- Here’s everything you need to know about why the Amazon-Deliveroo investment is such a big deal.
- Uber should be afraid. Shares in other delivery companies like Just Eat are already tanking on the news.
- Deliveroo no longer needs IPO money.
- Amazon has locked in another piece of the last-mile home delivery network it is obsessed with building.
- The US fast-food business doesn’t know what’s about to hit it.
- See more stories on Business Insider’s homepage.
Amazon’s investment in British food delivery unicorn Deliveroo as part of a $575 million raise will probably change the landscape for last-mile solutions globally.
The deal allows Will Shu to avoid staging an IPO — for now
For years, founder and CEO Will Shu has considered taking his company public. It was worth $2 billion privately before the Amazon deal. It is probably worth north of $4 billion now.
The new funding means Shu does not need IPO cash to fund the next phase of expansion. Shu now has extra money to play with and a more relaxed timeframe for building his company globally.
He will come under pressure to show investors returns, of course — at some point a company can take in so much investment money that it becomes mathematically difficult to return a multiple via the public markets. But now he has options.
Shu is also personally publicity shy — so not having to go public saves him from that scrutiny, too.
No IPO is probably good given Uber and Lyft’s rocking offerings
The two ride-sharing platforms’ stocks have both collapsed since they floated. It’s not a good look. Deliveroo, as a somewhat similar platform with a business model that also relies on a gig economy contractual workforce, probably didn’t want to join them right now.
Read more: How Deliveroo went from being the idea of a hungry banker to a $2 billion food delivery giant with backing from Amazon
It builds a war chest for Deliveroo’s US launch
Although Shu is American, Deliveroo has yet to launch in the US. Densely populated food markets like New York and Los Angeles will be easy pickings for Deliveroo.
Although the US has plenty of app-based food delivery options, the arrival of Deliveroo will be a wakeup call for the fast-food and delivery industry there. Competition in the US is about to get more intense.
It’s half a billion dollars — this is strategic and global
Although we don’t know the size of Amazon’s stake, it’s probably not a passive “nice to have” investment for Jeff Bezos. This is strategic and global in scale. Deliveroo services 80,000 restaurants, it has 60,000 riders, 2,500 employees, and operates in over 500 towns in 14 countries. In the UK, the stock of Just Eat, declined on news of the deal — a harbinger of the way people feel about the Amazon-Deliveroo deal.
The deal sets up battle with Uber Eats
Uber’s food delivery brand is probably the best-capitalized delivery network on the planet, given the cash influx from the IPO. Now it has competition. Uber and its Uber Eats brand will be threatened by this, especially when Deliveroo arrives in the US.
Amazon is obsessed with grocery home delivery platforms
Amazon held talks to acquire Ocado, the most technologically advanced grocery delivery platform on the planet, years ago. Investors have been betting on some kind of Amazon-Ocado deal for a while. Eventually, Amazon and Ocado got into a three-way arrangement with supermarket Morrisons, in which Ocado provides the delivery, and Morrison’s provides the food to both Ocado and Amazon.
Amazon is probably not interested in delivering pizzas
It’s more interested in building a “last-mile” delivery network. Amazon is obsessed with delivery generally. The fact that Amazon is planning to launch a drone delivery service (it’s not quite off the ground yet) and is building its own airport tells you how intense Bezos’ interest is in getting products to your front door.
Deliveroo is the gold-standard of fast-food delivery in the UK. It’s also the most innovative — the company is starting to build its own on-location kitchens that only provide food delivery, with no on-site eating.
Amazon has largely failed to build its Amazon Fresh delivery service in the UK
Although Amazon has a delivery presence through Prime (it has yet to launch outside London and the south east), its food offering is often an also-ran internationally. Deliveroo fixes this. “We’re impressed with Deliveroo’s approach,” as Doug Gurr, Amazon’s country manager in the UK, put it.
Deliveroo’s COO is an Amazon alumni
Rohan Pradhan is the chief operating officer of Deliveroo. From 2015 to 2016 he was a founding team member of Prime Now 3P, Amazon’s “ultra-fast delivery service that delivers products from local retailers to customers in 1 hour.” He helped launch the service in New York and Europe.
Say goodbye to your kitchen
The worst-kept secret about Deliveroo is its desire to kill home-cooking.
SEE ALSO: Amazon has invested in UK food delivery startup Deliveroo in a massive $575 million fundraise
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