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Amazon leads $575M investment in Deliveroo

Amazon is taking a slice of Europe’s food delivery market after the U.S. e-commerce giant led a $575 million investment in Deliveroo .

First reported by Sky yesterday, the Series G round was confirmed in an early U.K. morning announcement from Deliveroo, which said that existing backers, including T. Rowe Price, Fidelity Management and Research Company and Greenoaks also took part. The deal takes Deliveroo to just over $1.5 billion raised to date. The company was valued at more than $2 billion following its previous raise in late 2017, although no updated valuation was provided today.

London-based Deliveroo operates in 14 countries, including the U.K., France, Germany and Spain, and — outside of Europe — Singapore, Taiwan, Australia and the UAE. Across those markets, it claims it works with 80,000 restaurants with a fleet of 60,000 delivery people and 2,500 permanent employees.

It isn’t immediately clear how Amazon plans to use its new strategic relationship with Deliveroo — it could, for example, integrate it with Prime membership — but this isn’t the firm’s first dalliance with food delivery. The U.S. firm closed its Amazon Restaurants U.K. takeout business last year after it struggled to compete with Deliveroo and Uber Eats. The service remains operational in the U.S.

“Amazon has been an inspiration to me personally and to the company, and we look forward to working with such a customer-obsessed organization,” said Deliveroo CEO and founder Will Shu in a statement.

Shu said the new money will go toward initiatives that include growing Deliveroo’s London-based engineering team, expanding its reach and focusing on new products, including cloud kitchens that can cook up delivery meals faster and more cost-efficiently.

[Center] Will Shu, Deliveroo CEO and co-founder, onstage at TechCrunch Disrupt London

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How Data Helps Deliver Your Dinner On Timeand Warm

Guidebooks highlight San Francisco’s Hayes Valley neighborhood for its lively bars and restaurants, nurtured by the removal of an earthquake-damaged freeway and swelling tech industry salaries. At Uber’s headquarters nearby, data scientists working on the company’s food delivery service, Uber Eats, view the scene through a more numerical lens.

Their logs indicates that restaurants in the area take an average of 12 minutes and 36 seconds to prepare an evening order of pad thai—that’s 3 minutes and 2 seconds faster than in the Mission District to the south. That stat may seem obscure, but it’s at the heart of Uber’s bid to build a second giant business to stand alongside its ride-hailing service.

Uber is fighting other well-funded startups and publicly listed GrubHub in the fast-growing market for food delivery apps. Winning market share and making the business profitable depend in part on predicting the future, down to the prep time of each noodle dish. Getting it wrong means cold food, unhappy drivers, or disloyal customers in a ruthlessly competitive market.

The mobile apps of Uber Eats and competitors such as DoorDash list menu items from local restaurants. When a user places an order, the delivery service passes it along to the restaurant. The service tries to dispatch a driver to arrive just as the food is ready, drawing on a pool of independent contractors, like in the ride-hailing business. Meanwhile, the customer is shown a prediction, to the nearest minute, of when their food will arrive.

“The more detail with which we can model the physical world, the more accurate we can be,” says Eric Gu, an engineering manager with Uber Eats’ data team. The company employs meteorologists to help predict the effect of rain or snow on orders and delivery times. To refine its predictions, it also tracks when drivers are sitting or standing still, driving, or walking—joining the growing ranks of employers monitoring their workers’ every move.

Improved accuracy can convert directly into dollars, for example by helping Uber combine orders so that drivers carry multiple meals without any getting cold. Drivers get a small bonus for ferrying multiple orders on one trip. “We can save on delivery costs and pass back some savings to the eater,” Gu says.

Four blocks away, Uber rival DoorDash has its own team of data mavens working on an AI-powered crystal ball for food deliveries. One of their findings is that sunset matters. People tend to order dinner when it’s dusk, meaning they eat later in summer and shift their habits when the clocks change in spring and fall. Like Uber, the company keeps a close eye on sports schedules and weather patterns, while also tracking prep times for the dishes offered at different restaurants. Company data indicates that pad thai takes 2 minutes longer to prepare Friday through Sunday than during the rest of the week, because kitchens are busier.

