A year after IPO, Facebook aims to be ad colossus

NEW YORK (AP) — It was supposed to be our IPO, the people's public offering.

Sizing up GrubHub’s IPO prospects

GrubHub Inc. is going public.

That’s the upshot of a Friday report that said the Chicago-based online food-delivery company selected Citigroup to lead an initial public offering of stock in 2013. If the report holds — in an interview with Crain’s, a GrubHub representative called the report speculation — GrubHub would become the second of the current generation of Chicago tech companies to go public, following Groupon Inc.’s November 2011 IPO.Investors will hope for better luck from GrubHub than Groupon. The daily-deal company’s stock debuted at $20 and has recently slumped to less than $3 a share.

There’s reason to think GrubHub won’t repeat Groupon’s struggles, according to Terry Howerton, managing partner of Chicago-based tech-business incubator TechNexus. He says GrubHub is poised for success because of the quality of its relationships with restaurants nationwide and proprietary technology that those restaurants rely on, such as a tablet app introduced earlier this year that GrubHub says is decreasing order-confirmation time by 80 percent.

The IPO report estimates GrubHub’s revenue at about $30 million, or half that of New York-based rival Seamless North America LLC. (GrubHub doesn’t disclose its revenue.) Yet Seamless’ business is concentrated in New York; GrubHub CEO Matt Maloney said last year that GrubHub led in every other U.S. market.In this week’s Focus section, Mr. Howerton and other local tech mentors evaluate several of the IPO candidates likely to emerge from Chicago’s tech startup scene. We didn’t spotlight GrubHub because its IPO already seemed inevitable. But with Friday’s news that GrubHub may be putting its IPO plans in motion, we’ve added Mr. Howerton’s take on GrubHub’s prospects:

Star Potential: “GrubHub has gone to local merchants — restaurants — and said, ‘We’re going to take things you already have to do and we’re going to make them easier and more efficient,’ whether that’s online ordering, customer service, or delivery and follow-up. People think of GrubHub as a consumer business, but it’s really a business-to-business tech platform helping local restaurants utilize technology to better reach customers.

“Because of that, GrubHub’s long-term fundamentals are very strong; it’s a proven model with a very sticky business proposition for those restaurants. (GrubHub) is built to scale, so it just needs to replicate its plan in additional markets and with additional merchants.”

The Challenge: Emerging ahead of Seamless. “Even though Seamless is bigger in that one market, I think GrubHub is leading the way. Also, if GrubHub was just lead-generation for restaurants, it would be easy for Seamless to disrupt them. But GrubHub is making the right investments in technology to build stronger relationships with restaurants, and they’re ahead of Seamless in that regard.”

For more on which Chicago-grown tech companies are racing to be the next acquisition targets or IPO darlings, check out this week’s Focus section.

Steve Hendershot writes “Silicon City,” a weekly report on Chicago tech news and newsmakers. It appears Tuesdays on Crain’s blog for Chicago entrepreneurs. Follow Steve on Twitter: @stevehendershot.

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