Someone once told me there’s riches in niches, that focusing on a small and specific audience is great business practice. This niche newsletter can not yet confirm nor deny that advice, but I do know that incremental business is valuable to even the largest and most successful corporations.
On Tuesday, DoorDash announced plans to acquire Grubhub’s college campus business for $300 million. Grubhub Campus Dining, f.k.a. Tapingo, serves millions of students at 450 colleges and universities — students place orders for pickup through the Grubhub app, which links to campus meal plans. Grubhub acquired Tapingo from its founders for $150 million in cash in 2018. Then, Tapingo was dominant and specialized, serving students at 150 million colleges and universities. And since then, Grubhub has managed to triple that coverage while taking advantage of the relatively closed networks of college campuses to iterate and experiment — deploying delivery robots, for example. (A self-contained college campus is surely a more bot-friendly environment than most city streets.)
2018 was also the year that Grubhub’s valuation (and probably its popularity!) peaked — the company was worth as much as $13 billion before steadily falling in value and market share to relative newcomers DoorDash and Uber Eats. Early last year, Wonder, the New York-based food hall/delivery kitchen/virtual brand moonshot from entrepreneur Marc Lore, acquired Grubhub for just $650 million — $150 million cash and $500 in debt.
In addition to the acquisition, DoorDash also committed $125 million to Wonder’s Series D fundraising round.
“Wonder was founded to make great food more accessible. To us, that means higher-quality food at lower prices, with more choice and convenience, in more communities,” Lore said in a statement. “The partnership also allows Wonder to focus on our long-term ambition: a fully autonomous food system that can plan, produce and deliver personalized meals at scale, serving all 21 meals people eat each week.”
As Wonder streamlines Grubhub’s business, DoorDash scores big, picking up successful slice of Grubhub’s business that once set it apart from its competitors, reaching brand-new adults as they establish consumption habits.
Lore says DoorDash is well-positioned to grow the campus dining business. I can think of approximately 83 billion reasons why.
