Apr 4, 2014 · 4 minutes

GrubHub's initial public offering might not excite Silicon Valley in the same way Twitter's or Facebook's IPO did, but investors on Wall Street have greeted the company with open arms as its share price rose 45 percent in early trading.

The company priced its shares at $26 -- higher than the company forecasted in its initial price range -- and was trading at nearly $41 early this morning. (It is trading at $37.70 at time of writing.) The excitement comes on the back of a surge in orders placed on mobile devices in the last few years and a 67 percent increase in revenues between 2012 and 2013.

GrubHub isn't exactly the flashiest tech company around. It's an established player in what might be seen as a trivial market: ordering food and making sure it gets delivered to your door. While that is certainly useful, especially if you live in a closet apartment that isn't conducive to actual cooking, on a scale from "the wheel" to "virtual reality" GrubHub lands somewhere around the "phonebook."

Nevertheless, GrubHub is part of an important trend of companies like Uber that add a layer of technology to non-tech interactions. And investors worried about whether or not a business has millions of customers who rely on it for something they do about three times a day are proving to be very excited indeed, at least this morning. People are going to get sick of "Candy Crush" -- they probably aren't going to get sick of ordering food.

Reactions from around the Web

The New York Times describes the rush of IPOs coming this year:

One thing is clear: The market for I.P.O.s has reached levels unseen in years. Companies worldwide raised $47.2 billion in new stock sales during the first quarter, up 98 percent compared with those in the same period a year earlier, according to Thomson Reuters.

The United States has proved even busier, with 64 companies raising $10.6 billion in the most active first quarter since 2000, according to data from Renaissance Capital.

So far, the pace of new offerings shows little sign of slowing down. Several big names — including the Alibaba Group, the Chinese online commerce giant whose coming I.P.O. could set records for size — are expected to debut this year. Other eagerly anticipated offerings include those for the online storage provider Box and the sports camera maker GoPro.

The Wall Street Journal notes that tech stocks might not be as attractive as some think, despite the increase in companies going public:

However, while IPO activity continues at a healthy rate, a selloff in March of high-growth tech stocks showed the risk involved in these often volatile stocks, particularly because of the lofty valuations of many of these companies. 'Candy Crush' maker King, for example, had an underwhelming debut late last month when investor excitement fizzled.

CNN Money points out that GrubHub's profits are declining and that it has some legal issues:

GrubHub has reported strong growth in the past few years. The company generated $137 million in revenue last year, up significantly from 2012, according to its filings with the Securities and Exchange Commission. It had 3.4 million "Active Diners" and more than 28,000 affiliated restaurants.

But despite the growth, GrubHub's profits have been declining. Net income last year was $6.7 million, down from $15.2 million in 2011.

The company is facing a potentially expensive lawsuit by a software company in San Diego that claims GrubHub, along with several other food and technology companies, violated patents related to online order-synching technology and online menus.

Bloomberg offers some more financial context for the IPO:
At the IPO price, it will debut at a valuation of about $2 billion, or almost 15 times last year’s revenue.

E-commerce companies in the U.S. fetch an average of 2.5 times last year’s sales, while Internet services companies trade at over 6 times, data compiled by Bloomberg show. GrubHub lists its competitors as traditional restaurants, which trade at much lower valuations. The Bloomberg U.S. Full-Service Restaurant Index, which includes Buffalo Wild Wings Inc. and Darden Restaurants Inc., trades at about 1 times sales.

Pando weighs in

I wrote about GrubHub's newest competitor, Yelp, when the company's IPO was announced:

Yelp and GrubHub used to have little overlap. The former company focused on helping consumers find something to eat (especially in a new city) while the latter allowed them to order take-out without having to talk on the phone.

But Yelp has recently expanded its offering by adding Eat24, an ordering service similar to GrubHub, to its mobile app. Now that consumers can both find and order food with Yelp, why would they choose to use a service like GrubHub?

GrubHub will have to learn a lesson from its new rival: keep innovating and adding value, because the food market will chew up and spit out any company that dares to stand still. Pando alum Erin Griffith wrote about the growing appeal of food-related startups last year:

In the first nine months of this year, food-related startups have raised $798.1 million in venture funds. That includes everything from online ordering to loyalty rewards to recipes and restaurant marketing.

Meal kit services like Blue Apron ($8 million), Plated ($3.5 million), HelloFresh ($17 million), Fresh Dish ($500,000), Greeling ($5.2 million), ChefDay and Munchery  ($7.92 million) are popular. Peer-to-peer platforms like Kitchensurfing ($4.5 million), Kitchit, and Feastly connect private chefs with dinner party hosts and hungry diners. Relay Foods ($13 .3 million) and Abe’s Market ($9.08 million) do online grocery ordering; Good Eggs $10.5 million) connects you to local farmers. ChowNow ($4 million) and Ordr.in ($768,000) offer ordering platforms for restaurants. Red Book Connect helps restaurants schedule inventory and training; Shiftgig ($3 million) and Easy Pairings offer hiring platforms specifically for food service. Food52 sells fancy kitchen gear alongside its recipe and cooking blog (undisclosed size of round). The list goes on. [Illustration by Hallie Bateman for Pando]