Exactly one week ago, big news broke in the Berlin startup scene. Online food ordering platform Delivery Hero announced an $88m funding round – definite grounds for CEO Niklas Östberg to celebrate. Lead investor, later-stage VC Insight Ventures, has already helped Twitter and German company Trivago achieve impressive exits.
Now that the celebration has calmed down, we caught up with Östberg to find out what the company’s next step is…
Niklas, congratulations. This is a big deal. What do you plan on doing with the $88m?
Thanks. We’ll mainly use the money to develop our product and increase our marketing efforts. Aside from that, we now have a financial cushion in case any of our competitors tries to attack us.
What do you mean by that?
The competition in the delivery segment is high. There are international players in the market that are still bigger than us. Like JustEat, for example. And it’s possible that competitors in the US are considering expanding into our market. We’re now well-equipped to handle such cases.
Couldn’t you use the money to expand to the USA yourselves?
We will mainly expand in our existing markets.
What does “mainly” mean? Are there any plans to expand to other countries?
We will focus primarily on our core markets and continue our growth in them. And we’ll do that as fast as we want and as fast as is good for the company.
How about acquisitions? With $88m you could probably takeover one of your competitors…
The valuations are still too high…
You made the valuations higher yourselves via your financing round!
For us it’s still still easier and cheaper to grow organically and on our own rather than taking over our competitors.
So acquisitions are out of the question?
If we see a good team and the price is right, we could buy something in the future – if someone joined us in the deal. But we’re not in a rush.
Will you takeover Lieferando?
That’s not currently planned.
What about Food Panda? You both share the same investor – Phenomen Ventures…
No, that’s also not planned.
The German market is especially crowded – the situation is screaming for consolidation.
I agree, the German market is very competitive.
How important is the German market for you?
We make almost 25 per cent of our revenue in Germany, which means we’re not completely reliant on our business here.
And your most important markets after Germany?
We don’t look so much at individual countries – we define ourselves primarily by our products and our service, irrespective of country or customer number.
What will you spend the funding on if not on expanding to other countries or buying other startups? After all, you told TechCrunch that you’re still not profitable. Will you really just be spending the money on product development and marketing?
We are a young company, only two and one-half years old. Basically, it’s still too early to make a profit because we still want to grow rapidly. And yes, product and marketing are our focus.
What do you spend your marketing budget on? Do you spend more on restaurant acquisition or on customer acquisition?
Both customers and restaurants are essential for our business, so we take both areas very seriously. To compare the two, however, it is a little more complicated to show a customer the benefits of our product. A restaurant owner is usually very quick to understand where the benefits lie in cooperating with us. That’s why customer acquisition requires a greater marketing effort.
Why is this?
Because many customers have to first get used to the idea of ordering food online or on their phone. Look at the travel industry – it took around ten years until people were ready to book their flights online. And even today, many people still prefer travel agencies.
What’s your next step as a company? An IPO?
That’s not planned for 2014. As for 2015, we’ll see. I can say that we won’t IPO just to IPO. We’ll only do it if it fits with our business strategy.
And why is Insight Ventures a good fit for Delivery Hero?
We had several conversations and were in the fortunate position that we could choose between VCs. The team at Insight is great and brings a lot of experience with it. It was an easy fit and felt like the right choice.