Grubhub Broadens Platform With LevelUp Buy

GrubHub is buying LevelUp for $390 Million, deepening GrubHub’s loyalty, payment and ad platforms for clients like KFC and Taco Bell at a time when advanced ordering is remaking the QSR (quick service restaurant) experience. The acquisition also gives GrubHub a new white label capability for serving many of LevelUp’s clients, who are mostly comprised of regional QSRs. LevelUp’s Boston-based brand and team is being kept intact, and will continue to be led by orange-shirted founder Seth Priebatsch.

In our view, selling to GrubHub is a good way out for LevelUp, which had attracted $108 Million in funding but hasn’t seen a lot of momentum. In the early days, funders included Google Ventures, Deutche Telekom and various VCs. Most recently, in late 2014, ChasePay provided a $10 Million infusion, hoping to leverage LevelUp’s millennial-oriented, mobile- ordering and promotion “wallet” capabilities.

The company, which started as Scvngr, a loyalty play, emerged in 2011 as part of a group of roughly 30 payment intermediators, including such promising players as Google Wallet, ISIS, PayPal, First Data Offerwise, Groupon Rewards, Swipely, Punchey, Cartera, Cardlytics, LocalBonus, Mogl (Empyr), Five Stars, Belly and Edo.

LevelUp sought to differentiate itself from the pack as a new POS provider that would limit processing costs in exchange for paid loyalty and promotion services. In the same way that media companies use Facebook Connect to hook up with their customers across the board, LevelUp positioned itself as a common “open” connector for restaurants. “We’re Android, Square is Apple,” said CEO Seth Priebatsch during a memorable analyst presentation.

Like others, the company also hyped the strategic value of its data. Priebatsch told Pymnts in 2014 that “our data actually shows that customers will eat at the same restaurant, during the same fifteen minute window and order the same thing more than three times per week.”

Certainly, industry trends would seem to have gone its way. During its seven-year existence, there has been a massive rise in eating out and cashier-less, advanced ordering. There has also been widespread adoption of e-wallet supporting smartphones and wearables, such as Apple Watch. But the company – along with others in the space – had difficulty building an economical sales channel, and convincing restaurants it was more than just a new middleman and cost center.

Sales channels in the highly specialized QSR space also proved to be a real challenge for the company. After initially employing its own city-by-city sales groups, LevelUp made various deals to work with independent sales organizations like Cayan; payment processors like Heartland Payment Systems; and even Sprint. But they didn’t really stick. The company also suffered from constant shifts in strategies with multiple rounds of layoffs, especially in its early years.

After sell-offs, consolidation and closures, among the only survivors in the space specifically aimed at restaurants are Square, UpServe and Venga.