Shawn Tsao would undoubtedly be an architect today if it weren’t for his fraternity brothers. As a substitute, he co-founded a $400 million food delivery business.
In 2012, Tsao founded Caviar with the help of his four closest friends from the University of California, Berkeley. Before selling Caviar to Jack Dorsey’s payments platform Square — now known as Block — in a 2014 all-stock deal that valued their company at more than $100 million, they persuaded some San Francisco eateries to commit to online delivery and expanded to seven major U.S. cities, according to Tsao.
Five years later, Square sold Caviar for $410 million to competing delivery service DoorDash.
Tsao, 34, says to CNBC Make It that “a lot of the best companies solve the simplest of problems.” It was “Give me a sandwich” for us.
Their route was anything from simple. The co-founders’ initial concept for Caviar was a daily discounts app for food akin to Groupon. As a result, Caviar almost never came to be. Tsao and his friends contemplated closing the shop and going their own ways once it fully failed.
Their futures depended on a fateful encounter they had in a bar on the campus of the University of California, Berkeley at the end of 2011 when they had to decide whether to stick it out together and try a fresh idea or go their separate ways and hunt for work.
Tsao majored in architecture and sustainable design at Berkeley, transitioning from ‘Groupon for food’ to ‘Uber for food. In order to “become the next Frank Lloyd Wright or Frank Gehry,” he says he wanted to launch his own design company.
He claims that before graduating from college in 2011, he even had a job lined up at an architecture firm. It turned out to be more appealing to work alongside four of his closest friends, Caviar co-founders Abel Lin, Andy Zhang, Richard Din, and Jason Wang, the latter of whom would hold the position of CEO until 2016.
Their Groupon-like startup, Munch on Me, was accepted into the Y Combinator program, which brought in $180,000 in venture capital. Then Groupon began to report losses, which caused an 80% decline in market value.
Investors were reluctant to support a firm dubbed the “Groupon for food.”
It had all the telltale indications of a failing business, claims Tsao. The realization that we had $10 in the bank occurred to us.
Tsao’s mother pleaded with him to abandon his attempt to resuscitate the firm and return to school to acquire an MBA. If they didn’t have another idea that could actually succeed, the co-founders didn’t want to put off starting their own businesses.
They therefore gave themselves six months to find a new direction after selling Munch on Me’s data for “barely anything” to another firm, CollegeBudget, according to Tsao.
Tsao was sketching ideas on a whiteboard when he got “really hungry” and wished he could just walk across town to Ike’s Place and have his favorite sandwich.
According to the co-founders in a 2021 interview, Caviar increased its order volume and expanded its personnel headcount under Square, with Wang continuing as CEO for two years after the sale. Within six months of the takeover, it began operations in eight more cities.
The co-founders of Caviar have not revealed how much money they made from the business’s sales. When they sold the business to Square, they together held more than 50% of it, and according to Tsao, they had no part in selling the business to DoorDash.
Since then, Tsao has used his Caviar funds to become an angel investor in the food and IT industries. In 2017, He and Wang began investing in local franchisees for well-known national food brands like The Halal Guys and Bonchon Chicken.