Sarah Tavel - Consumer & Marketplace Investing

**Patrick O'Shaughnessy** (0:00)
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Hello and welcome everyone. I'm Patrick O'Shaughnessy, and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (0:56)
Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (1:21)
My guest this week is Sarah Tavel. Sarah is a general partner at Benchmark, working alongside past guests Bill Gurley and Chetan Puttagunta. Sarah has a long history as both an investor and as an operator. She was an early product leader at Pinterest before joining Benchmark. Sarah has become one of my go-to resources for topics like networks, consumer technology, and marketplaces, among many other topics.
I've used her frameworks for how to think about client engagement, company data, and marketplace liquidity, and quality over and over again in my business life. I'm so excited to finally have her on the show. Please enjoy our conversation.
So Sarah, let's start with something that you've been thinking about recently that everyone will understand because they're users of the companies, which is the lessons you've learned from looking at the food delivery companies, and just this space generally speaking. Why is this interesting? Why is it so incredibly competitive? Obviously, it's a big market. What are the main takeaways that you've learned studying this?

**Sarah Tavel** (2:16)
Yeah, it's such an interesting space. What a case study. It's been the confluence of so many different things that have just been happening in our market more broadly.
The first thing that I just, you can't help but reflect on, and I think is something that I think about when founders come to me and they're looking to start a new marketplace, and all they can see is incumbents everywhere and not see, where should I start a new marketplace, those types of questions.
But you look at food delivery and you had a dominant incumbent, which was Grubhub slash Seamless Web at the time, that had probably the way that they thought of the market, they had 60% or something of market share. They were the definition of a dominant incumbent. And so why now? I mean, just recently, I think it was Vox that released some data that showed that DoorDash had actually eclipsed Grubhub in terms of market share. And so it's a very unusual transition to happen in the market. And so what was the vulnerability and why did this happen? I think that there was two things that happened in this market. One of them was actually a self-inflicted wound by Grubhub. And the other was a more macro thing happening in the broader market. So what was the self-inflicted wound?
What Grubhub did was that they conceptualized the supply. So restaurants were the supply side for those. I'm sure everybody has ordered on Grubhub.
So how Grubhub limited their market was that they limited it to really independent restaurants that could do their own delivery. That was how they conceptualized the market. They didn't aggressively go after training restaurants to do their own delivery or actually starting to think about how do we give restaurants that don't have their own delivery a means of doing delivery. They didn't really attack that aggressively. And so what Postmates and I think Postmates was the first to really realize was that this was actually an Achilles heel of Grubhub because if you could learn from what was happening in a ride sharing space and actually bring a third side of the marketplace into this marketplace, which is the delivery itself, you create this opportunity to onboard all these restaurants that weren't at the time doing delivery. And so you could actually leapfrog the availability of the incumbent with a lot more restaurants and therefore create more liquidity. So that was a real insight that again, I think it was Postmates that had it and they and then DoorDash and then Uber Eats went after this Achilles heel incredibly aggressively.