“I was actually the first delivery driver, I still do deliveries for 4 hours a week,” Deliveroo CEO and co-founder William Shu tells me during a call. “I don’t do it on the scooter anymore, I do it on the bicycle. It’s actually really good exercise so I don’t mind.”
I can’t help wondering if this will soon change. His London-based startup, which offers food delivery from premium restaurants that don’t traditionally offer a take-out service, has just closed a $25 million Series B round led by Accel Partners. However, despite my suggesting otherwise, Shu insists that remaining so hands-on isn’t a PR gimmick, but enables him to gain a much better understanding of Deliveroo’s business.
Specifically, the problem that Shu and his co-founder and childhood friend Greg Orlowski have set out to solve is that a lot of take-out food, not least in the UK, is of poor quality, and yet most premium or higher-end restaurants don’t deliver.
To tackle the latter, Deliveroo has built its own online ordering and logistics platform, including recruiting a fleet of drivers and cyclists who, along with London, now service restaurants and customers in the UK cities of Brighton, and Manchester, with Oxford launching next week.
It’s this logistics element that differentiates the startup from Just Eat and Hungry House’s pure marketplace model, which relies on the restaurants themselves to handle delivery. It also means, in theory, that Deliveroo can offer customers the choice of better quality take-out food, and give the restaurants it signs up an additional and often much-needed revenue stream.
“The benefits to restaurants can be potentially huge,” says Shu. “A number of restaurants have increased their revenue by 30 per cent. Even a 5 per cent increase in revenues for the restaurant can be the difference between a so-so year and a good year. The difference between laying people off or keeping the thing afloat. With 30 per cent, you completely transform the business.”
Customers appear to like the proposition, too, which sees an average delivery time of 32 minutes, for a fixed delivery charge of just £2.50. As a result, Deliveroo claims that 50,000 people now use the service regularly.
“I think there’s this big gap in the marketplace for something better at home,” says Shu. “Once you get the high quality restaurants in a particular neighbourhood, and you get the local residents excited about it, people will use it.”
Unsurprisingly, however, Deliveroo isn’t without competition. Both Dinein and Meals.co.uk operate a similar service, though Shu says that the landscape is a little broader than direct local players, whom he claims to pay little attention.
“If you look at Just Eat and Hungry House, although we don’t list the same restaurants, they probably compete at some point for the same wallet. Likewise, Dominos is also competing for the same wallet,” he says.
With deep pockets, expansion is now the name of the game. “We are launching a lot of cities in the UK because the people have spoken and they like the product,” says Shu. “We’re also looking at different international markets, primarily European, and some of them seem very appealing and suffer from the exact same problem as, say, Londoners and the British do.”
When choosing exactly where to expand next, the company weighs up factors such as restaurant supply, population density, and a minimum level of affluence.
It also divides cities into a series of ‘hyper-local’ zones to ensure that deliveries can be executed extremely quickly, food doesn’t arrive cold, and Deliveroo can keep the cost down to £2.50 — a price tag Shu says is sustainable because the startup is running a very “high-throughput, high-effiecency” market.
In addition to those expansion plans and associated marketing — which until now has been largely word-of-mouth — Deliveroo will invest in its technology and grow the company’s 50 person-strong team that, along with engineers, includes customer service reps, account management, driver operations, and sales people.
Adds Shu: “There’s a lot of things we want to build to become the best food delivery company in the world and we’re going to have to hire people to do that.”
Perhaps the new hires will soon include another part-time delivery person: Cyclist wanted, 4 hours per week.