster, ProSiebenSat.1 Media AG (PSM), may help it eclipse local rival Pizza.de GmbH by the end of the year with 6,000 restaurants and 500,000 customers.
Menu aggregators have attracted investors and executives with previous Web experience. Lukasz Gadowski, a partner at Team Europe Ventures, co-founded shopping community Brands4friends that was acquired by EBay Inc. in December for about $200 million. Siegel helped to create Internet payment-service provider Clickandbuy, which was taken over last year by Deutsche Telekom AG. (DTE)
Just-Eat shareholder Greylock has emerged as one of the leading Internet investors since backing LinkedIn in 2004 and Facebook Inc. in 2006.
LinkedIn, the biggest professional-networking site, this year filed to go public. Just-Eat CEO Klaus Nyengaard said a share sale is also an option for his business.
“We need to reach a certain scale,” Nyengaard said in an interview, adding OpenTable Inc.’s IPO set the benchmark for his industry. The reservation company’s stock has more than doubled in value since its 2009 debut, giving the company a market value of $2.5 billion.
Just-Eat has delivery deals with 14,300 restaurants in Europe, while GrubHub has agreements with 4,000 restaurants in the U.S. and displays more than 13,000 menus on its website.
GrubHub aims to build a billion-dollar “category-defining online-ordering company,” said CEO Matt Maloney, who co-founded the company in 2004. The company forecasts it will process $200 million in orders in 2011, more than doubling from $85 million last year.
GrubHub knows its boundaries and won’t expand into offering food itself, Maloney said.
“We’re not interested in touching the food,” he said. “Restaurants do a good enough job in cooking the food.”