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Deliveroo raises $385M in new funding

118 points by beNjiox 9y ago

juskrey 9y ago
Like Pets.com never happened
- georgespencer 9y ago
  Very different. Pets.com in Y1: revenue $600k USD, advertising spend $11.5m. Deliveroo generates significant revenue and is a business/brand that consumers are passionate about. The bet investors are making is that their gross margin can increase quickly. Expect they're doing close to £300m of revenue now, so a 6.5x rev>valuation multiple is punchy but fair.
  - Zenst 9y ago
    £128.56m in sales last year, and a loss of £129m. So very much curious how they managed such a valuation without over-hype.
    - georgespencer 9y ago
      For a crowd who presumably work in startups, folks on here are always weirdly surprised by how this works. Generate vast revenue, reach scale, cut central costs. (To be clear, Deliveroo's challenge seems to be cost of sales.)
      - martinald 9y ago
        Well, it's a pretty huge loss (more than revenue! Also, I think people were surprised or amazed that they had no core profitability. Especially when it's likely COGS will go up with more and more regulation around their gig economy employees
        T2_t2 9y ago
        Depends what you think the lifetime value of a customer is, plus what the ongoing cost to retain them is. I ordered off Deliveroo in Sydney Australia, and they advertise on AdWords against individual restaurant names. If the Diliveroo brand is strong, and that AdWords click made me a Deliveroo customer, that is a win. If I always search and they always pay, this may prove problematic long term. That's the equation - if $X upfront + $y ongoing < lifetime value then you have a chance at profitability, assuming you can get overheads under control / can scale up the offering with minimal growth in overheads (the classic 2X revenue, 1.5X costs model).
        martinald 9y ago
        I mean the core delivery service assuming 0 marketing, tech, customer service costs is not really profitable according to their last accounts.
        T2_t2 9y ago
        How is that possible? What is the maths there?
        martinald 9y ago
        Delivery costs are very high?
  - loceng 9y ago
    If you look at these companies in silos then it seems like they could be legitimate, however once you look at the context of other similar companies who are hoping to be the winner - and that's the only way they can success and the outcome isn't sustainable for any of them (unless their goal is to exit via the public markets and give the loss to them or some big money VCs). They all need the metrics they're working with to hold and the outcome for all of them is likely to be drastic for all of them. Perhaps they're hoping efforts by Uber and others in the same boat will work together in helping mould the market and become aligned with society's efforts/need to create Universal Basic Income for everyone. If UBI is to come into play then other metrics must shift too. The reward we give people for innovation will have to be at par with what's reasonable - and the peaks and valleys will more or less flatten out. The people who will be most innovative can use their own funds to trickle into future innovations that will be operated efficiently, e.g. Elon Musk. Perhaps there will no longer be VC firms in the future, and it will be individuals that invest through crowdfunding platforms. What would likely be a great hybrid model is crowdfunding platform but with VC firms - syndicate-like - except where an individual could allocate $5/month into the fund, perhaps only allowing individuals to invest with a monthly cap, so no one individual or organization can have some bizarre incentive or goal towards swaying the decision makers of the fund, etc. I'd argue the pros of getting $1 from a million people is far better than $1mm from a few. The most successful crowdfunding platforms right now, because they're VC-backed and thus have those same pressures on them, have to charge an unreasonable fee - which is unnecessary pressure on the projects that are trying to get funded. The alternative right now is feeding into the VC system who expect relatively short-term high profits - which then only allows platforms that charge an excessive amount to become dominant; and this does cause more efficient efforts by others to not be able to survive as easily - something I'm sure they're aware of as part of how they can get ahead with their model.
- robk 9y ago
  But chewy.com sold for $3b so what's your point?
baxtr 9y ago
Party like it‘s 99...
- i_am_nomad 9y ago
  You mean, party like it's 1099.
marenkay 9y ago
Another unicorn that can only exist because it uses fake self-employment to turn their workforce into a cheaper one. Just like Uber and so many others this only works because for some reason turning paid work into something that is not even self-sustaining suddenly is accepted. Does nobody have ethical issues with seeing value in devaluing people?
- mattmanser 9y ago
