SoftBank considered backing Deliveroo, then Uber arrived
UBER Technologies Inc’s potential multi-billion-dollar deal with SoftBank Group Corp is handicapping a fast-growing rival’s fundraising efforts.
Deliveroo, a London-based food-delivery company, was in talks to receive a sizable investment from SoftBank’s nearly US$100bil Vision Fund in recent months, until the Japanese technology conglomerate abruptly halted negotiations, according to people familiar with the talks, who asked not to be identified because the matter is private.
Talks stalled partly because SoftBank was starting to get serious about buying into Uber, which sees food delivery as an important business for its future. Although SoftBank also expressed uncertainty about Deliveroo’s business, the firm didn’t want to invest in a direct competitor to Uber, the people say.
SoftBank and other investors are attempting to finalise a deal with Uber. They could put up as much as US$12bil and give new backers as many as two board seats, Bloomberg reported last month. A portion of the investment would provide additional capital to Uber at the same valuation from last year of nearly US$70bil, but the majority would go toward letting existing shareholders cash out.
The latter portion is expected to be structured as a Dutch auction, with a valuation starting at about US$48bil, people familiar with the matter say. The plan could still fall apart, though.
Spokespeople for SoftBank, Deliveroo and Uber declined to comment.
Deliveroo is little-known in the US but popular in countries such as the UK, France and United Arab Emirates. It has raised more than US$500mil from investors since 2012 and is rapidly expanding to better compete with Uber, Amazon.com Inc and others in the crowded restaurant-delivery market.
Dara Khosrowshahi, Uber’s new chief executive officer, hasn’t articulated his plans for UberEats, but under co-founder Travis Kalanick, the company saw the business as a promising way to augment its car-hailing service and take advantage of its logistics expertise. First launched in 2014, the delivery service is now available in more than 120 cities in the US, Europe, Asia, Australia and New Zealand. But the food market is crowded, with strong homegrown competitors around the world.
SoftBank and its Vision Fund are sometimes willing to invest in competing startups. It backs Uber rivals Didi Chuxing in China, Ola in India and Grab in South-East Asia. However, these businesses are often in different regions, while Uber and Deliveroo are increasingly competing head-on.
With Vision Fund talks on hold, Deliveroo is seeking alternative sources of funds, the people say. The company raised US$275mil last year but has been piling up losses in a race to expand. SoftBank may consider a future investment in Deliveroo depending on the outcome of the talks with Uber, one person says. During negotiations with Uber, SoftBank has said that it could instead back Lyft Inc, the main ride-hailing alternative in the US.
Meanwhile, Deliveroo lost £133mil (US$181mil) in 2016, compared with £30.1mil in 2015, according to a regulatory filing made on Wednesday.
It ended 2016 with £180mil in cash. Sales surged more than sixfold during the year to £129mil, an indication of the tantalising potential that venture capitalists and companies such as Uber see in the food-delivery market. — Bloomberg