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Rejected founder kept coming back
The founder who persisted
The startup was Woowa Brothers. Its founder had no impressive background and had failed once before as a designer, but he kept returning to update Altos on his progress. One of the seed investors, a successful entrepreneur Altos had backed who was also an investor in its funds, kept telling him to go back to Altos even though he held other term sheets.
A small bet
That gave Altos a second and a third chance. By the time it said yes, the company was making a couple hundred thousand dollars a month in revenue, and the founder had plenty of grit. The partners thought it could probably reach $2 million a month, a $24 million business, and a venture investment in a $24 million potential business in Korea was unusual.
How big it grew
It grew far past that. The business is now worth over $3 billion and very profitable, likely earning multiple hundreds of millions of dollars in profit, and probably the most profitable large food delivery business outside China. It is part of Delivery Hero now.
Why is a $24 million business unusual for venture?
Venture funds make money from a few outcomes large enough to cover all the losses, so they look for companies that could be worth many times that amount. A fund holding a small slice of a modest business gains little even when everything goes right. Most venture firms therefore pass on markets they believe are capped at a small size. Companies that look small at the start and then expand far beyond their first market are the ones that surprise investors.
What made Korea fertile ground for food delivery?
More than 80 percent of South Koreans live in cities, according to World Bank figures, and a large share of them live in dense apartment complexes. Short distances between restaurants and customers make delivery quick and cheap. Woowa Brothers runs the Baedal Minjok app, known as Baemin, which launched in 2010. Delivery Hero, a Berlin-based company, agreed to acquire Woowa in December 2019 in a deal reported at about 4 billion dollars.
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