  While I agree this self-employed farce has to stop, the service itself is good. Previously takeaways were all the more greasy options, the deliveroo options are nicer food and it's aimed at a different market segment. It allows venues access to a market that was previously denied to them because they couldn't justify running their own delivery service full-time. They charge £2.50 per delivery. If they were paying couriers minimum wage I assume they'd be able to make money off it still. I think that price probably includes the high risk that the self-employed status will be rescinded.
  - dnh44 9y ago
    Deliveroo also take 30% of the food sale so I always assumed the £2.50 went to the rider, which seems like decent amount.
    - mattmanser 9y ago
      Yeah, I forgot to say that. 30% is very similar to just eat's take too. Seeing as the minimum order is invariably £10, the minimum take for deliveroo is £5 per order, but I'm guessing it's usually more like £7-£10. They'll definitely still be able to make money after a change in status.
      - badestrand 9y ago
        Where have you got that 30% number from? I am pretty sure it was around 10% four years ago in most parts of western Europe and it would surprise me seeing it tripled.
mbrookes 9y ago
What have Deliveroo done differently to be more successful than the food delivery startups that came before?
- NamTaf 9y ago
  They beat everyone else, including UberEats, to the AU market. I think them and Foodora were the first two, but they won and UberEats just relied on their brand to muscle in. Both share the market pretty evenly ehre, from what I can tell. I wonder if they did this for many 'secondary' markets to try to beat the big players or if AU is just a weird case.
  - BigJono 9y ago
    Only the inner suburb markets though. Once you're >10km out of the city center it's all Menulog and UberEats, with a smattering of people using EatNow.
  - synicalx 9y ago
    In SA, I've really not had any luck with Deliveroo outside of the CBD - it only seems to work if you're right on top of the restaurants. UberEats seems a little better, but it still really restricts how far away from a restaurant you can be, I moved one suburb over (3km?) and lost access to about 10 restaurants that were in my old suburb. I tend to prefer apps where the restaurants themselves look after the delivery, EatNow is a good example. They can charge a little more for delivery, and therefore seem to be willing to deliver further away. And presumably, it's probably a little fairer on the delivery guys as they got an actual job rather than just an app.
- weego 9y ago
  In Reading where I used to live all they did was link me up with restaurants I actually want to eat at but can't because of kids or work or whatever instead of just disgusting quality pizza/curry/chinese/fried chicken joints
- wott 9y ago
  Nothing, they just managed to convince more investors to continue pouring tens and hundreds of millions in the hole of their losses, while others were rightfully let to die.
Zenst 9y ago
Was just reading about them only the other day and how they are losing money: http://www.bbc.co.uk/news/business-41347817 http://www.bbc.co.uk/news/business-41347817 So how they derive such a valuation is very much at odds with actualities.
- pault 9y ago
  Hmm, if that surprises you I have some bad news about the rest of the startup industry...
- busyant 9y ago
  https://en.m.wikipedia.org/wiki/Greater_fool_theory https://en.m.wikipedia.org/wiki/Greater_fool_theory
orf 9y ago
For those wondering about these numbers, Deliveroo has a great concept, solid execution and huge brand recognition. Just-eat (worth 4.6B) connects people to shitty takeaways and has a terrible website. Deliveroo connects people to restaurants and provides the delivery service themselves, through bikers (here in London). They have taken this and spread throughout Europe. They are going to (and are) completely canablising Just-eat who seemed to run out of stream and grind to a halt several years ago.
- Zenst 9y ago
  Would it be fair to say that the valuation is based on the back of Just-eats valuation?
- amyboyd 9y ago
  What makes you think Just-Eat ran out of steam "years ago"? Stock price is higher than ever: http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB00BKX5CN86GBGBXSTMM.html http://www.londonstockexchange.com/exchange/prices-and-marke... They are reporting good growth: http://www.cityam.com/256734/just-eat-reported-order-growth-36-per-cent-2016-but-shares http://www.cityam.com/256734/just-eat-reported-order-growth-... I see lots of Deliveroo bikes around where I live in the centre of London, but they are basically non-existant when I go to other towns and cities. Also, Deliveroo started up-scale -- they can't go down to selling cheap Chinese takeaway food, because it will hurt their image. Just-Eat started at the low-end and are now moving up-scale without hurting their image. And even then, plenty of people prefer low-end Chinese food (I sure do).
  - orf 9y ago