Rajat Shroff, vice president of product, says DoorDash data also clearly shows the connection between accurate delivery predictions and customer loyalty. “That’s driving a big chunk of our growth,” he says. The company was valued at $7 billion this month by investors who plowed in $400 million of fresh funding.

DoorDash has also been working to better understand what happens in restaurants, for example by connecting its systems with Chipotle’s in-house software so orders can be sent in more smoothly, and DoorDash can track how they’re progressing. The company has built a food-delivery simulator in which past data is replayed to test different scheduling and prediction algorithms. Both DoorDash and Uber use their data to offer drivers more money to head to areas where demand is expected to be strong.

Analytics company Second Measure says credit card data shows that DoorDash overtook Uber Eats for second place in US market share in November, behind GrubHub. As of January, the company says, GrubHub took 43 percent of food-delivery sales, compared with 31 percent for DoorDash and 26 percent for Uber Eats. DoorDash is a customer of Second Measure.

Still, DoorDash says it gets orders to customers in an average of 35 minutes. That’s slightly slower than the 31 minutes Janelle Sallenave, head of Uber Eats for the US and Canada, says her service averages for the US.

Uber’s data scientists have a potentially big advantage over their competitors: the rich live and historical traffic data from the company’s ride-hailing network. The company is also digging more deeply into its data on restaurants and Uber Eats drivers.

One project involves analyzing the language on restaurant menus. The goal is to have algorithms predict prep times for dishes it doesn’t yet have good data about by pulling data from menu items that involve similar ingredients and cooking processes.

Chris Muller, a professor at Boston University, says the data-centric view of dining taken by Uber Eats and its competitors is helping to drive a major upheaval of the restaurant business. “This is the biggest single transformation since we saw the growth of fast casual” chains like Chipotle that promise speedy meals of higher quality than fast food.

Joe Hargrave, who grew a farmers’ market stand into five Bay Area taco shops, is living through the food app transformation. He designed his Tacolicious stores for people who share his love of good food you can eat with your fingers while watching baseball. Now, more of his customers are eating their tacos at home, and delivery has become a lifeline.

Orders via apps including DoorDash and Caviar make up about 12 percent of Hargrave’s business, he says. They’ve helped revenue grow 8 percent over the past year, even while in-store business shrank by roughly a quarter. He appreciates what the apps do, but accommodating the delivery boom hasn’t been easy.

“I’ve spent my whole career trying to figure out how to put the best product in front of people,” Hargrave says. “Now I’ve been thrown this curveball where I have to put it in a box.” Tacolicious switched its register system to better handle delivery orders without compromising in-store service. There’s now often a person in each restaurant working exclusively on packaging and checking delivery orders.

Muller and Hargrave say the app-and-algorithm approach to dining can squeeze conventional restaurants and could even put some out of business. Uber’s standard cut of each order is 30 percent, a significant bite in a traditionally low-margin industry. Even restaurants like Tacolicious that accommodate delivery services must also serve people who walk in the door.

That’s one reason Uber is encouraging the development of “virtual restaurants,” which operate out of an existing restaurant’s kitchen but sell only via its app. Uber said last year that it was working with more than 800 virtual restaurants in the US; many operate during hours when a restaurant’s main business is slack or closed, allowing more efficient operation and use of the property.

Uber and DoorDash also work with so-called dark kitchens, operations that serve only via delivery apps and can be more efficient and predictable than conventional restaurants. DoorDash operates a 2,000-square-foot kitchen space in the Bay Area that it rents to such operators.

Muller likens the arrival of Uber Eats and others to how online travel sites shook up the hotel industry, forcing hoteliers to adapt their business models to a market where consumers are more engaged, driving more visits, but at lower prices.

How lucrative this new form of restaurant business will be is unclear. Uber has previously said its service is profitable in some cities, but financials released for the last quarter of 2018 didn’t offer detail about Uber Eats. In all, the company said it lost $940 million, 40 percent more than the previous quarter. In the third quarter of 2018, the company said Uber Eats accounted for 17 percent, or $2.1 billion, of its worldwide gross bookings.

