Not so long ago, venture capitalists applauded growth at all costs for those they were funding.

Now, the word is that making money matters and there’s new ethos that has VCs invoking terms like “discipline,” “unit economics,” and . .. . (gasp) “profitability,” (ref WSJ).  The reason for the dramatic change has been the frosty reception from public investors who found fault with companies that burned through cash without a second thought, like Uber, Lyft, WeWork, and Peloton.  And, of course, that doesn’t sound like good news for companies competing in sectors where their rivals are desperate to gain scale, such as food delivery companies.  Grubhub seems particularly hard hit by this situation, having shed 53% of its market value during the past year and 26% over the past three months.  The company’s rivals, UberEats and DoorDash have taken over market share from GrubHub during the past 18 months.  Not surprisingly, while losing its lock on the market, GrubHub has consequently become less profitable – net income fell from $54 million in the fourth quarter of 2017 to a loss of $5 million during the same period of 2018.  The company has said in its first quarter report this year that it would be more disciplined about spending despite heavy competition.  Regardless, even if that did happen, profits haven’t come bouncing back.  And, it’s expected that the company will deliver a $2 million profit report for its third quarter, which would be down more than 90% year-over-year.  Since GrubHub is the only publicly traded pure play in the industry, GrubHub’s shares are a seen as a barometer of the market’s views on the economics of food delivery.  Or, perhaps, in actuality, it’s a view on companies that spend without consideration of those dynamics that the VCs are now pushing.  Time will tell how GrubHub fares in all of this era of the “new economy.”


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