Investments Up, Deliveroo Scores

The weather has been warm all around the U.S. — much to the irritation and chagrin of the nation’s retailers. But the investment marketplace has had just the opposite “weather pattern;” in fact, it’s been a decidedly chilly place for the last several weeks. The weather outside has been far from frightful, but as regular readers of this tracker already know, the recent investment climate in the payments and commerce investment ecosystem has been far from delightful.

Some, most notably Marc Andreessen, have mostly shrugged off the latest wave of concerns about overly rich valuations flooding the marketplace and fears of a coming pop in what most say is the newest tech bubble waiting to burst. But, at least of late, that confidence has not quite been so robust among the investor class in the U.S. and abroad, as VC and equity firms started suddenly looking a bit more circumspect when handing out those big checks.

One successful — and unexpectedly so — IPO from Square later and it looks like investors have recaptured a bit of a spring in their step. That reality is observable on both a macro-level (see ecosystem analysis below) and in the big pickup the avid food enthusiasts over at Deliveroo managed to serve up.

Deliveroo has a startup story familiar to many who find themselves working the innovation beat: a group of founders who stumbled onto a business while in the midst of trying to solve a personal problem. In this case, being unable to get a good meal in London delivered in the middle of the night — a subset of the internationally discussed general problem: the inability to find a good meal of any sort in London at any time of the day or night.

And while it can be fun to pick on English food, Deliveroo Cofounder Will Shu realized that for late night workers like he used to be – Shu was once an investment banker fond of burning midnight oil – it didn’t matter what city one was in or how good the food was. If the place one happened to be was at work in the financial district where restaurants aren’t open late or delivering – the options weren’t going to be great.

And if Shu was bummed out about being hungry, he could draw solace from the fact he wasn’t alone in his suffering. London is awash in white collar workers burning the midnight oil and suffering for lack of non-sandwich dinner options.

This led Shu — along with cofounder and software developer Greg Orlowski — to found Deliveroo about two years ago.

The service has taken off fairly quickly, starting in London and quickly launching in 50 cities in 12 nations — most of which are in Europe but with a recent increased focus on the Middle East and Asia. If you haven’t heard of it yet, that is likely because you are one of our American readers, which means you haven’t yet had a chance to use the service.

And might not for some time to come.

Sure, Deliveroo just announced $100 million in new venture funding that Shu confirmed is earmarked to fuel the firm’s expansion beyond its U.K. roots, but as of now, it has no plans to enter the already rather crowded U.S. food delivery market.

This newest round of fundraising brings Deliveroo’s all-time total to $200 million.

“Because we are in such a competitive market, we go in with the intention of being first in that market,” Shu noted.

“Our priority and main focus is to accelerate our growth.”

And though that rapt focus on aggressive growth is perhaps familiar-sounding, Deliveroo is different in many regards from the other food delivery players in the market.

Many, if not most, of the competitors in the food delivery game aren’t actually in the business of delivering food so much as they are engaged in building a sort of one-stop shop for all the transacting that goes into a food order — a place to find (and compare) restaurants, build an order and pay. All easy peasy, all with a few taps on a smartphone. The actual delivering of the food was actually still the restaurant’s show; the mobile ordering platform just passed along the order.

But Deliveroo comes at its business model a little different and takes a more full service approach to making food delivery happen. The startup works with restaurants that are “not tech-savvy” and works with them to develop delivery logistics, including food packaging, ease ways to order via smartphone and, most critically, help delivery drivers to get the customers their food.

Those drivers are run by a proprietary logistics platform that keeps drivers efficiently deployed.

“Our drivers, on average, they get deliveries to the customers’ hands about a half hour after an order is placed,” Shu noted. “And, of course, we think we can and will get that number lower as we are able to build bigger scale.”

And building that bigger scale, Shu says, is and will be the firm’s priority moving forward because the space in which it plays is popular and getting more so, as already pretty established players, like Uber and Amazon, are offering similar services. But despite the serious competitors, Deliveroo has some pretty serious backers, including participation in the firm’s recent $100 million round by Yuri Milner’s DST Global — a firm whose greatest hits list includes a few somewhat successful ventures: Facebook, Alibaba and Xiaomi.

And a founder who says that the competition is bigger than just those players going after food delivery, as in dining out and those few people who still like cooking at home.

Delivery is tricky, and Deliveroo has a hard job ahead of it; with a $3 billion valuation and such big backers in the bag, it now has great expectations to live up to. But Shu says at the end of a competition, it doesn’t matter how many players entered, only which one was actually the best.

Deliveroo is hoping it will be the best.

Investments For Week 11-20-15

A bit of a dip, but relatively speaking. Headed into a holiday weekend, our Investment Tracker did not fare badly at all. For the week that ended Nov. 20, IT showed fund flows of $676 million (and change), with a decline from the $750 million seen in the previous week. It should be noted that the last two weeks have been a quite healthy step up from the anemic $150 million weekly tally seen not long ago. The bulk of activity in the most recent period came within FinTech, with 75 percent of the amount that changed hands. See below.

With a nod to individual transactions, there were more triple-digit deals than have been seen in previous periods, with a triumvirate accounting for about $440 million in investments. The top deal of the week, with $200 million in debt funding, came to online lender Earnest. The next largest headline came from the $139 million buyout of energy investment bank Simmons & Co. by Piper Jaffray. Finally, the last triple-digit deal in the week was another payments transaction, where zipMoney Payments, an online lender based in Australia, got $100 million raised for a debt fund to attract more business and also a $1 million equity investment from Victory Park Capital, a fund based in the United States.

FinTech, as a result of the recent two weeks’ worth of activity, has seen a bit of bottoming out in the sector’s investments, with quite a retracement road ahead of the sector, but at least some signs of life. See below for a graphical representation of the trend upward.

One would expect the holiday week to be a muted one, with many people taking off at least a couple of days, so the next few weeks will be crucial ones to determine how the stage is set for 2016’s investment activity.