    By ran out of steam I mean: 1. Their website is really quite poor, and has been for years. Why the hell is the navigation so crap, and why can't I search for a specific food item? 2. They still haven't done anything about the prevalent and pervasive fake reviews. Also, they cannot "move up-scale", their logo is associated with cheap food. Upscale restaurants don't want to put themselves on just-eat, next to the cheap low end places, nor do they want the just eat logo in their windows. IMO it's the opposite of what you describe - it's way harder to go low-end to high-end. Just eat has to somehow convince people their brand isn't for bad food.and cheap takeaways, then market themselves at high-end places. Deliveroo just needs to keep their high-end image, and then all the cheap places would throw themselves at Deliveroo to up their own image. No convincing required.
holydude 9y ago
Not very sustainable unicorn is it ?
mattmanser 9y ago
I find it funny they're claiming some sort of AI system will help them make better margins. In my city, Nottingham. all the deliveroo people gather in Trinity Square waiting for jobs. There's obviously no special AI needed. I do think though that it raises the issue that they should be paying for their own business premises and stop using our public spaces as their company waiting spots.
- mirekrusin 9y ago
  Similar at Angel, London. They gather at the shell petrol station; also for some strange reason pretty much all of them speak brazilian portuguese.
  - pault 9y ago
    Is that strange because they aren't Brazilian?
    - mirekrusin 9y ago
      They are Brazilians with paulistas accent. It's strange that they are, all, Brazilians.
      - mrisoli 9y ago
        As a Brazilian it makes sense to me, Brazil economy just keeps getting worse and worse, a lot of Brazilians are moving abroad chasing some opportunities. London is very famous as a destination for them, before there was Deliveroo I knew some people who did a lot of construction work because a lot of firms would hire them even if they don't have the proper visa, I assume you can do the same with Deliveroo.
        tomarr 9y ago
        A lot of Brazilians (allegedly) come in on fake Portugese documents too
common_ 9y ago
Alternative headline: for $385M, investors buy option for a large stake in Deliveroo if they don't surpass a valuation 'over $2B.'
codegladiator 9y ago
Is this last-mile delivery funding thing beginning again or the first one didn't stop ? It hurt everyone except the founders.
Theodores 9y ago
I had better pay when I was delivering newspapers as a teenager. This was many decades ago (when people bought their news on dead tree) and a lot of inflation as happened since. I didn't see my paper round as a 'proper job', but I think the inflation adjusted rate comes out to at least double the £8 per hour that Deliveroo riders claim to make on Glassdoor. I didn't have to pay rent since I was living with my parents, my income was purely disposable. Some numbers: late 1980's, my Sunday paper round took five hours and earned me £30 not counting tips. All done by bicycle. I also had a morning paper round and an after school round delivering the local paper. On the back of these 'gigs' I also had gardening, baby sitting and other jobs from my clients, making my childhood wages now seem positively 'over-paid' compared to what passes for 'gig economy' nowadays. I believe my take of the newspaper sale was around 20% with a delivery charge of 5 pence. Bicycles were just for kids back then and working for pocket money (not paying taxes or expecting benefits like holiday pay) was okay given I was at school. Furthermore, all my work was chargeable, I was not waiting around for someone to click on an app. From this perspective I find it crazy that this Deliveroo phenomenon has happened. I aspired to do more than ride around delivering stuff in all weathers. Fortunately I did move on to 'proper jobs'. The Deliveroo drivers are kind of with the pigeons in terms of London's pecking order. Although 'gig' economy, they lack the opportunities my humble paper round offered for 'up-sells' plus there are some venture capitalists creaming off what should be their cut. How did it all come to this?
- deleted 9y ago
  [deleted]
javiramos 9y ago
Money Quote: "Deliveroo grew a lot in 2016, with revenue up 611 per cent to £129 million. But losses were up too — a 300 per cent increase to £129 million. However, the figure to really watch is the food delivery company’s gross margin percentage, which sat at just 0.7 per cent." How can an investor, justify this as a solid investment when the gross margins are 0.7%?
- na85 9y ago
  It's been clear to me for a while that valuations lack any rational basis. I reached this conclusion shortly after Yo was valued at something like $10 million.
  - charlesdm 9y ago
    There still is money to be made in a bubble. Just gotta find some greater fool to sell the shares to and book that capital gain. Which usually (at the end of the road) ends up being a pension fund.
- raiyu 9y ago
