- Deliveroo founder Will Shu talked to Business Insider about the looming workers’ rights case that threatens the gig economy model of his massive food delivery startup.
- He also talked about whether he might take Deliveroo public in an IPO.
- The company is handing out helmet cams to deter the brutal attacks on his riders.
- And, he tells us, he once worked for Just Eat as a delivery guy in order to see what his company was up against.
On Sundays in London, former Morgan Stanley banker William Shu gets on his bicycle and delivers pizzas, a job that pays about £10 an hour.
Shu is the CEO of Deliveroo, and his company is now worth $US2 billion (£1.5 billion). Shu says that he has only ever been recognised by a customer once, when he delivered to a colleague he used to work with at an investment fund. “I hadn’t talked to him in like three years,” Shu told Business Insider recently. “He didn’t understand that I started the company. He just thought I was a delivery guy … He was just like, hey, what are you doing? I didn’t have time to talk to him. I said hey, I gotta go.”
The man then started contacting mutual friends, asking, “I’m pretty sure Will delivered a pizza to me a few weeks ago, and there’s no explanation.”
There is no parallel among other tech unicorns, either. Having your pizza delivered by the CEO of Deliveroo is the British equivalent of having your books hand-delivered to your house by Amazon’s Jeff Bezos.
Shu is hardcore about getting food delivered right. He got the idea for the company when he was working at Morgan Stanley in London. If he needed lunch or dinner at his desk, the “system” for ordering food consisted of a giant, messy bundle of takeout menus from local restaurants. There was no way to know what was good or bad, or which places were known for delivering promptly or not. How has this simple problem not been solved yet, he thought.
Now, Deliveroo is approaching a huge turning point, whether Shu likes it or not.
Shu and his board are hinting heavily that they might be preparing for an IPO. At the same time, the company is warily watching litigation work its way through the British courts that could upend its “gig economy” business model.
Like Uber, the people who deliver services for the company aren’t classed as actual employees. They’re freelancers, paid by the job. In November, a UK employment tribunal handed down an appeal ruling saying that Uber’s drivers should be treated as employees — a decision that could guarantee them minimum wage and paid time off for sickness and holidays, among a host of other old-economy benefits. