20VC Deliveroo Founder Will Shu on The IPO This Year, The Rise of Quick Commerce and The Fierce Competition with Uber Eats

In this episode of "20 vc," Harry Stebbings interviews Will Shu, the founder and CEO of Deliveroo, exploring the journey of the food delivery company from inception to its IPO. Will shares his motivation for starting Deliveroo, born out of a personal need for better food delivery options while working in finance. He discusses the expansion strategy, the importance of local markets, and the company's innovative approach to supply, including the creation of delivery-only kitchens, known as dark kitchens. Will also reflects on the challenges of scaling, the gig economy, the competition with Uber Eats, and how Deliveroo has evolved to include groceries, maintaining its growth in the face of a rapidly changing industry. Despite the complexities of going public and managing a large team, Will's curiosity and passion for the business shine through as he continues to focus on solving consumer problems and expanding Deliveroo's services.

• Harry Stebbings introduces Will Shu, founder and CEO of Deliveroo.
• Deliveroo has been instrumental in feeding Harry in London for the last five years.
• Will Shu raised over $1.7 billion from notable investors before the company's IPO.
• Will Shu has a background in finance, working with firms like Morgan Stanley in London and New York.
• Fun fact: Will Shu enjoys delivering food on his bike.
• Harry thanks various individuals for their questions and suggestions for the episode.

"Now, I'm not the world's greatest cook, but I do still love food and this company's largely kept me fed in London for the last five years." "Will raised over $1.7 billion for the company from some of the best in the business, including Excel Index, General Catalyst, Green Oaks and more." "Before delivery, Will worked in finance with different firms, including Morgan Stanley across both London and New York."

The quotes establish Harry Stebbings' personal connection to Deliveroo, the significant funding Will Shu secured for Deliveroo, and Shu's professional background before starting Deliveroo.

• Will Shu considers Deliveroo his only business idea to date.
• The idea for Deliveroo came from a desire to solve a consumer problem, not to start a business.
• Shu's experience with ordering meals at the office in New York and London led to the concept of Deliveroo.
• The lack of quality food delivery options in London prompted the idea on day one of Shu's transfer to London.
• Will Shu tried to start the business in 2008 but faced technological limitations.
• After attending business school in Philadelphia and observing the offline-to-online trend, Shu returned to London in 2012 to work on Deliveroo.

"So it is, to this day, probably the only business idea I've had." "The only fun part about it is your 20 pound allowance at dinner time." "I've only ever wanted to start one company."

These quotes highlight that Deliveroo was born out of Shu's personal experience and frustration with food options while working in finance, emphasizing the practical origins of the business idea.

• The vision for dark kitchens emerged as Deliveroo grew.
• Dark kitchens were developed to address areas with insufficient restaurant supply.
• The operational benefits include faster handoff times and a delivery-first mindset, leading to innovations like improved packaging.
• Dark kitchens offer a different financial model for restaurants, with lower costs and no front-of-house staff.
• Deliveroo has been investing in dark kitchens, which have grown significantly, especially during COVID-19.

"There are just some places where the supply wasn't great." "It yields all types of unanticipated innovations, like better packaging." "It's a really big part of our business and we're going to continue to invest a lot in these kitchens."

These quotes explain the strategic rationale behind dark kitchens and their operational and financial advantages for both Deliveroo and participating restaurants.

• Initially, Will Shu personally signed up restaurants for Deliveroo.
• The first restaurant to join was convinced because Shu lived above it.
• Restaurants were hesitant but began to see the benefits once Deliveroo proved operationally sound.
• The education process involved demonstrating that Deliveroo did not disrupt in-house dining and delivered food on time.
• Shu emphasizes the importance of restaurants talking to each other to drive the initial cohort of partners.

"I could only get three restaurants to sign up." "Once they saw that the thing was working operationally, we didn't destroy their in-house dining, and we got the food to people on time, they started talking to each other."

The quotes detail the challenges of early restaurant recruitment and the importance of operational success in convincing additional restaurants to join Deliveroo.

• Deliveroo's zone-by-zone expansion was driven by capital constraints rather than deliberate strategy.
• Shu funded the company with his savings and had to be resourceful.
• The early days involved unscalable practices like personally doing deliveries and signing up restaurants.
• Shu acknowledges the difference in capital availability today and how that might change a founder's approach.