  300 percent growth to £129M is impressive growth and those stats are 9 months old, so if they have been able to continue to increase their revenue growth they maybe ending 2017 with £250MM+ which would be about an 8-10x multiple on their 2017 year end revenue which isn't that outrageous. The challenge with startups is that you don't yet have a clear insight as to how their sales and marketing spend will evolve over time, so people are willing to invest in growth of revenue over those metrics. What's more worrying is their gross margin percentage. Taking the revenue growth and sales and marketing expense and overall loss out of the equation, that margin percentage is going to make it extremely difficult to make a business model that works in the long term. However, building a large revenue base helps to offset that, but we've also seen that play out negatively for companies in a similar position like Groupon. I think with this valuation they will need considerable consecutive years of revenue growth to grow into that valuation meanwhile their losses are high and also increasing so really this funding round buys them the usual 12-18 months of runway.
albertgoeswoof 9y ago
Currently there is a £2.50 fee for deliveries in London with Deliveroo. Even with extreme optimization a Deliveroo rider can't possibly make more than 3-4 "proper" deliveries in an hour (food gets cold fast! And when it gets returned deliveroo & the restaurant suffers) so maybe they can generate around £10/hour in revenue for Deliveroo. Then you need to take out costs for the driver, development, marketing, integration withe restaurants, etc. So where is Deliveroo's margin on that? There isn't one, and there's no way they can pay delivery drivers as actual employees (which the law will eventually catch up with by the way), even at minimum wage you'd need to cover £15+/hour to include holiday pay, sick pay, insurance and other standard benefits. MAYBE, delivery drones / robots will arrive before the funding runs out, but I doubt it very much.
- throwawaylalala 9y ago
  Don’t they get a discount on the food? That’s how a lot of the other services make it...
  - albertgoeswoof 9y ago
    Looks like from the comments below they can take out 30% of the cost of the food. Assuming average of £20/order, that's £6/order, which could work. Still doesn't seem like a great deal for the consumer / restaurant. E.g. I'm paying £8.50 of a £22.50 order purely on delivery, and I don't even get table service...
    - CamelCaseName 9y ago
      Part of the idea is that you were already paying that £6, or more, in advertising costs the restaurant pays and that Deliveroo is more efficient at customer acquisition than the average restaurant is.
      - throwawaylalala 9y ago
        Exactly. It broadens your target market. Channel takes ~1/3rd in the software industry...
cs702 9y ago
All these new delivery startups remind me of Kozmo.com, which raised quite a bit of money from high-profile investors (including Fred Wilson and Amazon[1]) and even filed for an IPO in 2000. Kozmo.com described itself this way in its IPO filing: "We enable consumers to order a variety of entertainment, food and convenience products over the Internet for free delivery in under one hour. Our promise of under one hour delivery is designed to satisfy a consumer's desire for immediate gratification. We focus on selling frequently purchased, high margin items with well-known brand names. Additionally, we recently initiated a business-to-business service to enable select retailers to provide their customers with an expedited delivery option on a fee-for-service basis through our distribution networks."[2] If you've never heard of Kozmo.com, it's because the company went bust. The business grew very quickly... but only as long as there was freshly raised capital coming in. When the flow of fresh capital stopped, the company couldn't find a way to become profitable. Here are some articles chronicling Kozmo.com's swift rise and even swifter fall: https://web.archive.org/web/20040821125230/http://www.manufacturing.net/scm/index.asp?layout=articleWebzine&articleid=CA184173 https://web.archive.org/web/20040821125230/http://www.manufa... https://www.forbes.com/2000/06/22/mu3.html https://www.forbes.com/2000/06/22/mu3.html Deliveroo doesn't look that different from Kozmo.com... or does it? -- [1] http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-newsArticle_Print&ID=81108&highlight=%20press%20release http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-new... [2] https://www.sec.gov/Archives/edgar/data/1075749/000091205700012562/0000912057-00-012562.txt https://www.sec.gov/Archives/edgar/data/1075749/000091205700...
- whipoodle 9y ago
  I work for a company worth billions. I've talked to entrepreneurs who "already tried the idea" for the sort of business I work at. I guess how you execute matters, or something.
  - john_moscow 9y ago
    Is the company you work for actually profitable?
    - 9y ago
kin 9y ago
It sounds like in addition to delivery services where margins seem pretty tight, they offer cloud kitchen services that partnering restaurants can use to expand.
elvirs 9y ago
why are they valued in billions? how profitable can an app that facilitates food delivery become? restaurant still has to charge for their food, customer still wants to pay minimum and the delivery person still needs to get paid. what innovation is this app bringing that will cut costs by so much that it will make billions in profit?
rdiddly 9y ago
Jesus, ANOTHER one of these? Why does this space get so much attention from startups? "We are making the world a better place by battling first-world temporary hunger in tandem with the lazy-person mobility crisis."

