When Chicago-based GrubHub held its initial public stock offering on April 4, the guys in charge of EatStreet were keeping an eye on the outcome.

“It’s really encouraging to see a company in our space going public,” said Matt Howard, CEO and co-founder of EatStreet, a fast-growing Madison business that lets hungry people order restaurant meals for pickup or delivery online or through a mobile device. “(GrubHub has) done a good job to prove that this concept works.”

GrubHub, which offers a service similar to EatStreet’s, started 10 years ago. Today, it lists menus for nearly 29,000 restaurants in more than 600 U.S. cities, including Madison, and in London, and it has more than 600 employees.

GrubHub’s IPO was expected to raise about $95 million for the company. Priced at $26 a share for the IPO, the stock opened at $40 and has been trading in the mid-$30 range for the past two weeks.

In Europe, one day before GrubHub went public, Just Eat — another online restaurant ordering company — started trading shares on the London Stock Exchange.

Madison’s EatStreet began in 2010 and now handles online and mobile orders for 6,000 restaurants in 75 cities. Its primary targets are medium- to small-sized cities with colleges or universities. This month, the service is launching in Cincinnati; Fort Collins, Colo.; Gainesville, Fla.; and New Brunswick, N.J. Portland and Seattle will be among the next to conquer.

“Our goal is 150 cities by the end of the year,” Howard said. “We want to become a nationwide brand as fast as we can.”

At least one investor thinks EatStreet has a good chance of accomplishing that goal. Could EatStreet be another GrubHub?

“Yeah, sure, it could be,” said Jon Eckhardt, associate professor in the UW-Madison School of Business and director of the school’s Weinert Center for Entrepreneurship.

“I’m not saying that would be smart to try, but it could be,” said Eckhardt, who’s also a co-founder of the gener8tor tech business accelerator in Madison and Milwaukee.

Just in the three-month period since Jan. 1, EatStreet more than doubled its listings and its staff. The company now employs 35 full-timers and 30 part-timers, and recently moved into larger offices.

“All of our interns are UW students. They’re really smart, and they are dedicated to us,” Howard said. “The startup vibe works really well for college students.”

Howard and co-founders Eric Martell and Alex Wyler, all 25 years old, were the same age as their interns when they started the company.

EatStreet now occupies the entire fourth floor of 131 W. Wilson St., updated with a $100,000 remodeling project. Individual offices have been transformed into large, open work spaces; hardwood-looking floors were installed; and the ceiling came down, exposing a maze of pipes.

“It’s the startup look. Every San Francisco office looks like this,” Howard said, noting a game room with big-screen TVs, a pool table and a pingpong table.

“It’s a work hard/play hard mentality,” he said.

Focus on local restaurants

EatStreet does more than facilitate restaurant orders for people looking for eats. It focuses on locally owned establishments and creates a new website for them — for free — in addition to posting their menus on EatStreet’s website.

“So when we walk into a ma-and-pa restaurant, we can say, ‘You’re going to be on EatStreet; we’re going to give you a brand new website, mobile access, and you’ll be on Facebook,’ ” Howard said. “Our sweet spot is: We want to give more to restaurants.”

For consumers, EatStreet works with restaurants to offer promotions, and gives discount coupons to customers for every four orders they place. The company donates 5 percent of its profits to nonprofit organizations, Howard said.

He declined to give revenue figures, citing concerns about competition, but said revenues have more than tripled each year since the company began.

GrubHub, in its IPO filing, listed 2013 revenues of $137 million and net income of $6.75 million.

EatStreet began drawing kudos in its early days. Then called BadgerBites, it won the $10,000 top prize and free office space, worth $15,000, in the UW-Madison School of Business’ G. Steven Burrill Business Plan Competition in May 2011.

“It’s a great story,” said Scott Button, a managing director of Venture Investors, a Madison early-stage venture firm. Button was one of the judges in that contest. “Where they’ve come from, from that, to where they are today is a pretty amazing story.”

The following year, EatStreet was chosen for the first gener8tor class. Gener8tor also provided EatStreet’s first outside investment, of $150,000, when the company graduated from the three-month learning and mentorship program in August 2012.

Other investors forked over $2.4 million in early 2013, and this year, EatStreet completed a $6 million funding round in early April, with participants from the Midwest and both coasts, including: Cornerstone Opportunity Partners, Chicago; Independence Equity, Northbrook, Ill.; Great Oaks Venture Capital, New York: CSA Partners, Milwaukee; and angel investors. Silicon Valley Bank, Santa Clara, Calif., provided $1 million debt financing as part of that.

Great Oaks and Silicon Valley Bank both have Chicago offices, and Cornerstone’s founder and managing director Michael Gruber said he introduced them to EatStreet. Gruber has been involved in the Madison company since mid-2012, first as an individual investor and then bringing Cornerstone into the two funding rounds. He said Cornerstone has invested about $2 million into EatStreet and beyond that has provided advice and mentoring.

“We’re extremely excited about the company,” said Gruber, who also became EatStreet’s first non-company board member. “The founders and management have been great at the vision, the building of technology, as well as the execution. Being young, they’ve shown a great sense of maturity for their age.”

Professor Eckhardt agreed, and said EatStreet’s market is significant. “There’s a fantastic team executing on an opportunity that seems quite large. There’s an immense number of restaurants in the U.S. that don’t have the type of service that EatStreet provides,” he said.

Restaurants pay EatStreet 10 percent of each order that comes through EatStreet or the services it provides. “It’s very much a partnership. If they succeed, we succeed,” Howard said.

Madison is EatStreet’s No. 1 city and Milwaukee is No. 2. It’s probably no surprise that pizza is the most popular food item ordered, followed by Chinese food and submarine sandwiches, in that order.

Menu for success

What could lead EatStreet to long-term success in a world where many startups barely make it out of the gate?

Eckhardt said he sensed something special, back when EatStreet was chosen for gener8tor. “We look for people that are truly dedicated, like 100 percent, to their idea; that their idea has some initial market traction; that they’re building something that people actually want to purchase; and that there’s a large, addressable market,” he said.

The technology is strong, letting EatStreet quickly create websites and apps for restaurants, and so is the business model, said Cornerstone’s Gruber. And there’s also another critical factor.

“Look at the people involved in this company,” Gruber said. “That’s the one thing I’ve continually been impressed with ... how amazed I am at the things that Matt and Eric have been able to do. They’ve been like bulldogs.”

Gruber said he thinks that rather than follow GrubHub’s lead and stage an IPO, EatStreet is more likely to be acquired at some point, either by a competitor such as GrubHub or by a major e-commerce company, such as Google, Yahoo, or Amazon. Its website platform for restaurants could easily translate to other types of small businesses, he said.

“There are 10 to 12 multibillion-dollar companies that Eat Street could become very interesting to,” Gruber said.

Madison’s Venture Investors has not funded EatStreet up to now. “But that has nothing to do with the viability of their business,” Button said. “You could just tell: the idea of failure and taking no for an answer for these young men was never in their vocabulary.”

He said EatStreet can be a good model for other tech startups. “Matt is a case study for what we need to have happen here. We need 50 more of those here in Madison or here in our state,” Button said. “If they can do this, why can’t others?”


Judy Newman is a business reporter for the Wisconsin State Journal.