Deliveroo raises $385M in new funding

https://techcrunch.com/2017/09/24/deliveroo-raises-385m/

by beNjiox • 9 years ago

118 142 9 years ago

techcrunch.com

juskrey• 9 years ago

Like Pets.com never happened

georgespencer2• 9 years 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.

Zenst3• 9 years 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.

loceng• 9 years 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.

robk2• 9 years ago

But chewy.com sold for $3b so what's your point?

baxtr• 9 years ago

Party like it‘s 99...

i_am_nomad• 9 years ago

You mean, party like it's 1099.

marenkay2• 9 years 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?

mattmanser5• 9 years 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• 9 years 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.

gaius• 9 years ago

While I agree this self-employed farce has to stop, the service itself is good

I think they are having issues then with scaling out - I've used Deliveroo a grand total of 3 times, all for restaurants that I know are about a mile from my house, every time Deliveroo have been 45-60 minutes after their estimated time, the food was cold and it would literally have been quicker to walk to the restaurant, eat, and walk home. Anecdata I know but I don't see how they can make it work without hiring a lot more people. And this business can only work financially if they don't.

CPLX• 9 years ago

While I strongly agree with your overall sentiment it's worth noting that this is not a new startup-developed characteristic. The people driving FedEx delivery trucks to your office are independent contractors too.

toomuchtodo• 9 years ago

Fedex settled for hundreds of millions of dollars for misclassifying Ground delivery truck drivers as independent contractors.

http://mobile.reuters.com/article/amp/idUSKCN0Z229Q

erdle• 9 years ago

Some Fedex Ground routes are awarded to independent companies, as in a local company that bids on the region or route. But it's not all Fedex deliveries and I can't vouch for every company that has one of theses routes as to the employment status of their drivers. And as far as I know, Fedex is not giving our Ground routes to individual contractors. And as far as I know Fedex Express is not handled by any outside contractors. Express and Ground are essentially 2 separate businesses within Fedex.

rrivers• 9 years ago

Are gig economies the problem (and the companies that create them) or are they an inevitability? I''d argue the latter, especially as the wave of automation that is foreseeable in the very near future will displace more people.

Companies are going to innovate but what we are witnessing now is innovation that under the current market economy ) this innovation "devalues" people. Perhaps the solution is better legislation and regulation of business to support this new, growing, and likely inevitable shift towards a gig economy and the people who operate within the sphere.

mschuster91• 9 years ago

and likely inevitable shift towards a gig economy

The "gig economy" scam must be stopped before it's too late. It is not "innovation", but pure exploitation.

As for automation, tax robots and distribute the profits to the people made jobless by them.

maxerickson• 9 years ago

It's a problem if they are flouting employment law in order to "innovate".

z3t4• 9 years ago

And when they want to increase their margins, guess who's gonna get cut !? The long game is to replace all manual work with self driving/flying drones. But for that to ever happen, those who are now carrying out manual work need to demand more, so it becomes economical to actually replace them.

skrebbel• 9 years ago

It's even worse than Uber. With Uber, at least you can drive for multiple companies at the same time. If you want to bike for both Deliveroo and, say, Foodora you need to first go home and swap one branded backpack for the other.

(Not sure if that's an international thing - here in NL the delivery people use bikes and have branded backpacks)

BillinghamJ6• 9 years ago

In the UK, it’s very common to see riders with a wide mix of differently branded clothing, bikes, boxes, etc. Very common for them to be working for Uber Eats, Deliveroo, Jinn, Etefy, etc. all at the same time

There may be some kind of rule around consistent branding, but I have never seen it enforced.

pveierland• 9 years ago

It feels as if the devaluation and irony is pushed further by Uber using the profits from human workers to invest in autonomous vehicles which will directly eliminate the same workers. Deliveroo doesn't seem to currently invest in robotics research, but other companies such as https://www.starship.xyz/for-businesses/ are pursuing autonomous delivery.

thisisit• 9 years ago

Is it even cheap? Uber's cost is more than what it seems: https://motherboard.vice.com/en_us/article/9a3vye/uber-true-...

So while it is cheap from a customer's perspective someone else is footing the bill. Once they run out of investor's money someone has to pay for it.

In India, drivers are already demanding more bonuses. They went on strike: https://yourstory.com/2017/02/bengaluru-drivers-indefinite-s...

Now they are building their own ride hailing app: https://yourstory.com/2017/03/disappointed-ola-uber-drivers-...

rce• 9 years ago

Delivering food is not a high value activity. Most people are only willing to pay a few dollars to have food delivered to them. If you raise the cost of employing low skill workers then many of these business models cease to exist.

It's hard to survive on very low wages. That's one reason we have a social safety net. Many argue that it should be the company's responsibility to pay their workers higher wages and not society's responsibility to take care of unskilled members of society. However, this is not a realistic option in all cases because some fraction of these jobs would cease to exist if higher wages are mandated as not all customers will be willing to pay higher prices. In the food delivery case it's a large fraction of customers and the business will probably cease to exist.

The fundamental problem here is that our economy is becoming more advanced and more and different skills are being required to be able to provide value to society and many people don't have the required skills. There are only a few things that can happen in this scenario: society educates low skill residents to prepare them for more valuable jobs, low skill residents work in low value jobs, low skill residents are unemployed. We should make the education option available and highly encouraged. We should provide for necessities like nutrition, safety, shelter that many young people are lacking that prevent them from availing themselves of educational opportunities. However, in the case that people aren't willing or able to complete the education required for jobs requiring a highly educated workforce, I think it's better that people have the option of working in lower value jobs rather than effectively outlawing it. This does not mean these workers should be treated as having low value beyond being paid low wages. There should be worker protections, customers should treat workers with respect, etc.

It would be better for the world if we had more people working in more valuable jobs like science, medicine, technology, etc. and fewer in food delivery. But raising wage regulations to the point that Deliveroo's business model is no longer sustainable probably just means that its workers are unemployed and people have fewer food delivery options.

tolien3• 9 years ago

If you raise the cost of employing low skill workers then many of these business models cease to exist.

At risk of getting into a discussion about UBI and tax doctrine, is that a bad thing?

The business doesn't have a right to exist. If it can't operate without paying its staff below-subsistence wages, why should it (or the VCs who provide it funding) expect the state (read: other taxpayers) to subsidise that?

Regarding your second point I'd argue the money would be better diverted to providing the education to raise the overall skill level of the economy rather than enabling people to work menial jobs that will (in the case of Deliveroo, Uber, et al) be automated away anyway.

marenkay2• 9 years ago

If most people are not willing to pay a sustainable price for delivering food, they have to cook or walk to the restaurant. It is not the task of social services to pay for that.

I also have strong objections to the notion of unskilled work here. Any kind of work requires training and skills, and I think you should never take the high road of having better education. It's in general 40 hours of your life time for any job you do. Coming back to that... is it realistic that all people having higher income now pay for food deliveries so that some companies can make money? I doubt it. That questionable both from economic and ethical viewpoints.

Regarding the advance of our economy I can not agree. We are basically recessing to 19th century trades and valuation of work. Just because things are IT based mostly now that does not make up a more advanced economy. Looking at laws, work practices, standards, I dare to say: we are actually watching the whole of mankind failing to take the next step.

We've made it to value of an individuals work, now we're killing that where instead we could also be asking us if our actual views on working and monetary compensation make sense.

From my point of view (and I've been on the crazy low and high paid side), it does not. As does compensating low paid jobs from all tax payers money instead of simply putting companies out of business if they can not sustain themselves.

Fricken• 9 years ago

I was a bicycle messenger for a little under a year a little over a decade ago. While the pay was shit, it was the most fun I ever had working a job. It didn't even feel like a job, it felt like a big game.

If there was any kind of bike based delivery service in my city that allowed me to work casually, I would do it just for an excuse to go out and dodge traffic on a bike a few evenings a week.

mbrookes• 9 years ago

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

NamTaf• 9 years 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• 9 years 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• 9 years 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• 9 years 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• 9 years 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.

Zenst3• 9 years ago

Was just reading about them only the other day and how they are losing money: http://www.bbc.co.uk/news/business-41347817

So how they derive such a valuation is very much at odds with actualities.

pault2• 9 years ago

Hmm, if that surprises you I have some bad news about the rest of the startup industry...

busyant• 9 years ago

https://en.m.wikipedia.org/wiki/Greater_fool_theory

orf3• 9 years 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.

Zenst3• 9 years ago

Would it be fair to say that the valuation is based on the back of Just-eats valuation?

amyboyd2• 9 years 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-marke...

They are reporting good growth: 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).

orf3• 9 years 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.

oakesm9• 9 years ago

Deliveroo in Brighton has KFC and McDonalds alongside their “high-end” restaurants. This, along with not having user ratings for outlets, has really made me question how good the other outlets really are.

arthurfm• 9 years ago

I see lots of Deliveroo bikes around where I live in the centre of London, but they are basically non-existent when I go to other towns and cities.

Whenever I visit Oxford I always see lots of Deliveroo bikes driving around the city centre.

BillinghamJ6• 9 years ago

Entirely anecdotal, but my perception of Just Eat, Hungry House, etc. is of consistently crap takeaway food. I do not, and will not, order from them. Their reviews are completely untrustworthy - you literally never know what you’re going to get. There is no image to hurt - they’re the lowest of the low.

In the UK, Deliveroo originally differentiated primarily by only accepting high quality restaurants, rather than takeaways.

Just Eat, etc. may try to improve their image, offer remotely usable interfaces, clean up their offerings in terms of food quality, but I don’t think their reputation will ever recover to the point that anyone in London etc. would consider them above Deliveroo/Uber Eats.

Not sure how closely these views tally with others, but they are representative of my friends/peers.

tommoor• 9 years ago

they can't go down to selling cheap Chinese takeaway food, because it will hurt their image

Oh, they totally can if the margins work. Just look at Uber which started as a black car service.

fish_fan• 9 years ago

While I've never heard of either of these companies (maybe because I'm american?), it seems like wider selection is better than "up-scale" food. Delivery on top of expensive food is a once a month prospect; cheap food delivered cheaply is a daily prospect. To put this another way, I've spent the vast majority of money on uber on uner x, not uber black cars.

Low margins are harder to pull off but are much more stable and easier to scale.

Why don't they just offer all restaurants, sort of like postmates did (does?).

Accacin2• 9 years ago

Anecdotal, but I know loads of my people in my age group that use Just Eat. I know none that use Deliveroo. I don't really have a problem with their website either, if I want some fast food it's quick and easy.. And I get the option to pay with cash on delivery or card.

mhaymo• 9 years ago

UberEats has largely won my business in Edinburgh. The app is nicer, the drivers more likely to find me without going to the wrong place first, and it lets me decide whether to tip after the food arrives.

holydude• 9 years ago

Not very sustainable unicorn is it ?

mattmanser5• 9 years 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.

mirekrusin2• 9 years 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.

pault2• 9 years ago

Is that strange because they aren't Brazilian?

duncanawoods• 9 years ago

Yep same in Bristol. They remind me of a loitering Bōsōzoku biker gang - scooters, similar outfits, alternative hair etc. eyeballing passersby.

sleavey3• 9 years ago

To be fair, a few motorbikes/bicycles temporarily waiting next to each other is not such a big deal to me in comparison to the fact that roughly half of every street in every big city in the UK is dedicated to parked cars. Putting aside the apparently shitty working conditions at gig economy companies like Deliveroo (which I dearly hope will be resolved with all the recent bad publicity around Uber and co), I like the idea of sharing the delivery services previously provided by individual restaurants between all. This is at least one positive aspect of the "sharing economy", which will hopefully also reduce the number of parked cars clogging up our roads.

ue_2• 9 years ago

You say that Deliveroo has shitty working conditions and I probably don't disagree (I know nothing of them), but I'm a second year university student and I'm being pressured to find a job by my parents while I'm here; Deliveroo seems like my best bet at the moment with flexible hours; I probably wouldn't be making any more than minimum wage elsewhere anyway.

I hope that's some insight as to why it's attractive to some people. If you know anything more about Deliveroo or other places I could look for jobs I'd be grateful, as it would really aid my search.

