German Accelerator Coffee Sessions

Felix Plog (foodpanda) | Scaling to 40 Markets in Two Years (Part 1)

Christian Busch and Felix Plog at the German Accelerator Office in New York

You were a co-founder of the famous food delivery company foodpanda in Germany. How did it all start?

Foodpanda was an incubator startup by Rocket Internet in 2012. The idea was to replicate the food ordering model and take it to markets where it was not yet established – such as emerging markets or markets that were a bit less developed in Western Europe or the U.S.. It was an ambitious plan and that’s why there was a lot of funding allocated to this project. I was brought in as one of the co-founders to take on the operational role. My focus was on getting this thing up and running from an operational point of view. That meant, finding a set up that worked for the market and an operational model that didn’t burn through all the cash so quickly (because that’s a big risk in food delivery). Together with the other co-founders Ralf Wenzel and Benjamin Bauer, who were focused on sales and marketing, we rapidly built our team in Berlin. There were a few active pilots in Southeast Asia, so we ran with it and embarked on a crazy expansion that took us to 40 markets in two years. We quadrupled every year over the course of 4 years and acquired $310M in funding. We also made 20 acquisitions during that time. It was an exciting and highly intense phase that over time forced me to adapt my role multiple times. I started off as a very functional COO, looking into the engine of the company, and then evolved to become a more high level COO focusing on hiring, governance, and strategic decisions.

We had two major advantages: we were operating in a bullish market and we had a fantastic team that was fully committed. The only problem was that our competitor DeliveryHero was always one step ahead since they started earlier and were slightly bigger. It was kind of natural for both of us to consolidate at some point. In hindsight, I can say it was the best decision to merge with a solid, well-financed company that had markets largely complementary to ours. This way we were sure that foodpanda would be taken to the next level. So we sold foodpanda to DeliveryHero (Lieferheld.de in Germany) and I joined DeliveryHero with that transition.

Sounds like an exciting journey. Expansion is a big topic for the companies going through the German Accelerator program. Generally, we work with a company that goes from one or two countries to three or maybe four. How do you go from one country to 40 countries? How do you pick those countries and how do you do it so quickly?

You do it by spending a lot of money. One thing you have to know is that the less mature your product is, the more costly it gets. Our product was not fully ready to scale, especially on the backend side, so we were required to shove a lot of money into building up local teams in order to bridge gaps in the platform. However, it was a conscious decision. We wanted to use the funding window and the hype around food delivery to get our foot into the door of some key markets and signal to potential competitors: ‘please stay out, this is our territory’.

Normally, I would not recommend going to 40 markets in 2 years unless there is a very strong strategic rationale to move very fast like in our case. It’s a very risky strategy and we had to endure a lot of complexity in the company which was challenging. Thankfully we had a very dedicated operations team that worked hard to put processes in place retroactively.

So your strategy was to lose money on every unit and then make it up by scale?

Kind of, but at some point, we didn’t lose money on units anymore. It’s an exceptional strategy that works in some cases, but generally, I think it’s much better to focus on a good product-market fit first.

Successful international innovation comes from the people you hire. The difference between an exceptional managing director and an average one is 10x in terms of what that person can pull off. When hiring, make sure you get all the references that you can, look into every part of his or her CV and do the background checks. I always do informal background checks because the formal ones are never really relevant.

When you enter a new country, do you look for local managers or do you bring someone over who did the same in country x and y? Is there a certain pattern that worked for you?

One of our key sources were ventures that were connected to a relevant network, for example, Rocket Internet. At first glance, having an expat definitely makes it easier, because they come from the same or similar cultural background as you. We then realized that some markets called for local expertise due to strong differences in culture and communication. Take for example Indonesia or India – these are rather complex countries for a Western European to navigate in. The Middle East is another very unique area where you need locally rooted people to get into the system. Finding local talent is more difficult and at the time when we went out there, six or seven years ago, the ecosystems were not yet very developed. We worked with a specialized headhunter to build a shortlist of candidates who were subsequently selected in person. It’s a tedious process, but you can get through it.

Let’s say you had another startup in Germany or somewhere in Europe and you wanted to expand to the U.S.. How would you do it? What kind of people would you try to hire?

It really depends on the business model, but I think you have to be very conscious about the costs that are involved with a U.S. expansion. It’s the most competitive market in the world and requires a totally different amount of funding.

I’d probably put a lot of thought into building the team, too. What I have seen work well among some startups is having a few people in New York and then scattering more people around the country for development of localization and for customer support. While it requires certain web-flow tools, governance, and process optimization, it seems to be a well-working model that bears many opportunities and keeps costs low. In the end, however, you have to be very clear on where you want to build your blueprint because aiming nationwide is too complex. Of course you have hubs like San Francisco or New York, but I also run into people who are based in cities like Portland or Austin. It’s all about the environment you want to be in.

In my experience, the number one thing is what you also said: they have to have enough funding to really have a shot here. It’s not going to be a quick game – the U.S. is very relationship-driven so it takes time to get clients, employees, or partners on board. You have to be able to survive that. In terms of location we have seen different models succeed. What seems to work well is having one of the founders move over and hiring a senior person very early on. Here in New York alone, we have around 900 employees of German Accelerator alumni companies, but we also have companies that settled in cities like Atlanta, Boston, Chicago, or Los Angeles depending on where the clients are or where they can find real good talent.

So after you sold foodpanda to DeliveryHero you stuck around for a bit. What was it like to sell your company and go back to being an employee?

Do you want to know the honest answer? It’s difficult (laughs). Once you have been in the driver’s seat, it’s very hard to take a step back and execute on other’s decisions again. I had some difficulties adjusting and those were my own issues, nothing I can blame the company for. I felt powerless because I could not do the things I wanted to do. As an entrepreneur, you just have to be aware of that. While it was hard to lose that liberty, I learned a lot of interesting things. I worked with new tools and powerful platforms and got deep insights into payments, which is super interesting if you work for a company like DeliveryHero that has billions in GMV (gross merchandising volume). Intellectually, it was a rewarding time, but it was also clear that not being in top management was hard for me to handle.

Coming up next week: Part 2 on how Felix chose to make his sabbatical year in New York impactful (hint, it involves rainforests) and what he thinks is the key to attracting VCs. Stay tuned!

About Felix Plog

Felix is an experienced tech entrepreneur and active angel investor based in Berlin. As part of TruVenturo, one of Europe’s largest company builders, he supports a wide range of companies in different stages of their lifecycle. Felix co-founded the foodpanda group that acquired $310M in funding and successfully exited to Delivery Hero AG in 2016. At the time of the exit foodpanda was the leading food ordering service in the emerging markets. After exiting the foodpanda group, Felix worked as SVP of Operations at Delivery Hero where he was responsible for scaling marketplace operations.

German Accelerator Coffee Sessions

#GAcoffeesessions is our interview series that aims to capture the lives and careers of thriving German entrepreneurs around the world. Read the January edition of Coffee Sessions with Philippe von Borries, Co-Founder of Refinery29, here.

Are you a German startup seeking to scale in the U.S.? Check out our German Accelerator programs in Boston, New York, and Silicon Valley. If you are interested in expansion opportunities in Southeast Asia, check out our German Accelerator program in Singapore.

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