Industry Leaders Interview With Conor McCarthy CEO, Co-founder, Flipdish

InterviewFood Delivery

The on-demand food ordering platform, which provides restaurants and cafes with the tech to accept online orders from customers directly via personalised websites and apps, is looking to pinch market share from third-party marketplaces.

Flipdish was set up by Conor McCarthy and his younger brother James. The Irish food delivery startup has recently raised €40 million (£34 million) in funding from Tiger Global Management to bolster operations in Europe.

In this interview McCarthy talks about the firm’s non-hierarchical business,  how it is undercutting marketplaces by taking less commission, the impact of Covid on the business, and plans ahead following its recent funding round, along with much more.

Interview

Paul Cautrecasas: How would you describe Flipdish today? What’s a description that people may not find on the website?

Conor McCarthy: On the website, we mainly talk about the products and the outside of the company. What we don't write there is what it's like inside Flipdish. Flipdish is an unusually open place.

We have an all-hands every single week where we share all information with all staff, everyone has access to whatever they need. If they want to access our data warehouse and understand how our business runs, they can do that.

We share with them our revenue, our burn rate, our runway, and we urge everyone to learn about other areas of the business, so they understand how the entire company works.

Our internal wiki is structured so that each team has two sections, one with information that other teams should know about, then another section for their own internal team, but both sections are open. We urge people to go and have a look at other teams’ internal areas so they can understand it.

PC: And do you find that people appreciate that openness?

CM: Yes, and it's been like that since the very beginning. I think it stems from not wanting to have a top-down order-lead system but understanding that there are a lot of brains in the company, and we want to make best use of them, and the best way to do that is to have them understand the business as a whole and empower them to have input.

PC: That's very interesting. Out of interest, what prompted you to make the change from online poker to the food tech space?

CM: I got into the online poker world for similar reasons to Flipdish: I wanted to solve a problem I was facing myself. I wanted to be able to play poker for real money on my iPhone but, amazingly, three years after the iPhone was launched this wasn’t possible. But after being in the industry for a few years I realised how reliant it is on gamblers who have problems / who cannot control their spend.

I didn’t like being part of the problem here. I wanted to work on a problem that I could put 100 per cent into, that I could try to be the best at, but I didn’t think I could create the best online poker site without increasing the gambling problem in the world.

I didn’t think that on my death bed I’d be proud of creating the largest gambling site in the world. In the food tech space, I’ve found an industry made up of millions of small and family-run businesses that are under huge threat from marketplaces, who will be driven out of business unless they are given the tools and technology with which they can compete with. I’m much happier helping these businesses thrive than I was working out how to maximize repeat player spend.

PC: Speaking of those customers. In The Times article in December, it was mentioned that Flipdish offers commission's as low as seven per cent instead of the more traditional 14 per cent to restaurants. Could you share why you think customers, both restaurants and other food businesses, are using Flipdish today?

CM: On the commission side, when we're compared with other food marketplaces and portals, we're dramatically cheaper, typically half or a third of what other marketplaces would charge. We can do this as our product is better suited to the world. We don't need to spend as much to get it out there because it has very good product market fit, and our customers need it.

In 2015, we set out to be a food marketplace (a single app with its own consumer facing brand from which people could order from any takeaway) but realised after many conversations with restaurateurs that there is little (or even negative) value for restaurants from marketplaces in this industry. In many industries marketplaces like this make sense.

Typically, they make sense when discovery is very important, when there is little repeat usage of the discovered service or when there are multiple disparate services involved.

Travel is a good example here: it makes good sense for a consumer to use a marketplace to discover a hotel and a car rental company when they book a trip to a city they’ve never been to and likely won’t go to again for a few years.

And it makes sense for a hotel to list on a marketplace as it’s impractical for them to market directly to consumers from around the world in the off chance that they will visit the city the hotel is in.

There are very different dynamics at play in hospitality. People tend to order from two or three takeaways in rotation as opposed to discovering a new one each time they order.

They also tend to order from one located physically close to them, and they usually can be efficiently marketed to by this takeaway directly, both via offline methods such as walking past the store each day, getting flyers in the door, and online via search and brand marketing.

