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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. Howe

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.

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.