In his book Zero to One, Peter Thiel writes, “All happy companies are different: Each one earns a monopoly by solving a unique problem. All failed companies are the same: They failed to escape competition.”

GrubHub (GRUB) and Just Eat (JSTLF) are very similar, almost twins. Yet one is a happy company that’s growing and increasing in value.

The other one, not so much. It has stalled. It’s not quite a failed company, but it seems on its way.

How could this have happened? And, most importantly for an early investor, was there any way to predict this?

Examining the companies themselves would have shed little light. Both developed the same kind of online food ordering marketplace. On one side, the restaurants that offer delivery. On the other side, the consumers who order from those restaurants online.

Both companies also charge a fee – about 10% to 14% of the order value.

They both IPO’d in April 2014 – within a day of each other. And their metrics were eerily similar.

GrubHub IPO’d at a $2.9 billion value. Just Eat did at $2.8 billion. GrubHub’s revenues grew from $170 million in 2013 to $333 million in 2015. Just Eat’s: from $154 million to $300 million. Their revenue and EBITDA multiples were also remarkably similar.

Now they look a lot different…

GrubHub’s value has dropped since its IPO. Its enterprise value (EV) sits at $2.1 billion. It’s expected to pull in $458 million in revenue this year. Its value is a modest 5 1/2 times revenue.

As for Just Eat? Its EV is double GrubHub’s – around $4 billion. Its revenues should reach about $518 billion. It’s valued at seven times revenue.

GrubHub also operates in a much bigger home market – the U.S. Just Eat is a British company operating in a much smaller home market.

So market size clearly wasn’t the problem.

Well, then, what was?

Different Markets, Different Outcomes

Just Eat was able to establish a monopoly-like status in a friendly market that put up few roadblocks. GrubHub’s market wasn’t nearly as accommodating.

Many more British restaurants offer delivery than do U.S. restaurants. And in the U.K., 30% to 35% of all takeout orders happen online. In the U.S., it’s only 10%.

After conquering London, Just Eat was able to extend its dominance to other cities. In the tougher U.S. market, GrubHub has had trouble repeating the marketing success it enjoyed in NYC.

It’s been successful enough to attract other competitors. Just not successful enough to squash them.

As a result, GrubHub now faces a slew of well-funded VC-backed competition. They include Postmates, OrderUp, Seamless, UberEATS and DoorDash.

What’s more, GrubHub has been forced to use third-party managed delivery providers for its delivery services. It can no longer match the cost efficiency of Just Eat.

Meanwhile, across the pond, Just Eat enjoys an 85% to 90% market share with little competition.

The Game of Monopoly

Could things have turned out differently for GrubHub?

I wonder what would have happened if it were as willing to spend as furiously as, say, Uber has?

Uber raised prodigious amounts of money to subsidize its drivers, passengers and rides in the cities it entered. Overall, the strategy has worked, not exactly killing the competition but at least holding it down while establishing its presence in hundreds of urban areas.

Startups acting on new, strange or original ideas often begin in the absence of competition. But it rarely lasts.

GrubHub’s current troubles remind us how important it is to find out how our startups plan to fight off the competition that is sure to come with their first signs of success.

Invest early and well,

Andrew Gordon