It is also rare that a consumer needs to make multiple purchases from separate services to order their food (they don’t, for example, usually need to order a taxi to collect the food after ordering it).

The value that restaurants get from joining a marketplace is the consumer-facing online ordering technology that they get access to, but not from the fact that they are getting it from a marketplace.

There is a lot of negative value for a restaurant in joining a marketplace (i.e., it causes them harm) as they end up sending their existing customer base away to a  3rd party who is incentivised to move the consumers away from that restaurant and over to one who will pay the marketplace more for the orders.

PC: And the restaurants increasingly realise they don't really need that, they just need the technology that you can deliver?

CM: Yes, exactly. Restaurants understand that we're aligned with their long-term health, and because of that they're very happy to do everything they can to get their orders to go through the Flipdish platform, because it's essentially ordering directly with the restaurant.

They maintain the relationship with the customers and therefore consumer marketing isn't a cost that we incur, so we can charge less

PC: In that context, how did you secure your first few customers?

CM: We reached out to them. We had to ring them and ring them again, reached out to them on LinkedIn and explained that we were a new company and we noticed that people could order online directly, and that they were sending their customers away to third party marketplaces, which just didn't make a lot of sense.

We told them that we had amazing new technology, which made it really easy for their customers to order online. So, we went and met restauranteurs in Dublin, where we were based, and convinced them to use our products. The product worked well for them, they told their peers, and it went from there.

PC: Okay. Yeah, that's reminds me of that story at Gumtree. We advised Gumtree on the sale to eBay and the founders told me stories of how they started going down to the tube in London and handing out cards saying, "if you're looking for a job or to buy something, just go onto this website". It was basic, offline, in your face, and it sounds like you've tasted that as well. What did the first version of Flipdish look like?

CM: So, our first product was mobile apps. Before we had a web ordering system we could offer a native iOS app, a native Android app, and that was very new in 2015/2016.

At that time nearly no restaurants, even the larger chains, had their own mobile apps. So, it was a unique service that we were able to offer to small restaurants, which helped a lot. These restaurants felt a lot of pride in having their own app, and they would tell their customers download and use it.

PC: Okay, that's very interesting. Talking about Flipdish's recent growth. The Times article in December suggested that Flipdish didn’t need to raise funds again soon, then in February, you announced a 40 million euro raise from Tiger Global. How do you plan to use those funds to grow now, over the next year or two?

CM: We're in the US, the UK, Germany, France, Spain, Ireland, and those geographies combined have over one million potential customers for us. We currently only have about 5000, so we have a huge amount of space to grow in the regions we're in, so we're not likely going to move into any new regions in a meaningful way for the foreseeable future.

We'll be putting the budget to use by increasing our penetration in the markets that we're already in, and building out our technology, so we can help give better products to our customers.

Last year we were in a position where we didn't need to raise, we were breaking even, and we had money in the bank, so the decision on whether we should raise or not came down to the deal that we were able to get. We had reached a place where we knew we could put a lot of money to good use and grow efficiently with it, but we also didn't need to raise.

PC: To grow from the 5000, how much of that will be taking market share or kicking out an existing player? Are there geographies where expansion will be more challenging, or segments that will be easy for you to grow in?

CM: it differs quite a lot in different markets. In Spain, for example, a lot of the restaurants we sign up would have had no online ordering before, whereas in the UK, a lot of customers that we sign up are moving from a different system.

A lot of our restaurants would use marketplaces in parallel with Flipdish, but they would never use another direct ordering system in parallel. So, we're moving people in the UK away from existing systems over to Flipdish because we have a more suitable product for them, but in Spain, it's more of a green field.    

PC: That’s very interesting. Olo has IPO'd, do you see any concern about that coming into your existing territories?

CM: If Olo coming to Europe helps restaurants, then that's a good thing. When we realised in 2015 how much help restaurants needed through technology to survive against marketplaces, we dedicated Flipdish to helping the restaurants.

So, whatever helps restaurants these days is good in our mind. If we can't offer a better product than Olo, then there's no point in Flipdish existing.

PC: I hear two answers there. One is the market is so big, that competition is almost welcome because it creates more awareness among those other 995,000 restaurants available in your existing territories, and secondly, if Olo ends up having a better solution, or better features, or product market fit, that's a challenge to your team, from a technology standpoint, to adapt and improve?

