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In the face of failure, do you give up and cut your losses, or do you learn from your mistakes and try again? This is the dilemma faced by five college friends in 2012, when they made a pivotal decision that eventually led to the inception of their successful startup, Caviar. Founded in 2012 by five college friends from the University of California, Berkeley, this food delivery app transformed a simple idea into a $410 million company.
Learning from Setbacks
While Caviar eventually turned into a success story, its origins go back to the university students’ failure in their first venture. Co-founders Shawn Tsao, Abel Lin, Andy Zhang, Richard Din, and Jason Wang had initially planned to create a daily deals app. They pitched their original startup, named Munch on Me, as a version of Groupon exclusively based on food deals.
However, faced with challenges and investor reluctance due to Groupon's losses at the time, their startup sputtered to a halt. As Tsao recounted in an interview with CNBC, Munch on Me showed “all the signs of a failing company. We came to the realization that we had $10 in the bank.”
Despite pressure from family members to abandon their entrepreneurial pursuits and focus on their studies, the team made the difficult decision to try again. Driven by determination and resilience, they gave themselves six months to come up with a new, successful idea.
Innovating to Meet a Need
Inspiration often strikes in unexpected moments. For Caviar, it was a desire for a simple sandwich during a brainstorming session that gave them their new idea. Tsao recalled feeling hungry while scribbling ideas on a whiteboard, and wishing he could get his favorite sandwich from a restaurant across town.
At that time, delivery services like Uber Eats were not yet widespread, and restaurants without their own delivery team couldn’t send food to customers at home. So the group shifted their business focus to create what they termed “Uber for food.”
A Slow But Steady Expansion
In July 2012, Caviar made its debut in San Francisco, initially focusing on providing weekday lunches to companies. They made a conscious decision to operate with just a handful of restaurants, but to focus on well-known names.
Initially, the co-founders took on the deliveries themselves, but as their orders grew, they were able to hire couriers. They created a fair compensation structure where couriers kept the $10 delivery fee and a portion of the gratuity, while the rest, including food surcharges, went to Caviar.
The initial model saw success, and Caviar gradually expanded to include 30 restaurants in San Francisco. However, during its inaugural year, the company concentrated on just two simple goals for success: increasing weekly orders and revenue.
At first, Caviar generated a loyal customer base and avoided over-extending itself by offering an invite-only membership. However, in March 2013 it opened its services to the general public, allowing for greater expansion.
The company soon ventured into new territories, launching its services in New York City and Seattle. With 15–20 restaurants in each locale, this marked a strategic move to capture diverse markets.
Caviar's slow but steady expansion demonstrated a commitment to quality and exclusivity, and a meticulous approach to building relationships with both restaurants and customers.
Leveraging Strategic Partnerships
An important part of Caviar's growth strategy centered around the restaurants it chose to partner with. It differentiated itself from the other delivery services in existence at the time by focusing on top-notch restaurants.
Tsao emphasized, "We realized that if we sign [the] best burger or best taco in the neighborhood, all of a sudden everyone’s talking about us in an indirect way." By focusing on higher-end, popular restaurants, the startup not only differentiated its business model from similar services but also tapped into the restaurants’ existing customer bases.
This unique approach allowed Caviar to ride the coattails of restaurants' existing popularity, minimizing marketing costs. As Tsao commented, promoting the business was easy “because all the marketing work was actually done by the restaurants themselves.”
As Caviar’s popularity grew, the company gained investments from notable backers like the Winklevoss twins, Andreessen Horowitz, and Tiger Global Management. The small startup had positioned itself for substantial expansion.
A Success Story
In 2014, just two years after its launch, Caviar received a nine-figure acquisition offer from payments platform Square (now Block). The deal included stock in the combined company and a promise to bolster Caviar's team with 20 top engineers from Square.
The team was torn at first between accepting the deal or continuing to build their company to greater value. In the end, though, Tsao reflected, "The offer was hard to turn down because we knew that would be the best direction for the company."
Under Square's ownership, Caviar experienced exponential growth, tripling order volume and doubling its employee headcount. The company expanded to 15 cities across the country within the next six months.
Caviar experienced further growth when it was sold to DoorDash for $410 million in 2019. Although the co-founders were not involved in this sale, it demonstrates the value of the company that they built and nurtured to success.
The original team of five is still in the food and tech sector today, having ventured into angel investing and established their own Thai chicken restaurants. Co-founder Jason Wang was recognized for his success in the company on the Forbes 30 under 30 list.
Conclusion
Caviar's journey stands out as an example of resilience and strategic decision-making. Learning from setbacks, differentiating their business model from the competition, and focusing on targeted growth were instrumental strategies in their success. Every step of the way, Caviar’s founders made strategic decisions that brought them closer to their end goals. The co-founders' ability to adapt and try again, even in the face of failure, underscores the importance of determination and resilience in the entrepreneurial game.
Sources
This article was originally published in Certainty News: Article Link
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