118 points by beNjiox 9y ago

juskrey 9y ago

Like Pets.com never happened

georgespencer 9y ago
Very different. Pets.com in Y1: revenue $600k USD, advertising spend $11.5m. Deliveroo generates significant revenue and is a business/brand that consumers are passionate about. The bet investors are making is that their gross margin can increase quickly. Expect they're doing close to £300m of revenue now, so a 6.5x rev>valuation multiple is punchy but fair.
- Zenst 9y ago
  £128.56m in sales last year, and a loss of £129m. So very much curious how they managed such a valuation without over-hype.
  - georgespencer 9y ago
    For a crowd who presumably work in startups, folks on here are always weirdly surprised by how this works. Generate vast revenue, reach scale, cut central costs. (To be clear, Deliveroo's challenge seems to be cost of sales.)
    - martinald 9y ago
      Well, it's a pretty huge loss (more than revenue! Also, I think people were surprised or amazed that they had no core profitability. Especially when it's likely COGS will go up with more and more regulation around their gig economy employees
      - T2_t2 9y ago
        Depends what you think the lifetime value of a customer is, plus what the ongoing cost to retain them is. I ordered off Deliveroo in Sydney Australia, and they advertise on AdWords against individual restaurant names. If the Diliveroo brand is strong, and that AdWords click made me a Deliveroo customer, that is a win. If I always search and they always pay, this may prove problematic long term. That's the equation - if $X upfront + $y ongoing < lifetime value then you have a chance at profitability, assuming you can get overheads under control / can scale up the offering with minimal growth in overheads (the classic 2X revenue, 1.5X costs model).
        martinald 9y ago
        I mean the core delivery service assuming 0 marketing, tech, customer service costs is not really profitable according to their last accounts.
        T2_t2 9y ago
        How is that possible? What is the maths there?
        martinald 9y ago
        Delivery costs are very high?
- loceng 9y ago
  If you look at these companies in silos then it seems like they could be legitimate, however once you look at the context of other similar companies who are hoping to be the winner - and that's the only way they can success and the outcome isn't sustainable for any of them (unless their goal is to exit via the public markets and give the loss to them or some big money VCs). They all need the metrics they're working with to hold and the outcome for all of them is likely to be drastic for all of them. Perhaps they're hoping efforts by Uber and others in the same boat will work together in helping mould the market and become aligned with society's efforts/need to create Universal Basic Income for everyone. If UBI is to come into play then other metrics must shift too. The reward we give people for innovation will have to be at par with what's reasonable - and the peaks and valleys will more or less flatten out. The people who will be most innovative can use their own funds to trickle into future innovations that will be operated efficiently, e.g. Elon Musk. Perhaps there will no longer be VC firms in the future, and it will be individuals that invest through crowdfunding platforms. What would likely be a great hybrid model is crowdfunding platform but with VC firms - syndicate-like - except where an individual could allocate $5/month into the fund, perhaps only allowing individuals to invest with a monthly cap, so no one individual or organization can have some bizarre incentive or goal towards swaying the decision makers of the fund, etc. I'd argue the pros of getting $1 from a million people is far better than $1mm from a few. The most successful crowdfunding platforms right now, because they're VC-backed and thus have those same pressures on them, have to charge an unreasonable fee - which is unnecessary pressure on the projects that are trying to get funded. The alternative right now is feeding into the VC system who expect relatively short-term high profits - which then only allows platforms that charge an excessive amount to become dominant; and this does cause more efficient efforts by others to not be able to survive as easily - something I'm sure they're aware of as part of how they can get ahead with their model.
robk 9y ago
But chewy.com sold for $3b so what's your point?

baxtr 9y ago

Party like it‘s 99...

i_am_nomad 9y ago
You mean, party like it's 1099.

marenkay 9y ago

Another unicorn that can only exist because it uses fake self-employment to turn their workforce into a cheaper one. Just like Uber and so many others this only works because for some reason turning paid work into something that is not even self-sustaining suddenly is accepted. Does nobody have ethical issues with seeing value in devaluing people?