CM: It's a challenge and it will drive us forward. That said, given our many years of experience serving this complex market, handling hundreds of localization intricacies, different payment methods, handling customer support in multiple languages and understanding the cultural differences in our markets, combined with some of the best talent in the industry and access to capital, I’ve every reason to believe that our clients will continue to see huge value from our product going forward, and that we will do very well regardless of what competition comes in.

PC: That is really interesting the talent and technology you have. I understand you've got a background in coding and considering your brother also comes with e-commerce experience. Did you decide from the beginning that whatever company you built, you wanted an extremely strong, robust technology platform and a technology team who would really help you continually be the best?. I'd like to ask about.

CM: Yes, my previous company was very much a lifestyle business. There was no intention to be the world leader. When we set out to build Flipdish, we had a completely different approach.

We had decided from the very beginning that either we're going to make a masterpiece, we're going to aim to be hugely successful, and we're going to do just that, or we're going to fail. We were not going to just set out for a lifestyle business or just go after the Irish market, and that played into the technology. So yes, we set it up from the start to build a system that could scale to serve most of the world.

I should caveat that with saying, we didn't from day one build a system that could handle a million restaurants, because we'd still be working on that if we did, but we took an approach that we would build it so it could be adapted and scaled.

PC: Yes, you have to walk before you can run! So, you built it as robust and as strong as it needed to be for the customer to still get excited and enthusiastic to sign on and use it, but continued to improve it and get better?

CM: Yes. When we were writing the initial code, we knew there was going to be a problem when we got past a certain scale, but we know at some point in future we would have an engineering team that would be dedicated to that problem. Now we're at that stage, and we have an engineering team fixing the problems that we created in the early days.

PC: So, your mindset was one of confidence. It's going to happen, it's just time, we just have to keep on doing what we need to do according to the business plan, but always confident you'll find the people you needed to find, either locally in Ireland, or anywhere in the world to build the best team?

CM: Even pre-COVID, when we didn't need to, we hired remotely. We’re very much a remote first company, and don’t limit ourselves to talent in the South of Dublin, where we are based.

PC: So, you can operate very effectively today with more of a virtual culture? Would you say that COVID helped the company to adapt to a culture that can be strong and grow, even with most people being virtual and remote? Or do you want to get back to the office environment?

CM: We are calling ourselves remote first. We're hiring staff who will never be able to come to an office and that's fine. But we also have offices in a couple of countries so staff who want to work from an office will have that option. This will result in a hybrid approach, not in terms of where all staff have to come in on a certain day of the week, but if you're the type of person who wants to work in an office then you can do it, and if you want to work remotely, you can do that as well.

PC: Interesting. Now thinking about the ghost kitchen model. How do you see that impacting the restaurant industry over the next few years in terms of what restaurants can do now with technology that they couldn’t before?

CM: Overall, I think it'll improve the economics of deliveries. That will mean eventually that consumers order deliveries more, that will be less expensive, and they’ll have access to more variety, because it's more efficient.

There will be faster delivery times for some areas, and I think that it means there'll be a lower cost for entrepreneurs get started creating restaurant brands, as they don't need to get a long-term lease on a building for them to start building their brand and their business.

They can rent space and market online, and I think it will mean that success will favour those who are adept at building brands, as opposed to those who were amazing at logistics and operations. Before when you had to get a lease, you had to hire or buy kitchen equipment, and you'd have to manage all your deliveries, you needed to be very operational, and I think there's going to be a slight shift away from that towards entrepreneurs who are able to build their own brands.

PC: And presumably, you're in a good position to help these new brands that are leveraging the cloud kitchen model?

CM: Absolutely. Everything that Flipdish is about is keeping restaurants in direct contact with their customers, having their brand first, not letting restaurants send all their customers away to a marketplace where they lose all contact with their customers.

We’ve created a virtual restaurant whitepaper where we pull back the curtain on virtual restaurants, and hear from creators and experts on where the fast moving sector is going next. If you Google “Flipdish virtual kitchen White Paper, you'll find it.".