"I funded the company myself. It's not like we had any money." "I did the most unscalable things. I did deliveries for an entire year."

These quotes reflect on the scrappy beginnings of Deliveroo and how the lack of capital influenced the company's gradual expansion strategy.

• Will Shu shares a story about the lengths they went to save money, including buying used tablets and printing 3D parts for stands.
• He mentions the importance of being capital constrained, which led to careful consideration of decisions.
• Shu suggests that while some early practices were not necessary, they helped shape the company's careful approach.

"We didn't know what tablets to use, but we were super cheap, right?" "Because we were so constrained, we definitely thought through a lot of things."

These quotes provide insight into the bootstrapped nature of Deliveroo's early operations and the creative problem-solving required when resources are limited.

• Will Shu observed strong performance in initial cities and decided to aggressively expand.
• The decision to launch 200 cities in parallel was driven by the success in a few cities.
• Expansion of this magnitude was challenging and not managed perfectly.

I mean, probably not well is the short answer, right? I mean, basically we saw something that was working really well in a few cities and we just decided to go for it.

The quote reflects Will Shu's candid admission that the rapid expansion was not managed perfectly but was a strategic choice based on early successes.

• Will Shu used personal experience and statistical data to gauge success.
• Success was indicated by friends repeatedly using the service and consistent customer retention and frequency across different zones in London.
• Observations in other cities like Brighton and Cambridge suggested the model would work in various locations.

And then after a while, I just noticed they kept ordering. And I'm like, oh. So maybe they actually just like the service, right? So that was one funny one.

This quote highlights the anecdotal evidence of success through Will Shu's personal network's continued use of the service.

The retention and frequency of the customers was exactly the same.

This quote points to the statistical evidence that showed consistent customer behavior as a sign of success.

• Achieving density of orders is key to making unit economics work.
• Expansion is a hyper-local endeavor, focusing on individual neighborhoods.
• Early stages require significant groundwork, which later transitions to more standardized and automated processes.

What we realized pretty quickly was driving density of orders would actually make the unit economics work pretty quickly.

The quote emphasizes the importance of order density in achieving favorable unit economics.

• Will Shu doesn't consider any market fully "won" due to the dynamic nature of the industry.
• Success in the French market was influenced by the rise of casual dining and changing consumer habits.
• Entering France late meant dealing with established players but also adapting to the local food culture.

I don't know if we've won any market to date.

This quote reflects Will Shu's view on the ongoing competitive nature of the industry and the difficulty in defining a clear "win."

The rise of casual dining made a big difference.

This quote identifies a key factor in the success of the delivery business in France.

• Key factors in new market launches include population and restaurant density, spending propensity, topography, competition, and labor environment.
• The launch process involves securing restaurant supply, onboarding riders, and acquiring customers.
• The business is built neighborhood by neighborhood.

Population density. Restaurant density can give you an indication of how many orders per hour you can do and ultimately give you a sense of how profitable a market can be from a gross profit standpoint.

This quote explains the importance of population and restaurant density in determining the potential profitability of a new market.

• Initial algorithms for driver distribution were simple but evolved to incorporate machine learning for efficiency.
• The complexity of driver optimization varies with different topographies and landscapes.

Our algorithm is what you would call initially was a greedy solver, which basically meant it would assign the closest available rider to an order.

The quote describes the simplistic beginnings of the algorithm used for driver distribution.

• Will Shu does not track rider drops per hour due to potential for gaming the system.
• The focus is on rider experience time for each order to ensure a good customer experience.
• Strategies include optimizing delivery kitchens and predictive models for restaurant prep times.

So what you actually care about is drops per hour for a given radius and for a given sort of customer experience.

This quote highlights the importance of balancing driver efficiency with customer experience.

• Will Shu acknowledges Uber Eats as a formidable competitor in the hyper-local, physical business of food delivery.
• The competition is unique due to the mix of local operational challenges and global internet company dynamics.

Look, I think that this business is an interesting one because it is a hyper local business, yet you're fighting against global Internet giants.

This quote reflects Will Shu's perspective on the unique competitive landscape of the food delivery industry, combining local and global elements.