As a side note, I despise the way it is called the "sharing economy"; it's no sharing at all, and I wish this term were reserved for ideas I regard as more noble, like the gift economy, or a model in which people chip in a certain amount to a shared product on a large scale (such as democratic management of the economy).

dbbk• 9 years ago

To be fair Nottingham city centre is tiny, and Trinity Square is bang in the middle. It's obviously a market that would not benefit from some fancy AI system.

mattmanser5• 9 years ago

Tiny? It's a bit more compact than other cities, but it's certainly not tiny. It's also damn hilly, which the riders can't enjoy much.

Try a bunch of cities at 200m zoom in google maps.

croatially2• 9 years ago

Their logistics solution is just not as advanced as it can be. That's just common startup logic, the hardest problem will be solved with more money and good people and SV network has good people.

They need combinatorial search and some travel time data, live re-search when new orders come in. For this to work well they need to predict new orders in advance, this means they need data on the spatial distributions of orders through time (which now they certainly have).

They practically need to solve a variant of a problem that Uber has. Their delivery drivers load much more "passengers" but have static pickup points (known restaurants so there's only variance in the delivery point, pickups are pretty much static).

It's an interesting problem to solve, given that this kind of logistics research is practically invisible and I can't name any papers that dealt with this problem in any advanced way.

If done properly, then they've solved the logistics problem for on-demand companies that have enough data.

If solution is some ad-hoc mutated monster then it is just a chance for someone else to get the other pieces of cake.

robk2• 9 years ago

Your dismissal of a non SV company's innovation is embarrassing for you. The tech here is as good or better as anyone in the Valley.

gwenzek• 9 years ago

For this to work well they need to predict new orders in advance

Calls for deep learning! Or using data from last week…

cakedoggie• 9 years ago

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.

How is it ok to constantly have cars using these spaces for free? Using roads for free?

notyourday• 9 years ago

In my city, Nottingham. all the deliveroo people gather in Trinity Square waiting for jobs. There's obviously no special AI needed.

I think you misunderstand: that is the AI system decision. Had it been done by management committee of founders and optimization experts, everyone would have been staged in the most bizarre places around town, typically alone, which would have caused most of their delivery force to quit.

common_• 9 years ago

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

codegladiator• 9 years ago

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

Theodores• 9 years 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?

javiramos• 9 years 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• 9 years 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• 9 years 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• 9 years 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.

albertgoeswoof3• 9 years 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.

throwawaylalala2• 9 years ago

Don’t they get a discount on the food? That’s how a lot of the other services make it...

albertgoeswoof3• 9 years 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...

hellofunk2• 9 years ago

I have no doubt Deliveroo gets a percentage cut on the cost of the food, too. That can really add up all by itself.

badestrand2• 9 years ago

Similar food delivery services get around 8-12% of each order afaik.

boyce• 9 years ago

Deliveroo take 30% (or at least did when a restaurant I ran looked in to it) and you can't charge extra according to their terms

cm21872• 9 years ago

Do people really return their food? I usually vote with my feet. I walked away from just eat precisely because this sort of experience.

albertgoeswoof3• 9 years ago

For deliveroo I just call them and they resend the food and give a credit on your account.

Kind of ruins the moment though.

majani• 9 years ago

Delivery start-ups appear to be built to race to IPO, much like music start-ups. There is no intent to make profit.

cs702• 9 years 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.manufa...

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-new...

[2] https://www.sec.gov/Archives/edgar/data/1075749/000091205700...

whipoodle2• 9 years 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• 9 years ago

Is the company you work for actually profitable?

gist• 9 years ago

Among other reasons Kozmo failed a) prior to smartphones and b) when there were less people using the internet.

Noos• 9 years ago

This one reminds me of groupon, the discounts they must ask for can't really be profitable to the business or drive much business to anyone. Otherwise the restaurants would just hire their own dedicated delivery person.

You have to love the new net economy, it's all about burning through investor cash while having the crappiest, unprofitable business model they can, but hey they have deep learning and algorithms!

BillinghamJ6• 9 years ago

Amusingly, something quite similarly along those lines launched fairly recently - http://etefy.com

Given they promise free delivery within an hour, 24/7, with no minimum order value, I reckon they’ll be gone within 6 months or so.

kin• 9 years 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• 9 years 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• 9 years 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."

Deliveroo raises $385M in new funding

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