Why Investors Are Hungry For Food Delivery

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To say that the food delivery business is popular with investors is sort of like saying Antarctica is cold. Investments have climbed from $25M in 2012, to $46M in 2013 and $600M (yes that is $600M) in 2014. And, it may kiss $1B by the end of this year.

To find out what’s fueling their appetite – and how one newly funded entrant is using logistics to differentiate the experience, look no further.

With the rapid influx of investor dollars has come a blossoming of businesses designed to deliver a veritable smorgasbord of food to hungry people who don’t want to get it themselves: GrubHub, Zomato, Caviar, Zesty, DoorDash, Deliveroo and FoodPanda, just to name several of the high-profile players in a field of many.

A field growing so large that it is drawing increasing concerns.

About a year ago, The Wall Street Journal pondered: Will Investors Back Food Startups As Competition Heats Up?” The direct answer to that question, given the record–breaking capital raising year 2015 is shaping up to be for food delivery startups, seems to be a pretty resounding “you better believe it.”

However, the broader issues raised by those like Stripes Group Managing Partner and Former PepsiCo executive Dan Marriott remain of concern to those interested in investing in those who build tech+food platforms.

“[With] software, your app has to function well on a daily basis to generally meet the needs of a customer,” he said. “And while you have to keep the service up, you can evolve your feature set over time and it’s pretty simple to deliver. [In food] the satisfaction of the customer can be blown up in one experience.”

Marriott also noted that those who go into the business of producing, preparing, or delivering food quickly learn that high frequency habituated users are extremely hard to attract and unusually easy to lose in this marketspace.

But despite these concerns, investor interest has not waned in the face of more entrants in the field worldwide. If anything, the appetite for such investment seems to be continuing to grow as more options are added to the startup buffet — no doubt in large part because the size of the opportunity is large. Of the approximately $70 billion global market for take-out and delivery, only about $9 billion of it derives from online channels. That other $61 billion worth of delivery orders are made the old-fashioned way: over the phone.

The market may have an increasing number of entrants, but it also apparently has a lot of share among consumers left to grab.

Brussels-based Take Eat Easy (get the play on words?) thinks it has the secret ingredients for grabbing some of that share up in the European market. One of many food-delivery operations backed by Rocket Internet — known lovingly worldwide as Germany’s startup factory — Take Eat Easy provides a fundamentally similar service to the U.S.’s DoorDash or the U.K.’s Deliveroo. It allows customers to order take-out from higher end or otherwise unlikely–to–deliver restaurants by managing the delivery end of the deal. Customers build and buy their orders on Take Eat Easy’s site, and the startup makes sure it is in the customer’s hands while it is still hot.

“We are still a long way off from a winner takes all marketplace,” CEO Adrien Roose noted in an email exchange with PYMNTS. “There is a lot of room to innovate a lot of the experience. We are focused specifically on the logistics of take-out.”

When a customer orders a package on an eCommerce platform, they can more or less track its location, Roose noted, and the ability to track a package from a starting point to one’s front door has been shown to increase repeat visits. Most customers aren’t looking for minute-to-minute updates on packages, however, because they aren’t planning on eating them for dinner that night.

The situation is somewhat different when customers are waiting for food — and only have a vague time window as to when it might be arriving.

“We prioritize efficiency in delivery and making the entire waiting process transparent through the use of real-time tracking. We offer customers a chance to view dynamic delivery times for all of our restaurant partners,” Roose noted. “Those times change based on demand, preparation time of restaurants, position and speed of couriers working in our network.”

The firm’s philosophy of managed expectations has led to steady if quiet growth. After launching in 2013 in Brussels it expanded into France, particularly with “trendy” Parisian restaurants. Last April, Take Eat Easy snapped up €6 million ($6.7 million) million Series A funding, and this week the firm announced securing an additional  €10 million ($11 million) in a Series B round led by Eight Roads Ventures. Rocket Internet was an investor in both rounds.

Roose says the new round of funding will fuel expansion into the U.K., as well as Spain and Germany. In the U.K., it will challenge similarly conceived Deliveroo directly, and in Germany it will face off with the also Rocket-backed Volo.

Roose is confident in the face of the new challenges, however, with great hope that his platform’s ability to better manage food delivery logistics will bring enough to the table to keep consumers coming back.

[/vc_column_text][vc_text_separator title=”Investments This Week” title_align=”separator_align_left” align=”align_center” color=”grey”][vc_column_text]To steal a line from T.S. Eliot (and might this poem’s title, “The Wasteland” serve as a nod to global stock market?), “This is the way the summer ends for our Investment Tracker – not with a bang but a whimper.”

August’s final week of the month showed what could only be charitably called muted investment activity, with only slightly more than $212 million in total fund flows for the week. Of that, financial technology dominated the action, with a $202 million take; the remainder was of course left to B2B investments.[/vc_column_text][vc_raw_html]

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[/vc_raw_html][vc_column_text]Looking deeper into who invested where, there were only a few deals of any size, with the biggest transaction coming from a funding round in iZettle, the mobile payment firm based in Sweden. The company’s financing was led by Intel Capital and Zouk Capital. The money itself will be used to support its existing mPOS technology and platform expansion.

In an interview with MPD, Jacob de Geer, iZettle’s co-founder and chief executive officer, stated that the company is looking to push into new geographic areas beyond Europe, and into Latin America, too. However, the business focus will remain on mPOS and merchant services.

In the next largest deal, Allegiance Bancshares filed last week for an initial public offering, and the S-1 Form that resides with the Securities and Exchange Commission shows that the offering is valued at up to $60 million. Allegiance Bancshares, with commercial bank products, targets small and mid-sized businesses and individuals primarily in the Houston area.

Several rungs below that $60 million “level” we find that BlueData Software, which focuses on big data using apps, raised $20 million in venture funding and announced a partnership with Intel. The company’s apps can run Hadoop and Spark across clients’ existing infrastructure. Among the investors in this round were existing investors including Intel Capital, Amplify Partners and Ignition Partners.

SumUp also managed to garner more cash, with a €10 million investment that will fuel expansion to new markets through the end of the year.

Geographically speaking, the United States dominated the anemic activity of the week, with a relatively smaller contribution from Europe (ex Russia). This time around China barely even registered, with only $4 million in activity.[/vc_column_text][vc_raw_html]

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The trends we’ve seen, wherein banking and trade finance dominate the investing landscape, continue unabated, and continue even in the face of stock market volatility. Thus far, strategic innovation and the need for technology advances trumps share price declines (and even a few hardy souls testing the IPO waters show that investing is not dead).

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