UK's Deliveroo raises $100 million amid food funding binge

By Eric Auchard

FRANKFURT (Reuters) - Deliveroo has raised another $100 million (£66.3 million) in venture financing, its third funding round this year, the company said on Tuesday, seeking to expand its premium restaurant home deliveries to Asia and the Middle East before rivals can outflank it.

London-based Deliveroo is looking to distinguish itself in the crowded market for high-end food delivery, one of the hottest areas for start-up investment. Data research firm CB Insights has charted 74 funding rounds raising $1.25 billion in the third quarter alone.

These services seek to capitalise on the growing demand among urban consumers for home or office deliveries accessible with a few clicks on a mobile phone app.

But a chorus of critics, including some top-flight venture capitalists, have singled out the funding surge as evidence of a new investment bubble.

On-demand food is "Exhibit A in the 'We're in a Bubble for Sure' argument", Silicon Valley-based tech website Re/Code said on Tuesday.

In September, rival Delivery Hero acquired one-year-old Foodora from Rocket Internet (RKET.DE). Foodora now offers delivery services from more than 4,000 upscale restaurants, in 14 countries to Deliveroo's 12.

Yet another competitor, U.S.-based DoorDash, was reported on Monday to be in fundraising talks valuing it above $1 billion, according to Bloomberg, citing unnamed sources.

Founded two years ago and active in eight European markets, Deliveroo offers local delivery from restaurants that do not offer takeaway themselves.

Its latest $100 million round was led by DST Global, the investment vehicle of Silicon Valley-based Internet financier Yuri Milner, as well as Greenoaks Capital. Russian-born Milner previously backed Mail.ru, Facebook and Alibaba.

The company is using the cash infusion to expand in Dubai, Hong Kong, Singapore and two Australian cities.

"What we look for is population density, affluence and restaurant supply," said co-founder and Chief Executive William Shu, a former banker.

The company has added 29 British cities beyond its London base this year alone and serves more than 5,000 restaurants globally, Shu said.

He declined to comment on the valuation terms of the new funding, which was also joined by existing backers Accel, Index Ventures and Hummingbird Ventures.

Deliveroo earlier took $70 million in July and $25 million in January, bringing total funds raised to around $200 million. By comparison, Delivery Hero has raised $1.4 billion since its 2011 creation, half of it this year.

When it comes to funding, however, major industry players including Union Square Ventures partner Fred Wilson caution that not everyone is going to come out a winner.

"Raising a ton of money to operate a scorched-earth strategy and force your competitors out of the market will work for some," Wilson said in a recent blog, "but not nearly as many as the capital markets seem to think."

(Editing by Dominic Evans and Laurence Frost)