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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

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.

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.