Amazon-backed food delivery unicorn, Deliveroo, picks London as the venue for its IPO; here’s why

The competition in the European market among food delivery companies is getting more fierce day by day. The online food delivery marketplace is becoming a very profitable industry and is set to grow to a whopping $200B (approx €167.26B) by 2025. 

Earlier this year, in January, Amazon-backed Deliveroo had announced pre-IPO funding of €149M from existing investors, valued at $7B (approx €5.85B). According to FT, the company is targeting a valuation of $10B (approx €8.36B) in its London IPO.

Deliveroo selects London for IPO listing

In a recent development, London-based Deliveroo, a food delivery platform that allows users to order food from local restaurants, has selected London as the venue for a future listing.

Speaking on the development, Will Shu says, “Deliveroo was born in London. This is where I founded the company and delivered our first order. London is a great place to live, work, do business and eat. That’s why I’m so proud and excited about a potential listing here. At Deliveroo we want to be the definitive food company, bringing consumers the best choice of foods, giving restaurants new opportunities to grow their businesses, and providing riders with great work. We are always focused on developing the best proposition for consumers, restaurants, and riders and look forward to bringing our service to new parts of the UK as we continue to grow.”

In the year 2020, the company saw growth in which it was profitable for over 6 months at the operating level. Given the significant growth potential in the online food delivery sector, Deliveroo is considering a potential listing in London to help deliver its ambitious growth plans to become the definitive online food company.

Supporting growth in the UK restaurant sector

The decision to list in London comes after Capital Economics – a London-based economic research consultancy, reveals the significant contribution Deliveroo made to the UK economy and restaurant industry since its launch in 2013.

According to the report by the independent analysis, Deliveroo has supported 46,700 jobs in the UK, including 38,300 in the restaurant sector since its inception. This is in addition to the thousands of self-employed riders who have worked with the company since launch and demonstrates the value Deliveroo’s operations add to the UK economy.

Rishi Sunak, the Chancellor of the Exchequer says, “The UK is one of the best places in the world to start, grow and list a business – and we’re determined to build on this reputation now we’ve left the EU. That’s why we are looking at reforms to encourage even more high-growth, dynamic businesses to list in the U.K. So it’s fantastic that Deliveroo has taken this decision to list on the London Stock Exchange. Deliveroo has created thousands of jobs and is a true British tech success story. It is great news that the next stage of their growth will be on the public markets in the U.K.”

During the COVID-19 pandemic, Deliveroo claims to have helped local restaurants by reducing onboarding fees, developing new services such as Table Service, as well as charging 0 per cent commission on Pick Up orders. Notably, the company also supported the NHS throughout the pandemic, delivering hundreds of thousands of free meals.

Following strong growth in 2020, the company plans to expand its services into around 100 new towns and cities across the UK in 2021. The cities and towns include – Yeovil, Bangor (Northern Ireland), East Kilbride, King’s Lynn, Scarborough, Llanelli, and Exmouth.

Innovation and growth in 2021

As part of its growth priorities for 2021, the company is focused on ambitious plans, including expanding its Editions delivery-only kitchens; expanding on-demand grocery; extending its Plus subscription service, bringing this to new markets; and offering its Signature service to restaurants, enabling customers to order delivery via restaurants’ own websites. 

The company when raised the last round had said it will develop new tech tools to support restaurants, to provide riders with more work, and extend choice for customers, bringing them food from more restaurants than ever before.

In a potential future float, Deliveroo may adopt a time-limited dual-class share structure to provide Will Shu, founder and CEO, with the stability to take decisions to enable the company to execute on its long-term strategic vision in order to create long-term shareholder value. 

Such structures involve two different classes of shares with differential voting rights and are currently commonplace on exchanges in the US and Hong Kong, as well as within Europe.

The announcement of the expected dual-class share structure follows the publication of Lord Hill’s UK Listing Review, which found, “[Dual class shares] provide a way for the founder of the company to continue to be able to execute their vision for how the company should evolve and grow while still allowing others to share in that growth…Their vision and their ability to execute that vision is often part of the company’s selling point.”

Deliveroo’s dual-class share is expected to closely align with the recommendations set out within the Lord Hill Review. The structure will be limited to three years, after which the company will move to a traditional single share class structure. 

Besides the dual-class share structure, Deliveroo intends to have a strong commitment to corporate governance standards including a majority independent Board of directors as well as upholding diversity standards.

A brief about Deliveroo

The company was launched in 2013 by William Shu and Greg Orlowski. Deliveroo owns and operates an online food delivery platform in the UK. Its platform allows users to order food from local restaurants. 

Deliveroo operates in over 500 towns and cities across 12 markets, including Australia, Belgium, France, Hong Kong, Italy, Ireland, Netherlands, Singapore, Spain, United Arab Emirates, Kuwait, and the UK. It has over 2,000 employees worldwide.

In 2020, more than 46,000 restaurants joined the platform and the company now works with more than 140,000 restaurant partners globally.

Furthermore, the company partnered with major supermarket brands including Waitrose, Sainsbury’s, Morrisons, Aldi, and Carrefour to grow its on-demand grocery offering amid the pandemic.