GrubHub has been consistently profitable since it went public in 2014 and sold $1.4 billion worth of food in the final quarter of 2018, an increase of 21 percent over the previous year. But it also reported a small loss after a big jump in marketing spending. GrubHub’s management told investors that competition wasn’t harming growth, but analysts interpreted the company’s results as showing how the rise of DoorDash and Uber Eats will put all the delivery apps under pressure.

Uber and DoorDash both declined to provide more detail about their businesses but are rapidly expanding their reach. DoorDash says it covers 80 percent of the US population, and Uber Eats claims to have reached more than 70 percent, in addition to serving more than 100 cities in Africa, Asia, and Europe. Sallenave, the Uber Eats head for the US and Canada, predicts eating via app will become the norm everywhere, not just in urban areas. “We fundamentally believe we can make this business economically viable, not only in large cities but also in small towns and in the suburbs,” she says.

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Asian food delivery startup Chowbus raises $4M

When one food delivery startup fails, another gets funded.

Chowbus, an Asian food ordering platform headquartered in Chicago, has brought in a $4 million “seed” funding led by Greycroft Partners and FJ Labs, with participation from Hyde Park Angels and Fika Ventures. The startup, aware of the challenges that plague startups in this space, says offering exclusive access to restaurants and eliminating service fees sets it apart from big-name competitors like Uber Eats, Grubhub, DoorDash and Postmates.

The Chowbus platform focuses on meals rather than restaurants. While scrolling through the mobile app, a user is connected to various independent restaurants depending on what particular dish they’re seeking. Chowbus says only a small portion of the restaurants on its platform, 15 percent, are also available on Grubhub and Uber Eats. 

The app is currently available in Chicago, Boston, New York City, Philadelphia, Champaign, Ill. and Lansing, Mich. With the new investment, which brings Chowbus’ total raised to just over $5 million, the startup will launch in up to 20 additional markets. Eventually, Chowbus says it will expand into other cuisines, too, beginning with Mexican and Italian. 

Chowbus was founded in 2016 by chief executive officer Linxin Wen and chief technology officer Suyu Zhang.

“When I first came to the U.S. five years ago, I found most restaurants I really liked [weren’t] on Grubhub nor other major delivery platforms and the delivery fees were quite high,” Wen told TechCrunch. “So I thought, maybe I can build a platform to support these restaurants,”

TechCrunch chatted with Wen and Zhang on Tuesday, the day after Munchery announced it was shutting down its prepared meal delivery business. Naturally, I asked the founders what made them think Chowbus can survive in an already crowded market, dominated by the likes of Uber.

“The central kitchen model doesn’t work; the cost is too high,” Zhang said, referring to Munchery’s business model, which prepared food for its meal service in-house rather than sourcing through local restaurants.

“We don’t own the kitchen or the chef, we just take advantage of the resources and help restaurants make more money,” Wen added. “The food delivery space is really huge and growing so quick.”

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This Week in the Future of Cars: Honey We Broke the Future

If any one thing launched Tesla’s meteoric rise from a small Silicon Valley startup to one of the world's most famous and exciting companies, it's Elon Musk. Every scrap of news about the company now makes headlines, as its outspoken, tweeting CEO struggles to turn a profit. But, whew, even by his standards, this week was a biggie for Musk … again. After a questionable announcement via Twitter that he's considering taking Tesla private, the Securities and Exchange Commission is reportedly investigating him. Investors have filed four lawsuits, so far. Rapper Azealia Banks is somehow involved, and furious.

None of that, though, stopped Musk's Boring Company from announcing plans to build a tunnel to LA’s Dodger Stadium. And amid the noise, Google sister company Sidewalk Labs revealed more details about its scheme for building the city of the future, starting with Toronto. It was a doozy of a week, and not just for Elon. Let's get you caught up.


Stories you might have missed from WIRED this week

Ummmm, What's Azealia Got to Do With This? Of the Week

Not a whole lot, but more than anybody expected at the start of this week. Until the rapper began recounting a very strange weekend in Elon Musk's mansion, waiting to record a song with Musk's girlfriend, the musician Grimes. The Times breaks down a very strange saga.

