Delivery Hero picks up InstaShop in $360M deal to expand in groceries in the Middle East

Grocery delivery has emerged as one of the hottest categories in e-commerce in the last six months, partly due to the coronavirus pandemic, where stay-at-home orders plus a general reluctance to avoid crowded places have led many more consumers to shopping online. Today, one of the big players in on-demand restaurant delivery is picking up a grocery delivery business both to meet that demand and continue diversifying its business.

Delivery Hero, the Berlin-based restaurant delivery company that operates mainly in emerging markets, has acquired InstaShop, a Dubai-based grocery delivery platform with around 500,000 users in five markets, where people can order food and other home supplies, pharmacy items, flowers and other items.

Delivery Hero said the acquisition values the company at $360 million, $270 million upfront plus an additional $90 million based on InstaShop meeting certain growth targets. It currently operates in five markets: United Arab Emirates, Lebanon, Egypt, Bahrain and Greece, the home country of the founders, Ioanna Angelidaki and John Tsioris. It’s a great return for investors: the five year-old startup had raised just $7 million before being acquired.

Both Delivery Hero and InstaShop are already profitable. The bigger of the two today posted half-year results that noted revenues were up 93.7% on a year-on-year basis to €1,126.8 million ($1.3 billion) in the period, although gross profit declined slightly given the impact of lockdowns and curfews, it said, posting gross profit of €167.2 million versus €168.3 million a year ago.

The plan is for InstaShop to stay as an independent brand under its current leadership team, both to expand in MENA, but also to look at how to apply its model to other markets.

This puts it (and now Delivery Hero) a significant step ahead of U.S. companies like Instacart, which was one of the pioneers and most popular purveyors of the grocery-on-demand model in the U.S. but hasn’t really exported its service outside of North America.

InstaShop’s basic business model is very similar to Instacart’s: its focus is on providing a two-sided marketplace not just to consumers but to retailers, which might not have their own delivery services, or want to use InstaShop to expand the number of deliveries they can make, or to reach a different audience.

DeliveryHero — which is now traded publicly in Germany with a market cap of nearly €19 billion ($22 billion) — is already running grocery delivery services across most of its operations in Europe, Latin America, Asia and Middle East/Africa, its founder and CEO Niklas Ostberg told TechCrunch.

“The largest part is Latin America and MENA but Asia catching up quickly. Today we cover 22,000 vendors in our quick commerce area,” he said. “InstaShop is unique in their customer experience. We looked into 100+ grocery players last year and InstaShop is a magnitude better than anything we have seen. This is one reason why they can grow incredibly fast while still being profitable. Together with Delivery Hero they can further improve their customer experience by offering faster delivery and more shops.”

If you count that they are from Greece, this is one of the largest exits for a Greek-founded company.

“The partnership with Delivery Hero is a great opportunity for us to continue to grow our business and put the group’s expertise to use,” said Tsioris, the CEO. “I really enjoyed working with Delivery Hero on this deal and am thrilled to continue to further expand the reach and quality of our service at InstaShop. Delivery Hero is a network driven by ambitious founders and entrepreneurs just like ourselves, and we are proud to become part of this family.”

The transaction is said to set a record value for a Greek startup and is one of the largest recent exits in the MENA region more generally. The previous largest Greek deal was Microsoft’s acquisition of Softomotive for around $150 million. Prior to this, other notable Greek exits include Samsung’s purchase of Innoetics and Daimler buying TaxiBeat — both for less than $50 million each.

InstaShop was initially backed in 2015 by VentureFriends, a European early-stage investor from Greece, and Jabbar, an investor in the MENA region. Notably, VentureFriends’ founding partner Apostolos Apostolakis co-founded e-food, a food delivery marketplace also acquired by Delivery Hero, in 2015.