The secret of Deliveroo’s rapid growth

How has William Shu, founder of Deliveroo, a rare European tech start-up unicorn, conquered the world’s crowded e-cuisine market? Following his short visit to Dubai last month, the Morgan Stanley high-flyer turned entrepreneur talks about food, passion, starting up, business growth, scaling, and more.
The secret of Deliveroo’s rapid growth
William Shu, founder of Deliveroo, a London-headquartered on-demand premium food delivery service.
By Tamara Pupic
Sun 03 Apr 2016 01:30 PM

“What surprised me is the universal appeal of the product,” says William Shu, the 36-year-old American founder of Deliveroo, a London-headquartered on-demand delivery service that brings the high-quality cuisine of premium local restaurants to your doorstep.

“I had zero doubt that customer demand would be high for this type of product because it was a problem I wanted to solve for myself. But I really didn’t know that it would have this kind of universal appeal. So that part is a bit surprising to me to be honest.”

Most entrepreneurs have learnt what it takes to create a start-up, but the secret to the venture’s rapid growth is still a mystery to many. For Shu, it comes down to empowering people to control more things – in this case their own time and the quality of food they consume – in their life.

“Every time you make somebody’s life easier and it is really an elegant experience that person is going to be converted,” he says in an interview with Arabian Business StartUp.

Taking approximately 32 minutes from a click to a knock on the door, Deliveroo enables customers to get premium food delivered from local restaurants, which usually do not have a delivery offering, by paying and tracking the progress of their delivery from purchase to supply via both web-based and mobile app technology.

Launched at the beginning of 2013 with three Chelsea-based restaurants signed up, Deliveroo has grown aggressively to now employ more than 300 staff and operate a fleet of 5,000 people delivering food in more than 60 cities across Europe and Asia.

Carving out a niche within the rapidly-growing sector of food delivery – delivering high-quality food from local restaurants to homes and offices quickly – has appealed to investors. In more funding rounds than the number of years of its existence, Deliveroo has raised nearly $200 million at a $600 million valuation, according to the last year’s analysis by Financial Times.

“I am lucky in the sense that I used to work in finance so if I wanted to meet any VC investor, I could. I had connections,” Shu says. ”My story is a little bit different from some other people who had to spend more time networking. But also I had a product already. We had customers, we had data, and we were pushing the company each day so it was not like I did not have that to show to people.”

The venture’s universal appeal and accelerating growth is due to the two fundamental pillars of its business model. “One is to work with great restaurants in your local neighbourhood and, secondly, to get that food to you quickly,” Shu says. “I think that people’s definition of what is great and how fast something is can evolve over time, but I think that those two are of outmost importance and that doesn’t change globally. That is the same everywhere.”

The lack of choice and (fast) delivery of food can be frustrating, especially if you work in the finance sector. “You work 100 hours a week. It is very tough. You are tired. You are working nonstop,” Shu says of his days as an investment banking analyst at Morgan Stanley in New York. “One of the highlights of that job was that you received $25 for dinner and you would always get that delivered because you never had time to go out. So you have about 15 to 20 minutes to hang out with people of your age and talk about the day. Everyone was always looking forward to that because otherwise you were just working nonstop.”

Relocating to London to work in the Canary Wharf office of Morgan Stanley in 2004 might have meant climbing up the corporate ladder, but for Shu the meal-time decision making-related frustration started to build up. He continued working long hours, but due to the lack of food delivery in London at the time he had to go to close-by outlets, such as Tesco’s and Chilli’s, every day.

Going forward, this got even worse despite online marketplaces, including Just Eat and Hungry House, UK-based online takeaway marketplaces, starting to disrupt the food and beverage sector.

“I found that that model had two fundamental flaws,” Shu continues. “One was that I did not recognise any of the restaurants that were listed on the platform. They tended to be downmarket places I had never heard of. Secondly, I had no idea when the food was going to arrive because you could not track it.”

Teaming up with Greg Orlowski, a software developer and his childhood friend, Shu set up Deliveroo, seizing business opportunities that emerged from the development of mobile technology. “We could actually build a delivery fleet without investing in a lot of customised equipment. It is really the smartphone and the tablet that allow this business to exist,” he says.

Delieveroo’s business model relies on offering a choice of high-end restaurants to ensure the quality of food, a proprietary technology and logistics platform to connect delivery drivers with the restaurants, and the team to make customer experience as convenient as possible.

Tracing down the steps that helped them chart an exponential growth, the model reveals a win-win situation for all stakeholders involved.

“For us, the type of restaurant that does really well are premium casual restaurants,” Shu says. “I think that to restaurants that are incredibly upmarket, like Michelin-starred restaurants, which we do have on the platform, you would go not just because of good food, but incredible service and beautiful artwork on the walls.”

“Our sales team is a field sales team so we do not go around calling restaurants, we actually go and visit them.

“We carve up London in a series of many neighbourhoods. Each sales person has responsibility for a particular area and over time a lot of our sales people either live in the area or become active in the restaurant community, and they just know,” Shu says of how they choose the restaurants. “And beyond that we do approach things systematically as well. We check all the review sites and we come up with a consolidated numerical view on an aggregated set of reviews and then we assign rankings to that. The final step though is that our sales person has to actually physically taste the food. That is super important.”

