Investors are delivering a lot of money to the bank accounts of… delivery startups. First up this week was Grofers, which raised $200 million from SoftBank. Then The Information reported DoorDash is seeking another round valuing its delivery services at $12 billion.
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And today yet another delivery startup has been added to our impromptu delivery funding roundup: U.K.-based Deliveroo has raised an additional $575 million led by e-commerce giant Amazon, bringing Deliveroo’s total war chest to $1.5 billion.
It’s the largest single round Deliveroo has raised, and it’s interesting to see Amazon investing directly in the food delivery company. Amazon, of course, has mastered the art of delivering a huge variety of goods in two days or less. Yet it has struggled to successfully deliver more on-demand items, like lunch from your favorite Pad Thai spot.
But where Amazon can’t compete it can put a stake (the e-commerce giant certainly has the money), and Deliveroo is widely considered to be a viable Uber Eats alternative. But the big question remains: is delivering food by app a viable business? Uber Eats apparently isn’t enough to carry Uber’s ambitious private valuation over to the public market.
So how private investors, including Amazon, are justifying this investment isn’t immediately clear. It’s likely Deliveroo, like much of its competitors, burns as much cash as it raises. Although it’s possible that delivery-only kitchens will help Deliveroo gain a competitive advantage while controlling costs—or at least keep growth rates on track, justifying the large losses.
All in all though, investors around the world have put nearly a billion dollars into just two delivery startups across the globe. For consumers, it’s a bet that immediately pays off. For investors and the founders they invest in, a lot of unanswered questions about profitability and eventual returns hitting or exceeding current valuations remain.
Illustration: Li-Anne Dias.