- Phood allows students to order DoorDash using their university dining dollars.
- The startup already works with colleges including the University of Texas at Austin.
College students often have hundreds or thousands of dining dollars to spend as part of their meal plans each school year. But where they can spend those dollars is limited to cafeterias or on-campus convenience stores.
Phood is trying to change that.
The startup works with university campuses to let students spend their dining dollars on off-campus food purchases such as delivery through DoorDash, founder Alex Parmley told Insider.
Phood works with five universities, including the University of Texas at Austin and The Ohio State University. It's also planning a launch on the State University of New York campuses in the coming months.
Parmley said that he sees opportunities to open up college students' dining dollars to lots of off-campus services and retailers.
"We're connecting their campus card to every merchant in the world to make it acceptable," he said.
Phood started as a food-delivery company but pivoted to payments
Parmley founded Phood in 2018. At first, the New York-based startup provided food delivery itself, using a team of couriers to send dining-hall food to students' dorm rooms and apartments.
But demand for on-campus food delivery dried up in 2020 as COVID spread, classes went online, and students left university campuses to go home, Parmley said.
On top of that, food delivery is a "capital-draining" business, he said. Phood filled a niche, but it was nowhere near the size of larger players. "I kept getting the question, 'How do you beat DoorDash? How do you beat Uber Eats?'" Parmley told Insider.
Demand for food delivery to homes grew quickly during the pandemic, but even well-funded companies have struggled to make it profitable.
Eventually, Parmley found an answer: Work with other delivery services instead of trying to beat them.
The company now connects students' dining accounts to the Discover Global Network, which allows them to use their dining dollars like a regular debit card outside of their university.
"I realized that the money was in the payments," he added.
In October, Phood earned $1 million in funding from 43North, a Buffalo, New York-based startup accelerator, using its new approach.
Phood sees itself as 'training wheels for financial literacy,' Parmley said
Students at universities that work with Phood can get a digital card that they keep in a virtual wallet. They can then use that card to make purchases online or in-person.
Besides using dollars they get through their meal plans, students and their families can also top up their balance with cash. That means anyone who wants to give a student money can deposit it for use through their Phood card, Parmley said.
The system allows students to decide how they want to spend their food dollars, Parmley said.
Parmley pitches potential university partners by highlighting how much students spend on food off-campus. "We're just like, 'Do you want at least 2% of this? Because it's better than the zero you're getting right now,'" he said.
For the universities, Parmley said, a Phood account with parental dollars flowing in represents an opportunity to grow profit. The universities that Phood works with receive part of the profit generated from each purchase.
Phood costs nothing to university dining services and students that use it. Instead, the company generates income from the service providers it works with as well as Discover, Parmley said in a presentation for 43North.
Over the next year, Parmley said he wants to sign more partners to Phood. Despite the company's name, Parmley said he doesn't want to limit Phood to food delivery: non-food options like ride sharing services are on his list of potential partners, he told Insider.
"We see this as training wheels for financial literacy and spending and allocating that capital in the right places," he said.