Deliveroo valuation hits £1.5bn after food delivery firm raises new funds

Deliveroo has been criticised by unions, which say it is exploiting its workers. Photograph: Dan Kitwood/Getty Images

Deliveroo has achieved a valuation of more than $2bn (£1.5bn) after the British takeaway food delivery firm raised $385m in new funds.

Deliveroo said the new funding brought the total it had raised since launching to $860m, with the latest round meaning the company has nearly doubled its value since its last fundraising in August 2016. In that funding round, the company raised $275m in a deal it said valued the business at about $1.1bn.

The new funds have been earmarked to help the startup business expand into new cities and countries, to enlarge its technology team and to work with restaurants to develop delivery-only kitchens, the company said.

Deliveroo currently operates in more than 150 cities across 12 countries and has about 30,000 riders on its books.

Like the taxi app firm Uber, which was stripped of its London operating licence on Friday, Deliveroo has been criticised by unions, which say it is exploiting its workers by not offering basic protections and the minimum wage.

The controversy around Deliveroo has centred on the employment status of its riders. The company argues the government should change the law either to allow additional rights for self-employed riders or to create a new category of employment. It claims that self-employed status gives both it and its staff flexibility.

However, the Central Arbitration Committee – a government body that resolves workplace disputes – is investigating whether Deliveroo’s drivers are independent contractors or whether they should be classified as workers with rights to holiday pay, the national minimum wage and collective bargaining via a union. A group of 20 British riders is seeking compensation in a similar employment tribunal case.

The new investment has also been unveiled just days after it emerged that the Deliveroo founder, Will Shu, handed himself a 22.5% pay rise last year.

Shu, a former investment banker who set up Deliveroo from his London flat in 2013, increased his salary to £125,000 and handed out close to £4.5m in share bonuses to directors and hundreds of other head office staff, despite a 300%-plus increase in losses.

The new funding for his company is being led by two US-based investment companies, T Rowe Price Associates and Fidelity Management & Research Company, which have previously backed technology startups such as Facebook, Airbnb and Tesla.