mattmanser 9y ago
While I agree this self-employed farce has to stop, the service itself is good. Previously takeaways were all the more greasy options, the deliveroo options are nicer food and it's aimed at a different market segment. It allows venues access to a market that was previously denied to them because they couldn't justify running their own delivery service full-time. They charge £2.50 per delivery. If they were paying couriers minimum wage I assume they'd be able to make money off it still. I think that price probably includes the high risk that the self-employed status will be rescinded.
- dnh44 9y ago
  Deliveroo also take 30% of the food sale so I always assumed the £2.50 went to the rider, which seems like decent amount.
  - mattmanser 9y ago
    Yeah, I forgot to say that. 30% is very similar to just eat's take too. Seeing as the minimum order is invariably £10, the minimum take for deliveroo is £5 per order, but I'm guessing it's usually more like £7-£10. They'll definitely still be able to make money after a change in status.
    - badestrand 9y ago
      Where have you got that 30% number from? I am pretty sure it was around 10% four years ago in most parts of western Europe and it would surprise me seeing it tripled.

mbrookes 9y ago

What have Deliveroo done differently to be more successful than the food delivery startups that came before?

NamTaf 9y ago
They beat everyone else, including UberEats, to the AU market. I think them and Foodora were the first two, but they won and UberEats just relied on their brand to muscle in. Both share the market pretty evenly ehre, from what I can tell. I wonder if they did this for many 'secondary' markets to try to beat the big players or if AU is just a weird case.
- BigJono 9y ago
  Only the inner suburb markets though. Once you're >10km out of the city center it's all Menulog and UberEats, with a smattering of people using EatNow.
- synicalx 9y ago
  In SA, I've really not had any luck with Deliveroo outside of the CBD - it only seems to work if you're right on top of the restaurants. UberEats seems a little better, but it still really restricts how far away from a restaurant you can be, I moved one suburb over (3km?) and lost access to about 10 restaurants that were in my old suburb. I tend to prefer apps where the restaurants themselves look after the delivery, EatNow is a good example. They can charge a little more for delivery, and therefore seem to be willing to deliver further away. And presumably, it's probably a little fairer on the delivery guys as they got an actual job rather than just an app.
weego 9y ago
In Reading where I used to live all they did was link me up with restaurants I actually want to eat at but can't because of kids or work or whatever instead of just disgusting quality pizza/curry/chinese/fried chicken joints
wott 9y ago
Nothing, they just managed to convince more investors to continue pouring tens and hundreds of millions in the hole of their losses, while others were rightfully let to die.

Zenst 9y ago

Was just reading about them only the other day and how they are losing money: http://www.bbc.co.uk/news/business-41347817 http://www.bbc.co.uk/news/business-41347817 So how they derive such a valuation is very much at odds with actualities.

pault 9y ago
Hmm, if that surprises you I have some bad news about the rest of the startup industry...
busyant 9y ago
https://en.m.wikipedia.org/wiki/Greater_fool_theory https://en.m.wikipedia.org/wiki/Greater_fool_theory

orf 9y ago

For those wondering about these numbers, Deliveroo has a great concept, solid execution and huge brand recognition. Just-eat (worth 4.6B) connects people to shitty takeaways and has a terrible website. Deliveroo connects people to restaurants and provides the delivery service themselves, through bikers (here in London). They have taken this and spread throughout Europe. They are going to (and are) completely canablising Just-eat who seemed to run out of stream and grind to a halt several years ago.

Zenst 9y ago
Would it be fair to say that the valuation is based on the back of Just-eats valuation?
amyboyd 9y ago
What makes you think Just-Eat ran out of steam "years ago"? Stock price is higher than ever: http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB00BKX5CN86GBGBXSTMM.html http://www.londonstockexchange.com/exchange/prices-and-marke... They are reporting good growth: http://www.cityam.com/256734/just-eat-reported-order-growth-36-per-cent-2016-but-shares http://www.cityam.com/256734/just-eat-reported-order-growth-... I see lots of Deliveroo bikes around where I live in the centre of London, but they are basically non-existant when I go to other towns and cities. Also, Deliveroo started up-scale -- they can't go down to selling cheap Chinese takeaway food, because it will hurt their image. Just-Eat started at the low-end and are now moving up-scale without hurting their image. And even then, plenty of people prefer low-end Chinese food (I sure do).
- orf 9y ago
  By ran out of steam I mean: 1. Their website is really quite poor, and has been for years. Why the hell is the navigation so crap, and why can't I search for a specific food item? 2. They still haven't done anything about the prevalent and pervasive fake reviews. Also, they cannot "move up-scale", their logo is associated with cheap food. Upscale restaurants don't want to put themselves on just-eat, next to the cheap low end places, nor do they want the just eat logo in their windows. IMO it's the opposite of what you describe - it's way harder to go low-end to high-end. Just eat has to somehow convince people their brand isn't for bad food.and cheap takeaways, then market themselves at high-end places. Deliveroo just needs to keep their high-end image, and then all the cheap places would throw themselves at Deliveroo to up their own image. No convincing required.