Deliveroo takes a small commission from restaurants and consumers pay a delivery charge on top of the price of the meal. The model helps restaurants to increase sales, but the premium eateries have been more enticed into signing up due to the hassle-free service of Deliveroo’s own high-tech courier fleet. Known as Roomen and women, many of whom are students working part-time, the recognisable delivery team has contributed to building the Deliveroo brand.

At the beginning of this year, Deliveroo launched in Dubai, in addition to Hong Kong, Singapore, Melbourne and Sydney. Now it operates in 12 countries.

A seemingly easy expansion outside the UK as well as Europe is due to the lessons learnt in London. “I would keep in mind that we did not exit London for two years,” Shu says. “London is such a big city that is so geographically and demographically diverse that we really looked at it neighbourhood by neighbourhood. That really gave us great practice to go into other cities because we never viewed London as one huge entity. We just viewed it as a series of cities.”

However, there have been a few surprises. One of them is how well the concept has been received by Parisians, who are traditionally accustomed to dining in their haute-cuisine restaurants.

Shu adds: “Another thing that surprised me is how quickly people in restaurants adopt something new if it is working. We went to a lot of places where people had not heard of this type of thing before. For example, in Italy, like Milan and Rome, this is not something that people are used to. But when you explain, customers and restaurants really embrace it.”

Deliveroo’s meteoric rise in a short space of time has already made Shu repeat a few anecdotes that marked the venture’s beginnings over and over again. The stories of a former investment banker riding a motor bike and delivering pizzas on a rainy day in London have become part of Deliveroo’s history. His gold-painted scooter now stands in the center of their headquarters in London.

Talking about marketing tools they use, Shu shares one more interesting story. “Word of mouth is obviously always the best because it comes with a genuine reference,” he says. “It also doesn’t cost anything [laughs]. But we did a lot of different things at the beginning that worked really well.

“For example, you know those ‘do not disturb’ signs in hotels. At the beginning I made a bunch of those with our logo and the names of some restaurants we were working with. So I went into a neighbourhood in London and just hung them up on everyone’s door. We saw amazing conversion rates on something that just costs nothing. If you stick something on their door and make them take it off, they really interact with it.

“The downside of doing that is that it is not incredibly scalable and also you can really annoy people [laughs] but it is a great way to get people’s attention. When you are small, you try all these things.“

Another pillar of their business model is proprietary technology. The team of data scientists are always refining Deliveroo’s software, which assigns the most appropriate driver and then guides the driver in the best direction, Shu explains. “We are a technology company at its core, but it is not just about technology,” he says. “That is a major component of it. The other component of it is really about human resources and making sure people are trained well, making sure people are incentivised.”

Shu explains that key to expanding in London was hiring well. “It was challenging to recruit people because the office we were in we didn’t have windows, we didn’t have heating or AC,” he says. “We were paying something less than £1,000 a month for an office. And I think that when people saw that, they were like: ‘wow, this is pretty nuts.’

“But when they talked to the team and understood how passionate they were about the problem that we were solving, it became kind of contagious and then having an office that was almost like really horrendous was an appeal because people were like ‘well, it is not about this other stuff, but about actually tackling this problem.’

“And that continues to be my biggest role which is attracting great people.”

Their country managers, Shu explains need to be natives of the city they are in, have a very good educational and professional background, but more importantly each country manager has to have a start-up experience either as a founder or an early stage employee at a start-up.

“All international managers are CEOs of their domains and they are essentially creating something from scratch,” he says. “So you need someone with that mentality. You have to get your hands incredibly dirty and you have to think about all types of things.”

He tries to avoid building strong headquarters and a number of relatively weak satellites by insisting on regular exchanges of employees of different age groups and seniority between the office in London and the country branches.

“It is all about information exchange because a lot of these guys in international offices come up with the best ideas, but since they are not in London sometimes it is a little harder for people to hear about them,” he says.

In addition to ensuring that the local teams do not feel marginalised, taking care of the company’s culture is part of his comprehensive and adaptable approach to scale. “We have quarterly general manager meetings with all the international guys and I also visit every single office.

“Sometimes I think about it like ‘why am I visiting this office? Is there a specific agenda?’

But what I have found is that sometimes it is not really about that. It is about sitting down with the team and explaining to them the path that we are on and where we are trying to get to.

“One is that maybe I am repeating myself, but the other person has only heard it once. Secondly, it is actually important to repeat the message over and over again. Thirdly, just by going to different places you show very much that you care very much about what people are doing.“

Convinced that he has a mainstream product on his hands, Shu is fully focused on their customers. “What I am obsessed with is really giving to customers the best experience possible, but I am trying to lower the price for them over time as well. We do that by becoming more and more efficient over time,” he says.

Having spent only 24 hours in Dubai, he concludes by advising entrepreneurs on how to achieve scale. “If you have not done it before you have to hire people who have done it before,” he says.

“That is incredibly important because you will save years. There is going to be stuff that are super obvious to a guy who has scaled a business in 20 countries that you would not even think about.

“And just be humble about what you know and what you do not know.

“The other thing is that you have to make sure that there is a cultural conversion and that information goes both ways between your main office and all others. I think that is incredibly important so that you can have cross-polarisation of both people and ideas.”

For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.