“It’s so much fun to raise money when you don’t actually need it.”
That’s one of the first things Stefania Mallett, CEO and co-founder of ezCater, tells me when I ask about the $35 million Series D round her online business catering marketplace announced on Wednesday morning. The Boston-based startup has now raised a total of $70 million, the majority of which has been raised in the last year and a half.
Mallett declined to say what ezCater’s valuation is with the new round but says it’s much higher than when the startup closed its $28 million Series C round in October 2015.
While some on-demand food ordering startups like DoorDash, GrubHub and Postmates see low margins in part due to the large networks of independent contractors they run, ezCater has avoided that costly business model by running a two-sided marketplace connecting caterers with businesses. That means ezCater doesn’t have anyone on payroll delivering the food.
It’s that “asset-light” business model — one that’s very similar to Boston online alcohol marketplace Drizly — that helped attract ICONIQ Capital as ezCater’s lead investor for the round, Mallett says. ICONIQ is a Silicon Valley family office and venture firm that manages funds for big-time tech executives like Facebook’s Mark Zuckerberg and Twitter’s Jack Dorsey.
Because ezCater wasn’t in need of money to keep the lights on, Mallett says, her startup was able to be more selective with which investment firms she wanted to work with to put ezCater’s business into overdrive.
She says she originally met an analyst from ICONIQ at an event run by America’s Growth Capital, where investors often scope out for new deals. After speaking with various investors, Mallett says she received five term sheets. Ultimately, she decided to go with ICONIQ as the lead, with existing investor Insight Venture Partners participating.
“I have to say, we had to turn down fantastic partners,” Mallett says.
With the new round, Mallett says ezCater plans to hire around 100 people within the next year. That includes doubling its staff of developers to 50. Within the last 18 months alone, ezCater has doubled its headcount to 175 employees, who Mallett says are obsessed with finding new ways to be efficient and automate tasks — another thing that attracted ICONIQ.
“We really have 175 people who are constantly thinking, ‘how can I do this better?’”
“We really have 175 people who are constantly thinking, ‘how can I do this better?’ And that leads to a very effective operation,’” Mallett says.
EzCater has been growing at an annual rate of 2x to 3x for the last four or five years, Mallett says, with revenue outpacing bookings because ezCater has found ways to “create more value for caterers.” In other words, it has found more ways to get caterers to pay for its services.
Caterers can list their menus on ezCater’s website for free and they pay ezCater a percentage of each order they receive as a fee. As for one way ezCater has been able to bring in more money, the startup provides a Google AdWords-like service exclusively to caterers that have received four or five stars on its website, Mallett says. This gives them higher visibility in the search results depending on what businesses are looking for. It also gives businesses an easier way to find highly-vetted caterers.
Caterers and businesses alike are apparently big fans of the service. Nearly 50,000 catering businesses are now on the marketplace, and ezCater has now processed orders for more than 16 million business people across the country. In addition to hiring, the startup plans to use some of the funds to increase those numbers through sales and marketing efforts.