Amazon is investing millions in Deliveroo in a boost to the UK food delivery service as it takes on rivals such as Uber Eats and Just Eat in a competitive market.
The online giant is the lead investor in a $575m (£450.8m) financing round, which also includes existing investors T Rowe Price, Fidelity Management and Research Company, and Greenoaks. Deliveroo said it had raised a total of $1.5bn since it launched in 2013.
Deliveroo will use the funding, which values the business at as much as $4bn, to “invest heavily” in expanding its technology team at its London headquarters, further expand its geographic reach and grow its delivery-only kitchens business.
Significantly, Deliveroo said it would also use funds to develop “new tools to offer riders flexible and well-paid work”. The company has been heavily criticised for its treatment of the 60,000 riders who make its deliveries. Riders are not employed directly and are paid per delivery.
Will Shu, the founder and chief executive of Deliveroo, said the investment would result in the creation of more jobs in all of the countries in which it operates.
“This new investment will help Deliveroo to grow and to offer customers even more choice, tailored to their personal tastes, offer restaurants greater opportunities to grow and expand their businesses, and to create more flexible, well-paid work for riders,” he said.
Deliveroo will also use the money raised to invest in formats that will help restaurants expand into new areas at a lower cost and lower risk, bringing more choice to local neighbourhoods.
The news of Amazon’s entrance into the food delivery market hurt rivals, with Just Eat the biggest faller on the FTSE 100 on Friday morning, down almost 7%. The Berlin-based Delivery Hero and the Dutch group Takeaway fell as much as 6%.
“We think that market leaders such as Just Eat, Delivery Hero and Takeaway.com are likely to become targets, with several possible buyers,” said Ian Whittaker, an analyst at Liberum.
Amazon, which has in the past been tipped as a potential buyer of Deliveroo, briefly had its own rival delivery service, Amazon Restaurants UK, which it launched in 2016. However, the London-based delivery service shut in December amid fierce competition from Deliveroo, Uber Eats and Just Eat among others.
“Will and his team have built an innovative technology and service,” Amazon’s UK country manager, Doug Gurr, said. “We’re impressed with Deliveroo’s approach and their dedication to providing customers with an ever-increasing selection of great restaurants along with convenient delivery options.”
The ride-hailing service Uber, which operates rival Uber Eats and earlier this month listed on the New York Stock Exchange, is reported to have previously held preliminary takeover talks with Deliveroo.
Last year, Deliveroo was criticised for making a £10m award of stock options to employees but excluding its couriers as they are classed as self-employed contractors.
In December, Deliveroo riders lost a high court battle to gain union recognition, in a blow to gig economy campaigners.
In June a group of 50 UK Deliveroo couriers won a six-figure payout after claiming they had been unlawfully denied holiday and minimum wages. Deliveroo reached the settlement with the riders without an admission of liability, meaning it did not have to look to change its business model relating to the classification of couriers.
Deliveroo operates in more than 500 towns and cities across 14 markets, including the UK, Australia, Belgium, France, Germany, Hong Kong, Italy, Ireland, Netherlands, Singapore, Spain, Taiwan, United Arab Emirates and Kuwait.
The latest available results show Deliveroo’s global sales more than doubled in 2017 to £277m but its losses continued to increase, doubling to nearly £185m as the company continues to invest in global expansion.