The State of Wisconsin Investment Board (SWIB) has participated in a $15 million growth funding round for EatStreet, the US online food delivery platform company. The raise was led by tech-focused firms 4490 Ventures and Lumia Capital, according to a press release.
The funding round more than doubles the total investment in EatStreet since its inception to nearly $30 million, according to Securities and Exchange Commission (SEC) filings.
GCI Capital, MATH Venture Partners and existing investors including Gener8tor, Cornerstone Angels and Independence Equity also joined the funding round.
The board invested both directly and indirectly in the locally-based company. A representative for SWIB confirmed that the board had participated in the raise through a private equity fund with an allocation of $270 million, focused primarily on Wisconsin businesses launched in 2000. SWIB also serves as one of two LPs backing 4490 ventures, an independent venture capital firm focused on Midwestern tech startups. The University of Wisconsin-Madison’s Wisconsin Alumni Foundation serves as the firm’s other LP. EatStreet was founded by three University of Wisconsin students in 2010.
SWIB intended to make five new direct investments – two new and three existing, and consider a discretionary fund increase in late 2015, according to PEI’s Research & Analytics division. The institution also said it would work to foster VC relationships through its venture capital Catalyst Portfolio, launched in 2011.
EatStreet provides online delivery and takeaway service to more than 250 US cities. According to the SEC filing, the company generates between $1 million and $5 million in annual revenues. The company will use the funding to increase its market share, expand into additional cities and further develop its core products. The company also plans to hire an additional 30 service support team members by the end of 2016, according to the release.
The raise comes as the US market for online food delivery platforms becomes increasingly crowded. In April 2014, industry leader, GrubHub issued a $192 million IPO that nearly doubled its initial $100 million. The following year saw start-ups in the sector increase by 50 percent, a CB Insights report found. Despite the growing competition, and widespread speculation that the sector is in the midst of a bubble, investors continue to show enthusiasm for the space. Most recently, Bloomberg reported that San Francisco-based DoorDash may return to the well just eight months after a $40 million raise led by Sequoia Capital.
Despite the flood of new brands and capital Martin Gedalin, founder of Lumia Capital, said EatStreet has room to grow.
“We spend a lot of time looking at investments in the food space, globally. It’s a highly localised business with a very strong competitive moat and room for multiple winners in each country,” he told Agri Investor by email. “Online penetration remains relatively low in the takeaway market and there is room for significant growth. When we’re talking about a $70 billion market for takeaway in the US alone, this is very meaningful.”
James Crawford, Principal at 4490 Ventures, said his group was impressed by EatStreet’s ability to grow in tier two and three cities. He said his company is not specifically targeting other online food delivery companies. However, he told Agri Investor that he doesn’t see the sector as oversaturated to the point that newcomers can’t carve out a space in the market. Instead, he said the move to online ordering platforms reflects a consumer shift that will only open more opportunities.
“I think that consumers are increasingly interested in companies that are essentially selling their time back to them,” he said, citing other convenience service providers from grocery delivery to valet dry cleaning services. “I think there’s a lot of opportunity here.”