William Shu runs Deliveroo, a startup that manages a fleet of 5,000 people across Europe and Asia delivering hot food from nice restaurants within 30 minutes. Three years ago, he was the company’s first delivery boy.
After founding Deliveroo in February 2013, the former investment-banking analyst spent the rest of the year driving his scooter around the suburbs of Chelsea in Central London for roughly six hours a day. He wanted to get a deeper understanding of the logistical network he was building.
At one point he ended up bringing a pizza to his old manager from a London hedge fund.
“What are you doing?” the manager asked, surprised to see Shu had apparently fallen on hard times.
“Delivering pizzas,” Shu replied. “It’s fine.” Shu had another delivery waiting and was too busy to explain what was really going on, so he left.
Less than three years later Deliveroo has more than 300 employees in London and offices across Europe and Asia, along with 5,000 delivery agents on bikes and scooters that it’s poured into the burgeoning gig economy.
It has raised nearly $200 million from investors like Yuri Milner’s DST Global, Accel and Index Ventures, and is worth more than $600 million, based on its latest funding round in November 2015.
Shu says revenue has grown at a steady clip of 20-25% a month for the last three years. Deliveroo makes money by charging restaurants a commission and customers a flat, £2.50 fee on its app.
It offers restaurants who don’t normally deliver an extra source of revenue by outsourcing the job to Deliveroo. It’s currently in 60 cities across Europe and Asia, and Shu says he’ll take his network to the U.S. at some point down the line too.
Public filings show Deliveroo booked a loss of £1.4 million in 2014. That’s because the company is growing so aggressively, a source close to the company says, adding that Deliveroo becomes profitable in each city as quickly as Uber does. Uber was profitable in 80 cities when numbers leaked in December 2015 revealed its financials, making it appear that Uber takes about two years to become profitable in a city on average.
Right now Deliveroo doesn’t have a problem with demand, Shu says. It’s spending the money from its latest funding round on setting up offices in Dubai, Hong Kong, Singapore and Sydney and hiring more delivery agents, or what Shu calls his “Roomen.”
The secret to Deliveroo’s rapid growth is down to Shu being hyper-focused on logistics, according to one investor. Shu concedes he doesn’t have previous experience in logistics, though being a near full-time delivery driver for the first 10 months of the business helped.
“I did it seven days a week,” he says. “You do that and you get pattern-recognition on minutes. You can shave off elements of the journey.”
Today he keeps the Deliveroo machine efficient by constantly tweaking things. His team of data scientists run simulations on Deliveroo’s own software to better understand new geographies, and are constantly re-testing its core routing algorithm that decides how to pick the right driver to deliver an order.
Deliveroo’s data scientists look for more efficiencies by breaking down the delivery process into several steps: interacting with the customer, cycling or driving to the restaurant, picking up the food at the back door, or punching in a code at the restaurant to get in.
“If you tell the restaurant precisely when the [delivery] guy is going to be there, that’s better than saying he’ll be there in 10 minutes,” says Shu. “You give them precision. A Neapolitan pizza takes 90 seconds to cook. A steak takes 10 minutes. How do you pair that so the food is piping hot when the guy gets there? We have a million tests going on all over the place.”
Shu has also hired engineers who have experience in managing complex logistical problems. One of his engineers used to manage constellations of satellites, while another optimized warehouse production rates for FedEx and UPS.
Shu, who describes himself as “level headed” is open to the prospect of one day using automated fleets of self-driving drones or delivery robots like those being tested in London by Starship Technologies. But he’s characteristically pragmatic about the concept, thinking about all the logistical wrinkles that could throw up.
“The autonomously-driven rover thing is super cool… if you live in a neighbourhood where it’s a bunch of terraced houses,” he muses. “If you live in an apartment building, how would that thing get up the stairs?”