Required Reading

News from elsewhere on the internet

  • Remember when Uber dominated the headlines? It may have lost its place as media favorite to Tesla, but it’s still working to refresh its image with new hires, as Reuters reports, and actually make a profit ahead of a public offering, due next year.

  • Residents and tourists in Santa Monica had a taste of life in the olden “pre-scooter” days on Tuesday, when Bird and Lime deactivated their services in protest at city plans to prefer Jump for an official pilot program. (Jump is owned by Uber.) “Don't let a #LifeWithoutScooters be the future.” Lime tweeted.

  • Los Angeles became the first US city to install body scanners on its subway this week. The portable devices are designed to catch weapons and explosives.

  • Forbes speculates that NYC’s cap on Uber style ridesharing might not work in other cities, as The Guardian reports that London’s mayor wants the power to do so in his jurisdiction.

  • Is Elon Musk crazy? No, according to Kara Swisher's latest in The New York Times. He is just an “impulsive and driven boss who runs a very hot and messy kitchen and does not spend a lot of time apologizing for it.”

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UberEats is going take orders from ghost restaurants that don’t really exist

Image: Getty Images

Craving something, but UberEats doesn’t list it in your vicinity? The company has a novel way to tackle that issue.

Uber is now serving dishes from “virtual restaurants,” a relatively new concept in the food delivery industry that allows you to order a meal from a restaurant that doesn’t have a full-fledged store presence.

The idea is that a sandwich cafe for example, could theoretically also serve salads, with relatively no change to the ingredients in its store. So on UberEats, it could become a virtual salad place, while staying a sandwich cafe in real life.

UberEats thinks the virtual restaurant concept could be used to fill in “trend gaps” in places where there is demand for a certain type of dish, but a lack of supply.

Poke Cafe is a virtual restaurant in Chicago

Image: ubereats/screenshot

UberEats has already started work on the idea. In Chicago, Poke Cafe is a virtual restaurant serving Hawaiian poke bowls.

But customers don’t know that Poke Cafe’s food actually comes from Rice Cafe, a sushi restaurant. Poke Cafe is already serving up about 100 orders a week, which translates to $2,000 in sales, reports Restaurant Hospitality.

“We can work with existing restaurant partners to create delivery-only menus. [They would] appear as entirely new restaurants on the UberEats app,” Ambika Krishnamachar, UberEats product manager told Mashable.

Delivery-only “ghost restaurants” popping up

Competitors like DoorDash and Grubhub in the U.S. are already serving dishes from “ghost” restaurants.

Earlier this year, Grubhub invested $1 million in Green Summit Group, a startup which has launched nine virtual restaurants from just one single kitchen. All the restaurants appear as separate listings on Grubhub.

Yet the term itself is still relatively unknown to many. UberEats throwing its weight behind virtual restaurants could change that.

Krishnamachar tells us that at this point, the concept of virtual restaurants is still “fairly experimental.”

“We’re still trying to understand what the demand gaps are, [it’s still] fairly experimental at this point,” she says.

An UberEats spokesperson told us that the company was experimenting with virtual restaurants “mostly in the U.S.”, though they were “looking to launch more experiments outside of the U.S. next year.”

A smarter, algorithmic menu

Uber’s food delivery platform also rolled out several new app features on Thursday.

Customers will now receive “personalised” menu recommendations for every restaurant. So instead of scrolling through an entire menu, the app floats what it thinks your favourite dish options will be up to the top of the page. 

The customisation is based on what UberEats calls a “taste profile.”

If you’re a pasta fan, that’s going to be the first thing you see

Image: ubereats/supplied

The taste profile learns your preferences based on factors like your previous orders and what restaurants you’ve browsed through — so clearly the more time you spend on UberEats, the more your profile will be customised for you. 

UberEats, which has been investing heavily in AI, told Mashable that it has 10 people on the machine learning team powering taste profiles.

The app will also see the introduction of restaurant ratings. You’ll be able to rate not only each restaurant, but each individual dish.

Image: ubereats/supplied

As UberEats moves to becoming more personalised, it looks like other platforms might have some catching up to do.  

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