Exclusive: Food Delivery Search Engine GrubHub Raises $20 Million

We’ve learned exclusively that Chicago-based startup GrubHub, a service that lets you order food for delivery or take out from local restaurants online or by mobile phone, has raised a whopping $20 million in Series D funding led by DAG Ventures with Benchmark Capital participating in the round. The startup recently raised $11 million in funding in November 2010, and has raised $34 million to date.

GrubHub gives its users access to food delivery service from more than 13,000 restaurants in U.S. cities including: New York, Chicago, San Francisco, Oakland, Boston, Los Angeles, Washington DC, Philadelphia, San Diego, Seattle, Portland, Denver and Boulder. CEO and co-founder Matt Maloney says he expects to list 80,000 restaurants in the next three months and will be in over 26 cities by the end of this year.

GrubHub is free for diners who order and pay for their meals with while restaurants pay
commissions on each order processed. Restaurants that do not currently partner with GrubHub can still list their telephone numbers and menus for free. And of the 13,000 restaurant menus currently available on GrubHub, 5,000 establishments are paying GrubHub to manage and market a white-label online order and food delivery service.

Mobile has also been a part of GrubHub’s expansion strategy, and the startup has launched iPhone and Android apps in the past year that allows users to find the restaurants that deliver near their current location. The apps feature the same functionality as the website, including the ability to view menus, comments, reviews and order, but adds GPS to the mix, making it easy for users to order food from the restaurants near their location.

GrubHub has experienced a 300 percent increase in mobile food orders since last Fall. The company projects mobile orders to make up 20 percent of its total food sales by the end of 2011, which is compared to less than two percent in 2009 (mobile food orders accounted for 10 percent of total food sales in 2010).

And if you take a look at the numbers (which GrubHub is more than willing to be reveal), the startup appears to be on a high-growth track. GrubHub sent $85 million in orders to restaurants in 2010 and is projected to send $200 million in orders by the end of this year. Last year, GrubHub pocketed $8.5 million in revenue (which is over 1000 percent growth from 2007’s revenue), and is on track to more than double revenue in 2011. And the company has only 100 employees.

Maloney says he wasn’t planning to raise such a big round but after the recent $11 million Series C raise, he said he received emails and calls from over 30 top-tire VC firms looking to invest in the company. The new funding, says Maloney, will be used towards acquisitions and to boost GrubHub’s product development. For example, within the website and mobile apps GrubHub will be adding a “pick-up” option which will show users restaurants within a mile or so, that allows for pick-up orders.

Bill Gurley, general partner of Benchmark Capital, said of the new round: “This additional funding will further support GrubHub’s momentum and enable it to follow in the footsteps of Benchmark’s other on-line portfolio companies such as OpenTable, Yelp and Zillow, which all share a template of local, social and mobile components.”

Maloney feels that GrubHub can become the next OpenTable (which also had roots in Chicago), and that there is tremendous room for growth in the ector. He says that there are more than 300,000 delivery and takeout restaurants in the country and on average, GrubHub users order out more than 10 times a month. “Pickup and delivery are the fastest growing segments in restaurants and one of the largest sectors of the U.S. economy,” he explains.

Another goal Maloney has is taking GrubHub public, also following in the footsteps of OpenTable, which filed for an IPO “Going public is a very realistic opprtunity for us wihtin the next two years,” says Maloney.

Of course, for this to happen, GrubHub will have to increase revenues (OpenTable has close to $60 million yearly revenue when it went public), and prove to investors that its business is stable and growing in terms of both sales and users. Those are challenging and ambitious goals and certainly won’t be easy to achieve. But with savvy acquisitions, the right business model and a significant uptick in usage, GrubHub certainly shows potential to be a lasting presence in the online food services industry.