• Uber Eats entered the market with McDonald's as a secret weapon.
• Importance of hyper-local consumer value proposition in the food delivery business.
• Key aspects include having the right restaurants, delivery times, clear communication, and availability for late night and breakfast.

"They had McDonald's, right? They had this secret weapon, and McDonald's is the world's most famous food brand."

This quote highlights the competitive advantage Uber Eats had by partnering with a globally recognized brand like McDonald's.

"It's all about your hyper local consumer value proposition."

The quote emphasizes the importance of tailoring the food delivery service to local consumer needs and preferences as a critical success factor.

• Emotional aspect of food and the importance of having the right brands on a platform.
• Exclusivity with certain brands can be an advantage over competitors.
• Building strategic partnerships through initiatives like exclusive kitchens for partners.

"I believe an online food platform is an emotional platform."

Will Shu points out that food is inherently tied to emotions, and having the right brands can strengthen the emotional connection with customers.

"We build things like additions, kitchens that are for our exclusive partners."

This quote illustrates Deliveroo's strategy of creating value for their partners through exclusive arrangements and infrastructure investments.

• Raising significant funding without the use of bankers.
• Challenges faced due to Brexit and Uber Eats' global expansion.
• The importance of not being distracted by short-term share price fluctuations as a public company.

"I just went in there and said, does this really change kind of your perspective on what we're trying to do?"

Will Shu discusses the approach he took in reassuring investors during the challenging period of Brexit and Uber Eats' aggressive expansion.

"We didn't use a banker because we never used a banker."

The quote explains Deliveroo's decision to raise funds without a banker, relying on Will Shu's own finance background.

• Changes in leadership style upon becoming a public market CEO.
• Importance of being cautious with public statements and considering the impact on employees.
• Acknowledgment of areas for improvement in management and team building.

"You sort of think about the implications of what you say, especially when you're a leader of 2500 people."

Will Shu reflects on the need for careful communication and the responsibility of leadership in a large public company.

"I've never managed a company of the size, obviously."

This quote reveals Will Shu's candidness about his experience and the challenges he faces as the company scales.

• Will Shu's lack of a formal mentorship relationship.
• The value of mentorship in learning from others' experiences.
• Will Shu's openness to learning and his recommendation for others to seek mentors.

"I've never developed a sort of regular relationship with someone where you meet them once a week or once a month."

The quote shows that while Will Shu did not have a regular mentor, he recognizes the benefits of having one.

"I kind of wish that I had done that because why bother figuring things out on your own when there's other people have done it before and they're there to help?"

Will Shu expresses regret over not leveraging mentorship opportunities, acknowledging the potential advantages they provide.

• Analysis of the rise of quick commerce and its relation to Deliveroo's business.
• The total addressable market (TAM) for food delivery and grocery is vast, with different players serving different needs.
• Deliveroo's grocery business growth and the evolving consumer expectations for faster delivery.

"Our grocery business, I think we said in our H one results, is over 7% of our business now, right?"

This quote indicates the significance of the grocery segment within Deliveroo's business model.

"We all play a piece in this very, very large tam, this $1.8 trillion tam."

Will Shu discusses the large market potential and the various roles that different companies play within it, suggesting that competition can be both direct and indirect based on the consumer's occasion.

• Discussion about the potential for multiple winners in the quick commerce space.
• Harry Stebbings questions the viability of multiple winners given the partnerships and infrastructure of established players like Deliveroo.
• Will Shu acknowledges the compelling elements of the quick commerce model, particularly regarding inventory management.

So you think there is like a multistakeholder winner? Because just transparently, for me, I'm like, you know what? With the partnerships that you have with co op, with Waitrose, if you're looking.

Harry Stebbings is questioning whether the quick commerce sector will have multiple winners considering the strong partnerships and infrastructure of companies like Deliveroo.

• Will Shu elaborates on inventory management advantages of a small warehouse (dark store model) over a store pick model.
• He explains the challenges of stockouts and the limitations of machine learning models and operational improvements in resolving these issues.
• Shu contrasts the quick commerce model with the complex supply chains that traditional grocers have developed over decades.