PC: What is the biggest challenge you would say Flipdish is facing at the moment?

CM: There's a couple of transitions going on at the moment. We're moving from having a single product to multiple products, which is a challenge we're facing. Historically we only offered an online ordering solution and websites for restaurants.

Now we have kiosk solutions, we have table ordering systems, we have a managed marketing service. It's not just a matter of creating these products, we need our sales team now, instead of going into a client meeting knowing that we have a single product to sell, they need to understand which product is suitable, because we have clients who are only interested in kiosks, for example, or only interested in table ordering. So, there's a big change there to go from one to more than one product.

Then in parallel, we are being pulled up market to larger enterprises. Historically we'd sell to SMBs, but now we've chains of 1000s of locations looking to use Flipdish, and it's a very different sales cycle.

PC: Like chains of pubs and restaurants?

CM: Chains of restaurants, pubs, cafes. It requires a different type of account manager, and so forth. These are challenges of pretty much every grown company has gone through, and we'll get through it, but that’s something that's happening at the moment.

PC: Yes, growing pains. One specific question on table ordering - one of our larger clients, a Fortune 500 brand name that is very present in restaurants, bars, hotels, etc. did a detailed study to understand the real pain point of customers in the venue. They found the main pain point was paying for the bill.

They were looking for a company that was brand agnostic, so as a customer you didn't have to have an app for every single restaurant you went to. Have you ever thought about that from a product development point of view to solve that pain point?

CM: Well firstly, table ordering solves that. Instead of people paying for the bill at the end they just pay as they go -- they would scan a QR code on the table which instantly opens an ordering web-page, no app download required. But for those restaurants who aren't using table ordering and just want a payment solution, then yes.

This is something that didn't make sense as a product two years ago - most people didn't have Apple or Google Play on their phones, so they couldn’t easily pay, and QR codes weren't used very much in the Western world - Apple only introduced it as a feature on iPhone cameras about a year and a half ago.

Now since COVID, lots of people understand and use QR codes, lots of people have Apple or Google pay. So yes, now it is something that makes a lot of sense for restaurants, and we'll be able to help them with that soon.

PC: That's very interesting, because I think that was one of the ways of solving the pain point was to create a new pain point, which was “I need to have a specific app for the restaurant to be able to pay.”

CM: Yes, it should just be scan a QR code and tap pay. Did they find a solution?

PC: They ended up starting to build their own, and that's all I can say about it. They didn't find a company that did it. We helped them do a full review of every company in the world. We looked at other pain points as well, but that was the biggest one. We couldn't find any company that really did it very well, and so they ended up deciding to build their own in-house solution for that.

CM: Well, if they want to take a second look, we may have an amazing solution for them.

PC: Yes, I may take you up on that. What is the next big thing that you see for Flipdish 5 or 10 years out? You can grow forever based in your existing geographies, just based on the market size it seems.

And then you've got the rest of the world if your product is good enough to adapt it. So where does it end? The world of food is changing, as you know, and will continue to change when we have new forms of protein that are brewed bioreactors. We're going to have vertical farms at grocery stores, and maybe supermarkets will use additional space for cloud kitchens.

They can send Manna's drones from those grocery stores to deliver. The whole entire value chain really is being disrupted in front of our eyes. Do you have any kind of vision five years out about how you could accommodate that? Or are you more focused on growing, executing, finding the best people, and figuring it out along the way?

CM: A lot of it is going as quickly as we can with what we have. We're also very aware that we can't build everything ourselves, so we're not going to try to. Since 2017 we've had an open API, and we've had hundreds of companies integrate against us. We now have a pretty vibrant ecosystem of products around the Flipdish platform.

We're going to continue to embrace that because there's no way we can build every single thing that restaurants need, like POS integrations, payment system integrations etc.

That is something we'll need to continue to do because if you look 5-10 years out, you can't imagine a world where every Starbucks, every Subway, every large chain doesn't also have a kiosk, or that their customers are ordering through their own phones. Talking to staff when you're ordering your food and waiting to pay the bill is not going to be something that'll be happening in 10 years, and that's a massive change, so there's a lot of room for growth.

PC: Thank you for your time, Conor.

CM: Thank you, Paul.