Amazon leads £450m investment in Deliveroo

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Amazon has led a $575m (£450m) investment in food delivery company Deliveroo.

The e-commerce giant led the Series G round alongside existing investors T. Rowe Price, Fidelity Management and Research Company, and Greenoaks.

London-based Deliveroo operates in 14 countries, with 80,000 restaurants and with 60,000 delivery workers.

Deliveroo has now raised $1.53bn (£1.2bn) to date. The company was valued at over $2bn (£1.57bn) in 2017 following a funding raise in 2017. An updated valuation has not yet been provided.

Deliveroo has indicated the funds will go towards growing its London-based engineering team; expanding Deliveroo’s geographical reach; R&D; and product development.

Will Shu, founder and CEO of Deliveroo, said: “This new investment will help Deliveroo to grow and to offer customers even more choice, tailored to their personal tastes, offer restaurants greater opportunities to grow and expand their businesses, and to create more flexible, well-paid work for riders.

“Amazon has been an inspiration to me personally and to the company, and we look forward to working with such a customer-obsessed organisation.

“This is great news for the tech and restaurant sectors, and it will help to create jobs in all of the countries in which we operate.”

Doug Gurr, Amazon UK Country Manager, said: “We’re impressed with Deliveroo’s approach, and their dedication to providing customers with an ever increasing selection of great restaurants along with convenient delivery options.

“Will and his team have built an innovative technology and service, and we’re excited to see what they do next.”

Amazon’s move to foster a strategic relationship with Deliveroo indicates its continued interest in the delivery sector. Amazon previously trialled its own food delivery business with Amazon Restaurants UK but closed the service in 2018 after just two years.

The ripple effect

Just Eat shares fell 7% today following Deliveroo’s announcement.

The fall may knock Just Eat out of the FTSE 100 in the forthcoming quarterly index reshuffle.

Laith Khalaf, Senior Analyst at Hargreaves Lansdown, said: “Amazon’s investment in Deliveroo has taken a bite out of Just Eat’s share price. It’s not just the fresh funding that has stoked concerns, Amazon is known for its tolerance for losses, and its willingness to price-gouge in search of market share.

“We don’t know how much of the $575m of funding Amazon contributed, but considering it’s got $23bn  of cash on its balance sheet, this won’t break the Bezos piggybank. The investment represents another one of Amazon’s many tentacles, and it’s not too concerned when some get burnt, if others can take a vice-like grip on the markets they operate in.

 “They say profits are sanity and sales are vanity, in which case there’s plenty of mirror-gazing going on in the market these days, particularly in the tech sector. Unlike Just Eat, Deliveroo is not yet profitable, and Amazon’s backing shows that’s not a barrier to investment.”

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