holydude 9y ago

Not very sustainable unicorn is it ?

mattmanser 9y ago

I find it funny they're claiming some sort of AI system will help them make better margins. In my city, Nottingham. all the deliveroo people gather in Trinity Square waiting for jobs. There's obviously no special AI needed. I do think though that it raises the issue that they should be paying for their own business premises and stop using our public spaces as their company waiting spots.

mirekrusin 9y ago
Similar at Angel, London. They gather at the shell petrol station; also for some strange reason pretty much all of them speak brazilian portuguese.
- pault 9y ago
  Is that strange because they aren't Brazilian?
  - mirekrusin 9y ago
    They are Brazilians with paulistas accent. It's strange that they are, all, Brazilians.
    - mrisoli 9y ago
      As a Brazilian it makes sense to me, Brazil economy just keeps getting worse and worse, a lot of Brazilians are moving abroad chasing some opportunities. London is very famous as a destination for them, before there was Deliveroo I knew some people who did a lot of construction work because a lot of firms would hire them even if they don't have the proper visa, I assume you can do the same with Deliveroo.
      - tomarr 9y ago
        A lot of Brazilians (allegedly) come in on fake Portugese documents too

common_ 9y ago

Alternative headline: for $385M, investors buy option for a large stake in Deliveroo if they don't surpass a valuation 'over $2B.'

codegladiator 9y ago

Is this last-mile delivery funding thing beginning again or the first one didn't stop ? It hurt everyone except the founders.

Theodores 9y ago

I had better pay when I was delivering newspapers as a teenager. This was many decades ago (when people bought their news on dead tree) and a lot of inflation as happened since. I didn't see my paper round as a 'proper job', but I think the inflation adjusted rate comes out to at least double the £8 per hour that Deliveroo riders claim to make on Glassdoor. I didn't have to pay rent since I was living with my parents, my income was purely disposable. Some numbers: late 1980's, my Sunday paper round took five hours and earned me £30 not counting tips. All done by bicycle. I also had a morning paper round and an after school round delivering the local paper. On the back of these 'gigs' I also had gardening, baby sitting and other jobs from my clients, making my childhood wages now seem positively 'over-paid' compared to what passes for 'gig economy' nowadays. I believe my take of the newspaper sale was around 20% with a delivery charge of 5 pence. Bicycles were just for kids back then and working for pocket money (not paying taxes or expecting benefits like holiday pay) was okay given I was at school. Furthermore, all my work was chargeable, I was not waiting around for someone to click on an app. From this perspective I find it crazy that this Deliveroo phenomenon has happened. I aspired to do more than ride around delivering stuff in all weathers. Fortunately I did move on to 'proper jobs'. The Deliveroo drivers are kind of with the pigeons in terms of London's pecking order. Although 'gig' economy, they lack the opportunities my humble paper round offered for 'up-sells' plus there are some venture capitalists creaming off what should be their cut. How did it all come to this?

deleted 9y ago
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javiramos 9y ago

Money Quote: "Deliveroo grew a lot in 2016, with revenue up 611 per cent to £129 million. But losses were up too — a 300 per cent increase to £129 million. However, the figure to really watch is the food delivery company’s gross margin percentage, which sat at just 0.7 per cent." How can an investor, justify this as a solid investment when the gross margins are 0.7%?

na85 9y ago
It's been clear to me for a while that valuations lack any rational basis. I reached this conclusion shortly after Yo was valued at something like $10 million.
- charlesdm 9y ago
  There still is money to be made in a bubble. Just gotta find some greater fool to sell the shares to and book that capital gain. Which usually (at the end of the road) ends up being a pension fund.
raiyu 9y ago
300 percent growth to £129M is impressive growth and those stats are 9 months old, so if they have been able to continue to increase their revenue growth they maybe ending 2017 with £250MM+ which would be about an 8-10x multiple on their 2017 year end revenue which isn't that outrageous. The challenge with startups is that you don't yet have a clear insight as to how their sales and marketing spend will evolve over time, so people are willing to invest in growth of revenue over those metrics. What's more worrying is their gross margin percentage. Taking the revenue growth and sales and marketing expense and overall loss out of the equation, that margin percentage is going to make it extremely difficult to make a business model that works in the long term. However, building a large revenue base helps to offset that, but we've also seen that play out negatively for companies in a similar position like Groupon. I think with this valuation they will need considerable consecutive years of revenue growth to grow into that valuation meanwhile their losses are high and also increasing so really this funding round buys them the usual 12-18 months of runway.

