Deliveroo's strategic partnership highlights and insights from the Doordash agreement
Revised Article:
Deliveroo's grandiose entry into London's stock market in 2021 was supposed to cement its status as a top British tech player. However, a series of events transformed this anticipated success story into one of the year's most dismal IPOs.
The company, led by CEO Will Shu, had previously been valued at an impressive £7.6bn, propelling Shu into the spotlight as a promising tech mogul. But within days of its IPO, the shares took a nosedive, spiraling down to a third of their initial offer price and never truly recovering.
So, what went wrong? London's financial circles passed the blame amongst themselves. Some argued the initial price, set by lead banks Goldman and JPMorgan, was far from reality. Others pointed fingers at ESG concerns over the unstable employment of riders, while some found the dual-class structure and the firm's long path towards profitability off-putting.
However, many saw Deliveroo's IPO flop as a stark reminder that London's tech scene still had a lot to prove. The markets, particularly in New York, wouldn't bat an eye at dual classes and loss-making businesses.
Now, Deliveroo is the latest billion-pound tech business to bid adieu to the London Stock Exchange, with its takeover by US-based DoorDash. Some might argue that DoorDash's 180p offer—sandwiched between what Deliveroo was once valued and its current stock price—won't lay the debate to rest regarding its true potential.
As Deliveroo makes the move across the pond, Russell Mould, investment director at AJ Bell, admitted that despite its struggle, Management may envy DoorDash's New York-based valuation. But he wouldn't mind if Will Shu stayed behind. Shu deserves recognition for building a global business from the ground up despite skepticism from investors, and the venture capital world could learn a lot from him.
Moreover, if Shu cashes in on the takeover, let's hope he reinvests in British startups. His impending £170m payday could be a game-changer for the UK's startup ecosystem, just like Simon Beckerman, Depop's founder, did when he sold his London tech firm to US interests.
Prior to its IPO, Deliveroo had relied on funds from an American tech firm, Amazon, to keep its business afloat. Perhaps the next time a London startup needs financial backing to scale, it can look to Shu Capital Partners for a helping hand.
Enrichment Insights:- Deliveroo's IPO struggles can be attributed to a confluence of factors, including dual-class share structure, worker controversies, a weak debut, post-pandemic demand wane, fierce competition, and cost-cutting measures that came too late.- The IPO's failure serves as a reminder of the challenges in sustaining pandemic-driven valuations, the risks of controversial governance models, and the relentless pressures of a consolidating delivery sector.
- Despite Deliveroo's IPO flop in London's stock market, some investors might enviously tip the company's CEO, Will Shu, for envisioning and building a multinational business from scratch.
- The debate about Deliveroo's true potential may persist, partly due to DoorDash's 180p offer, which is expected to yield Shu an impending £170m payday.
- As Deliveroo moves to the US, there is hope that Shu may reinvest part of his earnings in British startups, much like Depop's founders did when they sold their London tech firm to US interests.
- Some industry experts argue that the challenges faced by Deliveroo in finance markets, such as its dual-class share structure, ESG concerns, and poor IPO performance, highlight the need for London's tech scene to prove itself, especially amidst stiff competition from American markets.
- Deliveroo's reliance on funds from an American tech firm, Amazon, during its pre-IPO phase raises questions about the future financial backing options for London startups, with Shu Capital Partners potentially stepping in to fill the gap.
