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How a fresh cash infusion from Amazon will help Deliveroo

How a fresh cash infusion from Amazon will help Deliveroo
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Amazon has led a $575 million Series G funding round in Deliveroo, the London-based food delivery startup, according to a Deliveroo press release. The round brings Deliveroo's total capitalization to about $1.53 billion, making it among the more well-funded pure-play food delivery startups in the world.

US Food Delivery market Leaders

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The company operates in 14 countries and counts 60,000 couriers that deliver from 80,000 restaurants globally, but the UK, Germany, and France are its largest markets. Deliveroo says it'll use the funding to expand its UK engineering team, its delivery reach, and continue developing new products, including delivery-only food kitchens.

Here's what it means: The fresh cash infusion will help Deliveroo improve and expand its engineering team in Europe, perhaps leaving it better positioned against Uber Eats on the continent.

Improvements to the firm's engineering team could make Deliveroo's app easier to use for both consumers and restaurants. For example, the firm's engineering team could improve the search and discoverability functions on the app. And for restaurants, Deliveroo's engineers could look to make improvements to the app that would speed up the new restaurant onboarding process.

Such improvements could leave Deliveroo better positioned in the UK food delivery market against UberEats, its top rival.UberEats and Deliveroo are locked in a battle for second place in the UK's food delivery market: Uber's food delivery arm had only about 50,000 daily active users in the country compared with Deliveroo's 44,000, though both are dwarfed by rival Just Eat's nearly 500,000, per Priori data cited by the Financial Times. Whatever tech improvements come out of the funding round could help Deliveroo edge out Uber Eats for second place in the UK food delivery space.

The bigger picture: While the firms said the funding would be used for improvements to Deliveroo's platform in Europe, the investment from Amazon could signal an eventual expansion to the US.

Amazon has shown a consistent interest in the food delivery space in the US, although it hasn't yet seen success. It launched a service called Amazon Restaurants, which allowed consumers to order and get deliveries from restaurants directly from Amazon's site back in 2015, and expanded it to the UK a year later. But Amazon shuttered the service only two years after its launch.

Separately, Amazon has also launched various crowdsourced delivery services - including Amazon Flex - that consumers can use to order food and groceries. Given Amazon's two reported attempts to purchase Deliveroo outright, the e-tailer has grander ambitions for the delivery app than building up its local engineering team. It's reasonable to expect the e-tailer to eventually push Deliveroo into the US.

The US food delivery market isn't dominated by one player, meaning conditions could be ripe for Amazon to try again, this time with an already proven venture in Deliveroo. No single company controls an especially dominant stake of the US food delivery market: GrubHub (which owns Seamless) controls about 32% of the market, with DoorDash controlling 29%, and UberEats controlling about 22%, according to data from Second Measure cited by Vox.

Amazon will likely try to expand Deliveroo's US presence by undercutting the competition on price - an approach the e-tailer has employed across industries ranging from freight brokerage to over-the-counter drugs. With this investment in Deliveroo, Amazon will likely seek to gain more operational knowledge of Deliveroo's business before it looks to ride the delivery app to success in the US food delivery space.

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