albertgoeswoof 9y ago

Currently there is a £2.50 fee for deliveries in London with Deliveroo. Even with extreme optimization a Deliveroo rider can't possibly make more than 3-4 "proper" deliveries in an hour (food gets cold fast! And when it gets returned deliveroo & the restaurant suffers) so maybe they can generate around £10/hour in revenue for Deliveroo. Then you need to take out costs for the driver, development, marketing, integration withe restaurants, etc. So where is Deliveroo's margin on that? There isn't one, and there's no way they can pay delivery drivers as actual employees (which the law will eventually catch up with by the way), even at minimum wage you'd need to cover £15+/hour to include holiday pay, sick pay, insurance and other standard benefits. MAYBE, delivery drones / robots will arrive before the funding runs out, but I doubt it very much.

throwawaylalala 9y ago
Don’t they get a discount on the food? That’s how a lot of the other services make it...
- albertgoeswoof 9y ago
  Looks like from the comments below they can take out 30% of the cost of the food. Assuming average of £20/order, that's £6/order, which could work. Still doesn't seem like a great deal for the consumer / restaurant. E.g. I'm paying £8.50 of a £22.50 order purely on delivery, and I don't even get table service...
  - CamelCaseName 9y ago
    Part of the idea is that you were already paying that £6, or more, in advertising costs the restaurant pays and that Deliveroo is more efficient at customer acquisition than the average restaurant is.
    - throwawaylalala 9y ago
      Exactly. It broadens your target market. Channel takes ~1/3rd in the software industry...

cs702 9y ago

All these new delivery startups remind me of Kozmo.com, which raised quite a bit of money from high-profile investors (including Fred Wilson and Amazon[1]) and even filed for an IPO in 2000. Kozmo.com described itself this way in its IPO filing: "We enable consumers to order a variety of entertainment, food and convenience products over the Internet for free delivery in under one hour. Our promise of under one hour delivery is designed to satisfy a consumer's desire for immediate gratification. We focus on selling frequently purchased, high margin items with well-known brand names. Additionally, we recently initiated a business-to-business service to enable select retailers to provide their customers with an expedited delivery option on a fee-for-service basis through our distribution networks."[2] If you've never heard of Kozmo.com, it's because the company went bust. The business grew very quickly... but only as long as there was freshly raised capital coming in. When the flow of fresh capital stopped, the company couldn't find a way to become profitable. Here are some articles chronicling Kozmo.com's swift rise and even swifter fall: https://web.archive.org/web/20040821125230/http://www.manufacturing.net/scm/index.asp?layout=articleWebzine&articleid=CA184173 https://web.archive.org/web/20040821125230/http://www.manufa... https://www.forbes.com/2000/06/22/mu3.html https://www.forbes.com/2000/06/22/mu3.html Deliveroo doesn't look that different from Kozmo.com... or does it? -- [1] http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-newsArticle_Print&ID=81108&highlight=%20press%20release http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-new... [2] https://www.sec.gov/Archives/edgar/data/1075749/000091205700012562/0000912057-00-012562.txt https://www.sec.gov/Archives/edgar/data/1075749/000091205700...

whipoodle 9y ago
I work for a company worth billions. I've talked to entrepreneurs who "already tried the idea" for the sort of business I work at. I guess how you execute matters, or something.
- john_moscow 9y ago
  Is the company you work for actually profitable?
  - 9y ago

kin 9y ago

It sounds like in addition to delivery services where margins seem pretty tight, they offer cloud kitchen services that partnering restaurants can use to expand.

elvirs 9y ago

why are they valued in billions? how profitable can an app that facilitates food delivery become? restaurant still has to charge for their food, customer still wants to pay minimum and the delivery person still needs to get paid. what innovation is this app bringing that will cut costs by so much that it will make billions in profit?

rdiddly 9y ago

Jesus, ANOTHER one of these? Why does this space get so much attention from startups? "We are making the world a better place by battling first-world temporary hunger in tandem with the lazy-person mobility crisis."