MAP - Group 9

Investing in online marketplaces

Q. Which model should they invest in?
Of the five models in the online food delivery space, Greylock should invest in the prepared
meal kits model (Plated). The pros and cons of the model are listed after a brief criticism of
other models:
1. EatStreet (restaurant delivery) – The user experience in this model is in control of the
restaurants. Thus, EatStreet may not be able to build a consumer brand effectively
though the model is scalable. Markets with larger profit pools are already dominated
by GrubHub.
2. Postmates (courier delivery) – Search and discovery of food and cuisines in this
model will be incomplete as it doesn’t list all restaurants or their digital menus.
Chances of mismatch of products ordered and products available at the restaurant at
that time is difficult. Postmates is a horizontal bet at hyperlocal delivery space and
should not be looked at as a food-delivery platform. The scalability is limited by the
number of couriers that join its network.
3. Sprig (on demand food delivery) – The model is not scalable in terms of variety of
food and it can’t see exponential profit growth as profit will have a linear relationship
with the number of cars with the special retrofitted heating units. It doesn’t earn
anything from consumption at other restaurants.
4. Kitchensurfing (chef events) – The potential is limited to special events and
occasions and the user experience is not in control of the platform.
The pros and cons of the Plated model are:

Plated - Meal Kits

Pros Cons

Difficult to customize for tastes and

Taps into the large home cooked meal market
preferences
Not as exponentially scalable as pure tech
Control over user experience
platforms
Branding built into product (celebrity chef
Complicated supply chain required
assortments)

Model is easily extendible to assortments

Higher margins due to higher value add of

product, assortment, discovery and delivery

Greater defensibility of brand

Some visibility into future revenue through

scheduled deliveries and subscription model
 MAP - Group 9

Q. How to value the business?

The following steps can help us value the business
1. Determine the total addressable market size for meal kits service. Look at the number
of households that can become users of this meal kit (family dinners for parents who
shop for grocery and prepare a meal).
2. Filter out households based on income, geography, behavioral traits to arrive at the
serviceable market.
3. Determine the share you can capture based on competition, regulation and supply
constraints.
4. Determine the gross margins you can make at scale per meal kit.
5. Value the business based on capital required, fixed costs and available gross margins
at the volumes when we capture the targeted market size.