Super relevant choice and of course as the defender of GRUB I am obligated to chime in!
You articulated the business model very well – and I think Postmates’ User Interface is much better than Grub’s and their service is inherently ‘cute’ which may explain why all the wealthy techies of SF are so into it 😉
I do wonder about their alignment of their operating model throughout the ecosystem — the anecdote Carol points to of restaurants being forced to accept Postmates orders is troubling to say the least. It seems arrogant to force someone to be a customer; and thinking about the model, I wonder about the sustainability of the ‘flywheel’ if major stakeholders in the ecosystem feel used or rankled.
The pricing issue is also tricky – as is discussed on this medium post. the https://medium.com/@mattmaloney/not-all-that-glitters-is-gold-847c81e211b#.xavoa8iqj
My final question my just be one we will have to watch play out – but I wonder how ripe for disruption the delivery business really is considering Uber exists with first mover advantage and a deep, re-purposable fleet on one side while Amazon Prime and their distaste for profit margins sit on the other (with many an upstart in between). Given this landscape, I wonder if the ‘Horizontal’ approach will really yield the returns many are hoping for.
Especially when the ‘poster-boy’ (pun intended!) can’t seem to turn a profit even at current, seemingly elevated prices.
Terrific post Art. The MLP and then de-MLP Robby alluded to is fascinating to me; but because I am not well versed in the repercussions of each I will leave that to you to hash out.
What I like most about the post and KMI is they have made two pretty astute innovations which underpin the biz model/operating model alignment. First, they have been financially innovative around the capital structure (as you mention they were first to MLP and then first to reverse it) — and while its true they have used massive amounts of debt to grow, you rightly point out that the high predictability of their revenue stream and low risk level of infrastructure assets make this quite sensible – even if for now, the market doesn’t like it.
KMI was also early to understand the value of dividends to the shareholder even in the context of a leverage ladened balance sheet. Time will tell if they have been overly aggressive here – but I do like the shareholder friendly behavior especially in the context of a highly capital intensive but highly predictable, fee-based operating model.
Lets hope the capital markets stay (re-open?) for these and their ilk!
Grotta thx for response and very good point on Boston being awful on Seamless. Not really sure how to explain it – I guess it goes back to Ves and Ellen’s point about being a platform vs. owning the infrastructure, though as I argue I do believe that is the strength of the economic business model.
Anyway- heres the response from the horse’s mouth (GRUB CEO)
Its certainly a debate playing out in the market as we speak…although I’d argue that the delivery business broadly is not all that interesting to me given the razor thin economics and amazing efficiency of AMZN Prime and on the other side a player like Uber with the infrastructure in place to compete. In this arena its really the value GRUB is adding to both sides of the transaction (re: the operating model) which will allow it to grow and either prove to be a true moat, or not; though all are right that they have not yet proven efficacy beyond NYC/Chicago which is troubling.
I guess where I really struggle, though, is how some of these abhorrently loss-making delivery businesses get $Bn valuations and Grub is only worth $2bn despite a proven economic model which actually turns a profit…but alas perhaps thats a question for another class!
Incredible how far ahead of the competition MobileEye is in terms of enabling the driverless car. We took the company public at MS and did another capital raise this past spring and I remember one fact: they have 100% percent market share with OEM’s in terms of the ADAS technology. Tough to beat that…especially with Europe’s safety commission mandating the technology in order to get a 5-star rating on cars beginning next year. I suspect soon the world will be hearing more about this company…as we used to say: not many companies in the world growing revs >50%, 100% market share, 75%+ gross margins and the TAM of all Autos!