Like, the inventory management side of a small warehouse is a better consumer experience than a store pick model from an inventory standpoint.

Will Shu explains that a dark store model, where inventory is managed within a small warehouse, provides a better customer experience due to real-time knowledge of stock availability.

• Will Shu discusses the possibility of Deliveroo working with dark stores, similar to their dark kitchens.
• He believes that different models, like the dark store and the traditional grocery business, can coexist.
• Shu points out Deliveroo's advantages, such as a large user base and brand association with food, which contribute to their success in the grocery space.

It's definitely an area we spent a lot of time thinking about and considering because there's elements that are appealing.

Will Shu indicates that Deliveroo is considering the dark store model due to its appealing aspects, suggesting potential future developments in their business model.

• Harry Stebbings expresses skepticism about the number of winners in the quick commerce space.
• Will Shu mentions the diversity of big grocers in the UK and the complexity of the quick commerce model.
• He emphasizes the importance of being attentive to any superior consumer experiences and the need for continuous innovation.

But Harry, you know, there are eight big grocers in the UK. It's not like there's like one.

Will Shu points out the existence of multiple successful grocers in the UK, implying that there could be room for various players in the quick commerce market as well.

• Will Shu shares that his favorite book is "From Third World to First," Lee Kuan Yew's autobiography.
• He admires Lee Kuan Yew's achievements in transforming Singapore into a prosperous nation within a single generation.

The last few years, I basically have not had time to read too many, but I'd say my favorite book in the last kind of three, four years has been from third World to first.

Will Shu expresses his admiration for Lee Kuan Yew's leadership and the rapid development of Singapore as detailed in the book "From Third World to First."

• Will Shu finds it challenging to adapt to the growth of Deliveroo, which now operates independently of his direct control.
• He emphasizes the need for deliberate communication and organizational building, which differs from the company's early days.

I think it's sort of like, it always feels like a small company to me, but it's not.

Will Shu describes the transition from treating Deliveroo as a small company to recognizing its growth and the necessity for structured communication strategies.

• Curiosity is identified by Will Shu as the key character trait driving his success.
• He values deep dives into business issues and primary research, which can reveal insights that are not immediately obvious.

It's my character trait of curiosity, for sure.

Will Shu credits his curiosity as the primary attribute that has contributed to his success with Deliveroo, highlighting his desire to thoroughly understand and explore business challenges.

• When asked about a hypothetical billboard, Will Shu chooses a simple message promoting Deliveroo, which he would place everywhere.

It's going to say order from Deliveroo, for sure, and it's going to be everywhere.

Will Shu opts for a straightforward advertisement for Deliveroo, emphasizing the brand's name and service, suggesting a focus on widespread brand recognition.

• Will Shu addresses the misconception surrounding Deliveroo's involvement in the gig economy.
• He emphasizes the flexibility the job offers and the strong retention and applicant pool despite the availability of other job opportunities.
• Shu's personal experience as a delivery rider informs his understanding and defense of the gig economy model.

I think for me, it's around the sort of gig economy.

Will Shu confronts the negative narrative associated with gig economy jobs, advocating for the benefits of flexibility and the personal choice to work in such roles, based on his own experiences and Deliveroo's rider retention rates.

• Will Shu enjoys the experience of making deliveries, exploring neighborhoods, and interacting with restaurants and riders.
• He recognizes that while it is not his primary job, it provides him with a sense of enjoyment and connection to the delivery process.

I love it, man. I love the feeling of just getting on my bike, exploring a neighborhood, seeing a restaurant, seeing how things are, talking to a different rider, understanding how their day is going.

Will Shu expresses his passion for being actively involved in the delivery process, which allows him to stay connected to the core operations and community of Deliveroo.

• Will Shu discusses Deliveroo's ongoing expansion into new verticals and the low penetration rate of online food delivery, indicating significant growth potential.
• He stresses the complexity of solving online food delivery challenges and his passion for addressing the needs of all three sides of Deliveroo's marketplace.
• Shu looks forward to continuing to solve consumer problems and driving Deliveroo's success.

We are still super early in this journey.

Will Shu emphasizes the early stage of Deliveroo's growth trajectory and his commitment to further developing the business, suggesting a long-term vision for the company's expansion and innovation.