Posted on Monday, Aug 28th 2017
According to a ResearchandMarkets report published earlier this year, the global online food delivery and takeaway market is estimated to grow 15.25% annually over the five-year period through 2021. The growth is expected to be driven by the increased adoption of online food ordering services. Recently, industry veteran and Billion Dollar Unicorn club member Delivery Hero went public. Initial results suggest that the stock market is happy with the listing.
Delivery Hero’s Offerings
Berlin, Germany-based Delivery Hero (FRA:DHER) was founded by Niklas Östberg, Markus Fuhrmann, Lukasz Gadowski, and Kolja Hebenstreit in 2011 to set up a global food delivery platform. Delivery Hero has been focused on providing an innovative and scalable technology that can transform the food takeaway and delivery market by automating and customizing the food ordering process to the consumer. It has simplified the process and made it more transparent for restaurants, customers, and riders.
Delivery Hero allows restaurants to access its customer base through listings on its online marketplace. Additionally, it offers marketing and visibility tools for restaurants and provides them data-driven analytics to improve performance. For the end consumers, Delivery Hero offers a highly localized and personalized selection of restaurants and menus. It has an easy-to-access user interface, one-click reorder options, geo-location mapping for short delivery times, and delivery tracking options. You can check out the complete list and also the comparisons of various delivery services on ondemandly.
Delivery Hero allows restaurants to make their own deliveries. It also operates an additional delivery service for a few markets. Its services are available in more than 30 languages. It operates over 170 different point-of-sale integrations and over 150 integrated payment systems. It is present in more than 45 markets and has tie-ups with more than 150,000 restaurants.
Delivery Hero’s Financials
Delivery Hero has shown impressive revenue growth in the past year. Fiscal 2016 revenues grew 55% over the year to €297.0 million (~$330.7 million). But the company continues to suffer humongous losses. Operating loss for the year was €159.8 million (~$178 million). For the quarter ended March this year, revenues came in at €121.2 million (~$134.9 million) and operating losses were €35.7 million (~$39.8 million).
Till recently, Delivery Hero was venture funded with $1.8 billion in investment from investors including Naspers, Rocket Internet, Texas Atlantic Capital, Insight Venture Partners, Kite Ventures, Vostok New Ventures Ltd, Luxor Capital Group, German Startups Group, Target Ventures, Phenomen Ventures, HV Holtzbrinck Ventures, Kreos Capital, Point Nine Capital, Ru-net, Team Europe, and Tengelmann Ventures. Its last round of funding was held in May this year when it secured $421 million in a private equity round from undisclosed investors at an undisclosed valuation. An earlier round held in June last year had valued it at over $3.1 billion.
In June, Delivery Hero also listed on the Frankfurt Stock exchange at a price of €25.50 (~$28.40) per share, translating to a valuation of €4.4 billion (~$4.9 billion). The stock has fared well so far. It touched a high of €30.20 (~$33.63) last week. It is currently trading at a market capitalization of €5.15 billion (~$5.7 billion).
The online food and delivery space is a highly competitive market. Besides competition among local players like Deliveroo and Just Eat, the company is also dealing with bigger tech players like Amazon and Uber. To continue to grow, Delivery Hero has been actively acquiring other players. In December 2016, it announced the acquisition of competitor Foodpanda. Berlin-based Foodpanda was also backed by Rocket Internet and has presence in Asian markets. But the company had been struggling. With 2 million orders processed each month, Foodpanda was much smaller than Delivery Hero, which processes 18 million orders a month. But the consolidation of the smaller players will help the industry.
The concerning issue remains profitability. At what point does the company become profitable? At present, it maintains that it is looking at expansion to turn profitable.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
This segment is a part in the series : Billion Dollar Unicorns
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