The food-delivery-on-demand space continues to heat up in Europe. Today, Deliveroo, the London-based startup that at the end of September announced a Series F of $385 million at a valuation of over $2 billion, today announced it is adding another $98 million into the round, led by T. Rowe Price Associates and Fidelity Management & Research Company. The brings the total amount in the round to $480 million.
The news comes three days after Deliveroo was delivered (sorry) ruling in its favor in an employment tribunal in the UK, which determined that Deliveroo drivers are not mandatorily entitled to employment benefits as contractors with the company. If it had lost, it would have meant more costs for Deliveroo, which would put a dent into its margins. To be totally clear, it’s not apparent at all that today’s funding news is in any way related to the ruling, but it’s interesting because an unfavorable ruling could have meant Deliveroo might be seen as a riskier bet.
We have asked, and Deliveroo would not name who is behind this latest infusion into the Series F. In addition to T. Rowe Price Associates and Fidelity Management & Research Company, the round includes a list of previous, top-shelf investors: DST Global, General Catalyst, Index Ventures, and Accel Partners along with unnamed, private investors.
The news underscores how the food delivery business continues to be one of economies of scale: Deliveroo’s extra funding boost also comes just a day after Hungryhouse and JustEat announced that UK regulators have approved their merger, announced almost a year ago, in which JustEat is buying Hungryhouse from Delivery Hero (who is exiting the UK as a result of this) for £240 million to scale up its business in the UK, which is Deliveroo’s main market currently.
For its part, Deliveroo says that it will hit 200 cities next week, when it launches in Cannes, France, as the latest city in its French footprint.
Global growth, and subsequent economies of scale, are at the heart of this funding and the strategies of these companies.
Just as music streaming companies like Spotify are trying to grow beyond their low-margin business of streaming, Deliveroo is trying to add in more services to meet the needs of its restaurant customers in its two-sided marketplace. This has included building kitchens and more.
“This new investment will help Deliveroo to expand in the UK and around the world, bringing ever more great food directly to people’s doors. This is all thanks to the hard work of our riders, the great restaurants that we work with and our brilliant customers,” Will Shu, founder and CEO of Deliveroo, said in a statement.
But if expansion gives delivery companies the promise of economies of scale in what is otherwise a low-margin business, it comes at a price and is not always easy. Yesterday, Postmates, one of the delivery hopefuls in the U.S., made its first move outside of the country, to Mexico City, after saying two years ago that it would come to London in 2016 (it never has).
Others competing in the same area include Uber’s Uber Eats and Amazon’s Restaurants service.
Scaling and becoming profitable have other prices, too.
Deliveroo has been under scrutiny in the UK after a union brought a case against the company demanding that its delivery drivers be recognised as full-time rather than contract workers, and all the benefits that are afforded to the former group such as paid time off, statutory redundancy and other benefits.
This has been a contentious issue for on-demand businesses in other countries, too, and here in the UK just last week Uber lost a case where drivers were determined, after all, eligible for employment rights.
In the case of Deliveroo, the employment tribunal, called the Central Arbitration Committee, ruled in Deliveroo’s favor. This isn’t the end, however: the Independent Workers Union of Great Britain, who brought the case against Deliveroo, can appeal the ruling.
In the meantime, Deliveroo seems to be focusing more on how it can use this latest round to grow its business and the tech and logistics framework that runs it.
“The next exciting phase of the UK restaurant industry will see more power being handed to the consumer, with restaurants better able to cater for consumers’ needs because they have richer data to work with,” continued Shu. “This investment will help to accelerate this process, bringing more people more choice, healthier options and new food. As our technology improves deliveries will become faster and our selection on offer will become more varied. This is great news for the UK economy as it will help to create work in restaurants as well as well-paid, flexible work for our riders.”
Deliveroo has 10,000 restaurants in the UK on its books, and 15,000 riders.
This Series F brings the total raised by Deliveroo to nearly $1 billion.