The 100-hour weeks, intense culture, and divisive hires that made Deliveroo a $2 billion business with backing from Amazon

[ad_1]

Deliveroo graphic

  • Food delivery startup Deliveroo is a rare UK consumer-tech success story. It pulled off a coup in May by securing funding from Amazon as part of a $575 million investment.
  • The startup was founded in 2013 and insiders say its massive growth is partly thanks to the fierce but quiet ambition of 39-year-old CEO and cofounder Will Shu.
  • Shu founded Deliveroo out of his Chelsea flat and put in 100-hour weeks in the firm’s early days, according to sources.
  • He expects similar levels of commitment from his 2,500-strong staff, with insiders describing an intense culture focused on growth.
  • Deliveroo’s rapid expansion has not been without growing pains. Insiders said some hiring decisions had been divisive and there was an HR complaint about its former CTO.
  • Shu has flirted with selling the company and some say he would accept an offer at the right price, even though his official position is that Deliveroo is not for sale.
  • Click here for more BI Prime stories.

Food delivery startup Deliveroo is one of the UK’s fastest-growing and most promising firms.

The company is best known for its app which lets consumers order food for delivery from nearby restaurants. Delivery riders sporting teal-coloured uniforms pick up the food by bike, moped, or car and deliver it to the home. The firm doesn’t operate in the US, but the strategy is similar to Uber Eats or DoorDash.

It is officially worth $2.1 billion — almost certainly more now — and won rare strategic investment from Amazon as part of a giant $575 million funding round announced in May.

Amazon’s investment was blocked last week by the UK’s antitrust authority, which has concerns that the two companies could be planning a monopoly-making merger. Both deny this the case. That the Competition and Markets Authority (CMA) swooped underlines Deliveroo’s dominance in Britain.

The company was born out of a simple idea from CEO Will Shu, who was unable to get hold of good takeaway food while working long hours as a banker in London. It now employs 2,500 people, as well as a network of 60,000 contractor delivery riders globally, and its revenue rocketed 116% to £277 million ($347 million) in 2017.

Business Insider has spoken to eight people about Deliveroo’s rise since 2013. They describe how Shu — a press-shy pragmatist — worked intensively to get Deliveroo off the ground, making deliveries himself and convincing skeptical investors to come on board.

As the company has grown, insiders say its culture has become more demanding — and more American. Deliveroo said it is proud to be a company with a “hunger for growth.” Senior management changes have not been universally popular among staff. Former CTO Mike Hudack, for instance, was the subject of an HR complaint that was not upheld.

Shu has flirted with selling the company and sources speculated that he would accept an offer at the right price, even though his official position is that Deliveroo is not for sale. Either way, the Amazon deal is a sign of Deliveroo’s increasing maturity and could signal the start of a deeper relationship, even if it has caught the attention of UK regulators.

Early investors thought Deliveroo was a crazy idea

While Deliveroo is proudly claimed by the UK as a British startup, its founders are actually American.

CEO Shu is from Connecticut, is of Taiwanese extraction, and based in Notting Hill, London. Cofounder and former chief technology officer Greg Orlowski is a school friend from the US, but left the startup in 2016 in part because he missed home.

Shu, as one friend puts it, is “not a tech guy” and it was mostly up to Orlowski to put together the early version of Deliveroo’s app. It didn’t immediately work, partly because it pre-dated the iPhone’s app store in 2007 and the app ecosystem didn’t exist yet.

The pair returned to the idea in 2013, trying to turn Deliveroo into a reality from Shu’s flat in Chelsea. Shu crammed as many employees as he could into the space and, according to early employee Anton Soulier, the premises were “really a garage.”

While Orlowski concentrated on the tech, Shu focused on the concept of building out a network of delivery riders, initially doing food deliveries every day himself and persuading friends from the banking world to order food from his app.

Will Shu

Early backers thought the idea was crazy, but were eventually persuaded by Shu’s simple sell: food delivery is a huge potential market, because most people need to eat three times a day. Shu’s vision now is as ambitious as reducing cooking to a mere hobby.

Accel associate Luciana Lixandru, who led the VC firm’s investment in Deliveroo, was living in Chelsea at the time and spotted Deliveroo’s service. She initially thought getting takeaway regularly was too expensive and would eat up too much disposable income but, after meeting Shu, she was convinced by his vision and became one of the app’s first “superusers.” Accel would lead a $25 million round in the company in 2015.

Will Shu is a ‘down-to-earth, humble’ chief executive who wants to avoid distractions

Six years later, Shu continues to lead the company with much the same vision, and still gets on his £150 Evans bike (or a borrowed one) to make the occasional delivery.

Deliveroo remains unprofitable as it expands into new markets, according to its most recent earnings. But the firm said last year that it is becoming more efficient, something reflected in its improving gross profit margin. The firm intends to use its new tranche of $575 million funding to double down in the markets where it’s really working, such as the UK.

Read more: Amazon’s new $2 billion startup Deliveroo wants to reduce cooking to being ‘purely a hobby’ over the next decade

To date, the firm has banked almost $1.5 billion in funding. People who know Shu say the company has gone further and raised more capital than he anticipated.

“He’s one of the good guys,” one industry insider who knows Shu told Business Insider. “I find him very down-to-earth, very humble. He cares about his people and his company, he’s very quietly ambitious.”

The person added: “He’s raised far more money than he thought he needed to for his business, and it’s incredibly operationally intense and challenging, which he didn’t plan on. Competing with Uber isn’t the easiest life in the world but, despite all that, he’s grown the business and attracted Amazon as an investor.”

Deliveroo CEO Will Shu

In person, Shu tends to be casually dressed — an after-effect, he has previously said, of being suited up for most of his 20s while in banking. He has said he’s not much of a cook and, when trying to shrug off the extreme stress of running a business, that he likes to go rambling around London.

Former employees who spoke to Business Insider described him as inspiring.

Anton Soulier, who was Deliveroo employee number 10, now runs a startup called Taster that sells food through Deliveroo. He said Shu as a “very hard worker,” who sometimes spent “100 hours in a week” in the office in those early days.

“He is very straightforward, and really into details,” Soulier said. “He knew every single guy in the company, he was very approachable.”

Soulier said his former boss had been extremely supportive when he decided to found his own business. “I found him very open when I decided to do this venture, he was extremely supportive from day one,” he explained.

Shu’s discipline is evident not just in what Deliveroo has done, but what it chooses not to do. It has stayed pretty exclusively focused on food delivery, expanding only slowly into new areas such as Deliveroo Editions, its pop-up physical kitchens.

Deliveroo Editions

It has also held off on acquisition offers from Uber and Amazon. One insider said the Amazon offer wasn’t serious at the time, though the firm would go on to take a minority stake. The Uber deal, sources said, fell apart because Shu was adamant about a higher valuation of at least $4 billion for the business. Deliveroo hasn’t commented on these talks.

As Deliveroo has grown, Shu has apparently become more press-shy. His only in-person media interview in the past 12 months was an appearance at Bloomberg’s Sooner Than You Think conference in June — the only time he appears to have discussed the recent $575 million Amazon fundraise with any journalist.

Sources told Business Insider that he even discourages Deliveroo’s investors discussing the firm with the media. The industry insider pegs this to Shu’s wish to focus on his company. “He doesn’t want the profile,” a source said.

Deliveroo has experienced growing pains and hiring the right people has been a challenge

Shu has needed that focus as he scales Deliveroo’s complex three-sided marketplace.

Deliveroo’s business model, at its heart, involves matching diners, restaurants, and riders on a single platform. Growing all three sides in a sustainable way is a daunting task, and Deliveroo has had to deal with complaints from riders, who are employed as independent contractors, scrutiny from lawmakers, and bigger, well-funded competition.

Hiring for a startup growing at 116% has been another key challenge.

After founding CTO Orlowski decided to leave the business in early 2016, Shu said at the time there were no immediate plans for a successor. A new CTO, Mike Hudack, would join seven months later. Hudack was formerly a product director at Facebook and, prior to that, CEO and cofounder of video distributor Blip.tv.

Hudack was a grown-up hire for Deliveroo, coming from a major Silicon Valley firm and with entrepreneurial experience. His arrival coincided with a period of hyper-growth for Deliveroo through 2016 and 2017. These two facts would have ramifications for the tech team as Deliveroo evolved from a scrappy startup into a well-funded, international scale-up.

Multiple former employees said Hudack’s appointment wasn’t a universally popular decision. Specifically, they said there were personality clashes between the new CTO and other members of the engineering team who had been at Deliveroo for longer. Hudack, they said, brought an American-style of leadership to a team largely made up of British engineers.

At the same time, these former staffers said, engineers were feeling overstretched. They described how engineering managers went from overseeing 10 people to overseeing 30, as Deliveroo put its venture capital money to work and hired more staff. There was another influx of new engineers in mid-2017 when the firm acquired New York rival, Maple, cementing staffers’ sense that the culture was shifting to an American direction.

“That’s where that culture came in,” said one former staffer. “The one big moment was when Deliveroo acquired Maple … that brought in a big American engineering team and senior managers.”

The upheaval led to friction between some employees, culminating in a female engineer filing an HR complaint related to Hudack in 2017, two sources told Business Insider. According to the two sources, the pair didn’t get on, the female engineer felt that she was “isolated,” and that Hudack targeted her for criticism.

“Mike is an American, he’s flamboyant. It was a personality issue,” one person said. A company investigation found no wrongdoing, but the woman subsequently left Deliveroo in 2018. The female engineer did not respond to a request for comment.

Mike Hudack

One source close to Deliveroo countered this internal view of Hudack, describing him as a popular member of the senior team, whose contribution to the firm’s growth was recognized across the business.

Hudack eventually left Deliveroo at the end of 2018 for personal reasons unrelated to the HR complaint, sources told Business Insider. He is now a partner with new venture capital firm Blossom Capital. Hudack declined to comment for this story.

There were other senior departures the same year. Chief people officer Beth Clutterbuck, chief legal officer Rob Miller, and COO Roy Blanga left within a short space of time.

This changeover and a continued period of rocketship growth created strain inside some parts of the company, according to former employees and people close to the firm.

“When I first joined Deliveroo, which was more than two years ago, it was growing but a lot of the management was from the UK,” one former employee said. “They were very conscious about being a good company for the London tech scene, being different and doing things better. Over time, some of the nicer senior members left and got replaced by American tech company leadership.”

The person perceived Deliveroo’s culture as becoming closer to Amazon’s, fast-paced and relentless, even before the company took Amazon’s money.

Read more: The CEO of $2 billion startup Deliveroo says it isn’t for sale

While the tech team now has new leaders in place, insiders still question one other senior hiring decision related to Deliveroo’s acquisition of Maple in 2017.

Maple was a New York food delivery startup with one major differentiation from Deliveroo in that it prepared its own meals and delivered them to consumers. The concept would inform Deliveroo Editions, clusters of pop-up kitchens away from the high street that churn out food for delivery.

After the acquisition, Maple’s CEO Caleb Merkl became Deliveroo’s chief people officer. This was despite having no history of overseeing an HR department in a prior role, according to sources and Merkl’s LinkedIn profile.

“Because of fast growth and crazy decisions, the head of people has never been an HR manager in his life,” said one former staffer. “It’s a recipe for disaster.”

It was around this time that employee irritation boiled over, with The Telegraph reporting on the introduction of “stack ranking,” an unpopular method of rating employees by performance. Deliveroo has denied that it introduced stack ranking.

A Deliveroo spokesman pointed to Merkl’s experience as a CEO. “Caleb’s experience managing a team of 500 when founder and CEO of his own company, make him the ideal person to oversee the growth of talent and expertise at Deliveroo as the company scales,” he said.

Gad Allon, a professor at the Wharton School of the University of Pennsylvania and an expert on scaling businesses, told Business Insider that executive turnover isn’t generally a good sign in a startup — but added that a cultural shift is natural as a company grows.

“When the firm is very early stage, everyone is doing everything,” he said. “Everyone is working beyond what they’re capable of with the promise of the attachment to the mission or product… [but then] new people come who are not interested in the mission, and who are interested in being the best CMO. That’s the tension in any firm. The leader needs to have vision, but in the rest, you need professionals who can deal with scale.”

Shu said much the same thing during a June interview with one of his own investors, Index Ventures’ Martin Mignot. “Some people are not going to scale with the business,” Shu said. Mignot, who has been on Deliveroo’s board since 2013, added during the interview that Shu had been “ruthless” about letting senior people go when necessary.

A Deliveroo spokesman said: “Deliveroo is proud to be a company with a hunger for growth and innovation alongside an inclusive culture. Deliveroo has an amazingly talented and dedicated team at all levels, helping the company to develop smarter technologies to enable riders to work more efficiently, help restaurants increase their revenues and bring more amazing choice to consumers. Everyone at Deliveroo is excited about the future as we seek to become the definitive food company.”

Shu is a ‘pragmatic guy’ who has talked about selling

jeff bezos

In an email interview with Business Insider last year, Shu said Deliveroo wasn’t for sale. His remarks came a month after Bloomberg reported that Uber was in talks to buy the company. Sources said the talks fell apart less because Shu was uninterested in a sale, but because the price wasn’t good enough.

An industry insider who knows Shu said: “He’s a very pragmatic guy. I don’t think he does this because he loves food delivery. He’s challenged by it, and he enjoys it. The Uber deal makes so much sense… if you’re offered a ton of money — I don’t think he’s wedded to making sure people have a nice dinner every night.”

Shu’s official position remains that the firm is not for sale. He has also said that he loves food delivery. “It’s weird to say I’m passionate about food delivery, but I am,” Shu told Mignot last month.

Should his position on a sale change, Amazon would be the obvious candidate as a buyer. The firm has a history of investing strategically in companies and then snapping them up. Another British example is LoveFilm, the DVD rental business that became the basis for Amazon’s Prime Video streaming service.

Simon Calver, a British investor who ran LoveFilm and negotiated the deal with Amazon, says an acquisition looks more likely if Deliveroo can integrate into Amazon’s wider product.

“The question for Deliveroo is whether it becomes an Amazon product, a branded Amazon product, or be maintained as a separate product and service,” he told Business Insider last month. “I don’t know their strategic decision, but the more integrated it is to their core proposition, the more likely it’s going to end up being Amazon.”

Unfortunately for Deliveroo and Amazon, newly suspicious regulators may have other ideas.

The probe by the UK’s Competition and Markets Authority coincides with European regulators taking a closer look at the major internet platforms — Amazon, Facebook, Apple, and Google — to determine whether they behave competitively. That may see more acquisitions of smaller firms getting blocked.

Should the competition watchdog scupper the Amazon deal, Deliveroo’s future looks up in the air. But the firm has options. An IPO could be back on the table, and there has reportedly been investment interest from tech mega-funder SoftBank in the past. Uber, too, could be lying in wait.

Shu, the pragmatist, is unlikely to be daunted by the CMA probe. In his interview with Mignot recently, he had this to say about dealing with earlier challenges: “I don’t think I have a choice. I just had to figure it out. It wasn’t like I sat around being like, ‘What else do I do?’ I’ve got this problem and I have to figure it out.”

Join the conversation about this story »

NOW WATCH: Google finally revealed Stadia pricing, games, and release date



[ad_2]