Austin startup Favor has raised $13 million to expand its mobile service, which delivers orders from local restaurants and stores.
Using Favor’s mobile app, users place orders on a smartphone and a courier delivers items to their door within 35 minutes. The cost in Austin is $5 per trip, plus 5 percent of the cost of the items and tip to the driver.
The company, which began the service two years ago, has expanded from Austin into Boston, Dallas and Houston. It plans to enter seven to 10 new cities this year.
Co-founder Zac Maurais said Favor targets cities that have a strong concentration of college students. In Austin, the company got off the ground with University of Texas students and gradually added new ZIP codes.
“With Dallas and Houston, we started near SMU and Rice and thanks to word of mouth from Austin, it has become pretty big pretty fast without too much effort,” Maurais said. “The great thing about those areas is there are also a lot of young working professionals who are also want a service like this.”
The lead investor in the new funding was Austin-based S3 Ventures, with participation from Silverton Partners of Austin, Silicon Valley investor Tim Draper and other private investors. Favor had previously raised $2 million.
Since launching, Favor has completed more than 300,000 deliveries and has grown to more than 1,000 drivers. Drivers earn an average of about $15 an hour, Maurais said.
Favor generates revenue from the delivery fee and from restaurants that pay it for leads generated through the Favor app.
Users rate the company’s delivery people, who must maintain a high level of service to drive for Favor.
The company was founded by Maurais and Ben Doherty, who participated in business incubators in California before moving to Austin in 2013 to join the Austin Technology Incubator.
Maurais said Favor will use the funding to expand its 25-person workforce. It is currently hiring engineers and customer support workers as well as bike and car couriers.
To accommodate a larger staff, the company is moving from offices in the Brykerwoods neighborhood in North Central Austin to a new headquarters on West Sixth Street.
“We’ve got room to expand, but I think it’s going to fill up fast like the previous house did,” Maurais said. “The market is really hot right now. Now that the technology to power a business like this has arrived, and everyone has smartphones and apps, we think we can grow really fast.”