Deliveroo, an On-Demand Food Delivery Service, Raises $275 Million

http://www.nytimes.com/2016/08/06/business/dealbook/deliveroo-uber-food.html

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How much money does it take to compete with Uber?

Deliveroo, a food delivery start-up based in London, is about to find out after it raised $275 million on Friday to take the company’s fund-raising to almost half a billion dollars since it was founded in 2012.

The latest funding pushes Deliveroo into the so-called “unicorn” club of privately held companies around the world with valuations exceeding $1 billion, according to a person with knowledge of the company’s fund-raising who spoke on the condition of anonymity.

The company declined to provide precise details of its valuation.

It also gives Deliveroo increased financial firepower to keep Uber at bay. Uber, an American ride-booking service, recently started offering UberEats, a food delivery operation, in a small number of European cities. That pits it directly against Deliveroo, whose operations now extend across 12 countries, mostly in Europe.

“There’s a reason why some of the big players are now entering into this market,” Will Shu, an American former investment banker who helped found Deliveroo, said in an interview.

When it comes to the online food delivery market, he added: “We’re no longer in the first inning, but we’re nowhere near the ninth inning, either.”

Deliveroo has focused on logistical and technical support for restaurants to help them take orders and deliver food with a few swipes on a smartphone. It relies on a stable of contract drivers, many of whom use scooters or bicycles, and it promises delivery times of about 30 minutes.

But with Uber and rival European tech companies like DeliveryHero all battling to sign up restaurants and offering discounts to customers, Deliveroo now plans to use its financial war chest to intensify its efforts in existing markets. It also wants to expand its roster to add a few new countries with similar characteristics to those where it now operates.

That includes offering its smartphone food delivery service to second- and third-tier cities across countries like Germany, France and Spain (Deliveroo already is available in 84 cities, compared to 24 cities for UberEats).

Yet with Uber’s more than $10 billion in financing and the recent sale of its China unit to Didi Chuxing, a local rival there, analysts say the ride-booking service — whose valuation now tops $62 billion — may increasingly turn its attention to new areas of growth, like restaurant delivery.

For now, Mr. Shu is taking the potential competition in stride.

“I have a lot of respect for Uber, but focusing on a singular goal is what we do,” he said. “You won’t see us driving people around town. We deliver food.”