GrubHub

Dominating New York still didn't stop DoorDash. Grubhub held 80 to 90% of New York when DoorDash competed with it, yet DoorDash won through ambition and execution.

Tavel uses Grubhub's entrenchment in New York as an example of a condition that makes a market unlikely to tip to a newcomer, so she advises starting in small markets like Des Moines first.

Lenny's Podcast

Grubhub's CTO fired a passive, highly credentialed hire after one week. A QA hire with an amazing resume sat waiting to be told what to do and was let go after a week.

Casey Winters uses it to argue early-stage hires must show agency and bias to action rather than expect a 90-day plan. The CTO's line: "this is a startup. I'm not going to build a 90-day plan for you."

Subversive▶ 38:30

Cheap, divisive train ads let a small Grubhub punch above its weight. Grubhub ran offline ads on Chicago trains at roughly one hundredth of what Verizon might spend, using construction-paper design and cursing characters that showed the irrationality of hunger.

Casey Winters was Grubhub's first marketer, joining with a $1 million Series A and leading demand growth through the IPO over five and a half years. He argues brands get less divisive as they scale, so "you got to go a little bit bigger when you're earlier stage."

Subversive▶ 45:35

Grubhub's asset-light model kept it from fulfilling delivery itself. Grubhub's high-margin marketplace couldn't answer rivals who lost money on logistics. It was slow to change the atomic unit of its supply to include delivery it fulfilled, and DoorDash and Uber Eats overtook it.

As a public company it also lacked the capital access of its private rivals. Sarah Tavel puts it alongside HomeAway and VRBO losing to Airbnb: "You can never rest on your laurels when you're building a marketplace."

Subversive▶ 48:20

Dominating New York still didn't stop DoorDash. Grubhub held 80 to 90% of New York when DoorDash competed with it, yet DoorDash won through ambition and execution.

Tavel uses Grubhub's entrenchment in New York as an example of a condition that makes a market unlikely to tip to a newcomer, so she advises starting in small markets like Des Moines first.

Subversive▶ 33:50

Challengers broke Grubhub's network effect by offering far wider restaurant selection. DoorDash and Postmates started in less dense suburbs with restaurants that had never offered delivery, and even delivered from restaurants they had no agreement with. That made them look far more comprehensive than Grubhub.

Grubhub had raised $80 million plus $100 million in its IPO, while the challengers raised $100 million every six months and used it to lock in national chains. Pandemic changes later turned their margins positive. Casey Winters cites Grubhub's restaurants and diners as a classic cross-side network effect, the kind a much larger selection can disrupt.

Lenny's Podcast▶ 1:20:29

Grubhub's asset-light model kept it from fulfilling delivery itself. Grubhub's high-margin marketplace couldn't answer rivals who lost money on logistics. It was slow to change the atomic unit of its supply to include delivery it fulfilled, and DoorDash and Uber Eats overtook it.

As a public company it also lacked the capital access of its private rivals. Sarah Tavel puts it alongside HomeAway and VRBO losing to Airbnb: "You can never rest on your laurels when you're building a marketplace."

Lenny's Podcast

Assume the disruptor is right and copy or buy it early. Grubhub assumed negative-margin delivery players would stop getting subsidized, but they kept raising money and won. Casey Winters says Grubhub could probably have acquired DoorDash several times early on.

He calls this Grubhub's missed "Netflix moment" and argues strategy should assume the entrant plays an optimal game: "the only rational reaction is overreaction."

Lenny's Podcast▶ 27:53

Direct new leaders closely until they prove they make better calls. Erica Warren, hired to build Grubhub's loyalty program, told Casey after a month, "you're in all my meetings, I got this." He stepped back and she crushed it.

His rule: a founder's intuition should lead until the person shows they know more, and employees should signal either "I need direction" or "I got it, trust me."

Lenny's Podcast▶ 46:20

Founder bottlenecks slowed a competitor Grubhub acquired. The acquired company still routed every decision through its founders, which limited how many markets it launched, restaurants it signed and growth channels it ran.

Casey's lesson is that after product-market fit, stop doing things that don't scale and scale what works: "what got you here won't get you there."

Lenny's Podcast▶ 57:45