German online food ordering company Delivery Hero today announced a new $49 million investment round. The funding, led by existing investor Kite Ventures and including Kreos Capital, will help Delivery Hero as it takes on Just-Eat, a rival which is also pursuing a strategy of aggressive growth and acquisition in the online food ordering business outside of the U.S. Delivery Hero has been acquiring smaller players in markets around the world and establishing strong footholds in other countries where competition is scarce.
“In a way we are scrappy or opportunistic, in that we do a combination of both,” Delivery Hero CEO Fabian Siegel explained in an interview about how the company will use the new funds. “On one side, we’re in a couple of markets where we still heavily invest to acquire new users, where there’s strong competition, like in Germany and in the UK. On the other hand, we slowly build these organic markets from scratch like in Mexico and Korea and so forth.” Siegel said that through acquisitions or otherwise, he expects to expand to more markets in addition to their 12 existing ones by the end of 2012.
So far Delivery Hero and Just-Eat don’t overlap much in their target audience, though they do compete in both the UK and Switzerland. And Siegel says they aren’t likely to go head to head much more often in the near future, either. In fact, he says that the countries where Delivery Hero currently offers service makes up a potential €20 billion market in terms of the volume of delivery food sales annually, which, while dwarfed by the total global sum of €75 billion, is still a massive market to pursue. The U.S. alone accounts for around €30 billion, Siegel notes, but there are already a handful of companies competing for that space, including Seamless, and since they appear not to be concerned with external markets, that’s helped Delivery Hero and Just-Eat grow massively in other countries.
That growth has been pretty close in some respects, with Just-Eat racking up 27,000 restaurant partners, but with Delivery Hero hot on their tails with 22,000. Siegel predicts they’ll pass their UK-based competition sometime in the near future, judging by current growth rates.
The U.S. market remains a huge opportunity, and one that Delivery Hero said they’re looking at very closely. Siegel still seems to think the best way to go about things is to consolidate among international markets left open by the U.S. players for now, and then return later and gain a foothold in the U.S. through acquisition, but he described Delivery Hero as a “bold” company and hinted that other options might be available.