District-based investors are backing a food delivery service that operates in midsize cities, such as Phoenix, Indianapolis and Denver, where there are fewer couriers offering to bring your dish to the door.
OrderUp, based in Baltimore, has secured $7 million from Revolution Ventures and former LivingSocial chief executive Tim O’Shaughnessy. Founded in 2009, the company has expanded into 35 cities across the United States without raising any other money to date.
“A lot of people will be like, ‘Oh, another food tech start-up that received money,’ ” said co-founder Chris Jeffery. “We already have a substantial following and users in these markets. We’ve already built a company with 45 employees. We’ve built a profitable business and then we decided to raise capital.”
There are a number of Web sites and mobile apps that facilitate online food orders, such as Seamless or Eat24, and others that will deliver those orders to you if restaurants don’t offer their own drivers.
OrderUp tries to separate itself from competitors by offering both ordering and delivery services, Jeffery said, as well as operating in smaller markets that are less likely to be attractive to companies whose business models are built upon large cities.
“We take for granted that we can order food online,” said Revolution managing partner Tige Savage. “The fact of the matter is in a majority of locations you can’t do that. There’s no good food ordering options outside of the major metropolitan areas.”
“Just because you’re from Albany instead of New York City doesn’t mean you have any less desire to order online,” he added.
The infusion of money will allow OrderUp to open marketing and development offices in New York and Boulder, Colo. as the company ramps up plans to expand into additional cities.
The deal marks the second time in just the past two weeks that O’Shaughnessy has paired up with Revolution or one of its partners on an investment. He and Revolution co-founder Steve Case recently backed Framebridge, a Web site where amateur art collectors can order custom frames.
But O’Shaughnessy, who officially stepped down as chief executive of District-based LivingSocial earlier this month, said he hasn’t taken on a new role as full-time investor. Instead, O’Shaughnessy is cutting checks “ad hoc” as deals present themselves, he said.
The OrderUp investment is a unique fit for O’Shaughnessy, who experimented with online food ordering and delivery while at LivingSocial. The company ultimately abandoned that line of business.
“I think I came away from that experience ultimately more positive on the long-term future of this kind of business,” O’Shaughnessy said. “There’s all sorts of reasons why it didn’t make sense for LivingSocial to pour the gas on, but I came away understanding what the economics at scale should be.”
The deal also matches Revolution’s pattern of backing companies that use the Internet and mobile apps in a way that allows consumers to more easily access everyday services. In June, Revolution lead a $30 million investment in Handybook, a mobile app that allows people to request housekeepers and repairmen.
“There is a transformation among merchants and consumers that five years ago the expectation was basically you could buy any product online. Today, there’s an increasing expectation you should be able to buy any service online,” Savage said.
More from Capital Business: