Deliveroo raises $385M at $2B+ to fix thin margins with Editions kitchens

Deliveroo is a London-headquartered on-demand restaurant food delivery service: customers order from local restaurants and Deliveroo riders bring the food to the door. The bet recorded in its 2017 Series F was that on-demand delivery's brutally thin margins were an operational problem — fixable with logistics algorithms, data-driven kitchen placement and delivery-only Editions kitchens — and that a $2B+ pre-profit valuation was therefore defensible.

The round, announced on 2017-09-24, was led by US fund managers T. Rowe Price and Fidelity — backers of Facebook, Airbnb and Tesla — with existing investors DST Global, General Catalyst, Index Ventures and Accel following on, bringing total funding to $860M at a valuation the company called over $2 billion. Will Shu's statement tied the money to three bets: expanding Editions kitchens, growing the technology team behind the real-time logistics algorithm and AI systems, and entering more towns, cities and countries.

The accounts Deliveroo had just filed for 2016 made the stakes concrete: revenue grew 611% to £129M, losses grew 300% to £129M, and gross margin was 0.7%, as Business Insider reported. In that light the raise was a bet that scale plus technology — more deliveries per rider per hour, and restaurant supply that cost Deliveroo no restaurant capex — could turn the model profitable before the capital ran out.