LevelUp’s Winding Path Pays Off With $390M Sale to Grubhub

Xconomy Boston — 

LevelUp is the latest startup story to end in an acquisition. The company has gone through several transformations since it was founded a decade ago, eventually landing on mobile payments processing, customer loyalty programs, and data analytics tools for restaurants. Its journey ultimately led to Grubhub: the online food-ordering and delivery giant announced Wednesday it has agreed to acquire Boston-based LevelUp for $390 million in cash.

The deal signals Chicago-based Grubhub’s (NYSE: GRUB) ambitions to offer a more comprehensive set of software products and services for restaurants, as consumers increasingly expect their dining experience to involve mobile technologies and other digital tools.

The purchase might help Grubhub battle competitors in a crowded field of online food-ordering and delivery companies, which include DoorDash, Caviar, and EatStreet. Grubhub also owns the food-ordering services Seamless, Eat24, AllMenus, and MenuPages. Grubhub acquired Boston-based rival Foodler last year and later shut down its website and mobile app. The LevelUp deal is the company’s largest acquisition to date, in terms of price, a Grubhub spokesperson said in an e-mail.

Grubhub, which is valued at more than $12 billion, said Wednesday that it generated $239.7 million in revenues and a $30.1 million profit in the second quarter. Its stock jumped more than 25 percent on the earnings and acquisition announcements, trading above $136 per share in the early afternoon.

LevelUp is one of Boston’s longstanding mobile payments firms, and its sale adds another notch in the local sector’s belt. Past exits by local players include LoopPay (bought by Samsung in 2015), Paydiant (acquired by PayPal in 2015), and Where (acquired by PayPal in 2011).

After the LevelUp acquisition closes, the 200-person company will keep its brand name and “the entire team will remain in Boston,” founder and CEO Seth Priebatsch said in prepared statements. LevelUp’s Boston office will serve as a technology center for Grubhub, which also has offices in New York and London. Priebatsch will report to Grubhub founder and CEO Matt Maloney, according to a statement e-mailed to Xconomy.

LevelUp had raised at least $85 million in equity funding and $13 million in debt financing, based on past interviews with Xconomy. Its investors include JPMorgan Chase, Highland Capital Partners, and Google’s venture capital arm, GV.

LevelUp started out as SCVNGR, offering a text-message-based platform that corporations, associations, and nonprofits could use to set up interactive scavenger hunts and other on-site activities. It later introduced a consumer app that took a gamified approach to location “check-ins,” and then added a deals service called LevelUp that incentivized consumers to unlock additional discounts after making an initial discounted purchase.

The company eventually shut down the SCVNGR app, ditched that name, and moved into mobile payments processing and other software tools, primarily aimed at the restaurant industry. Along the way, the company’s employee count has risen and fallen as the business evolved.

The LevelUp app enables consumers to order food for pickup from hundreds of eateries nationwide. Restaurants can also use LevelUp’s software to power their own apps, deliver targeted promotions to patrons, and analyze their data, among other capabilities. LevelUp’s clients include Potbelly Sandwich Shop, Pret A Manger, and Steak ‘n Shake.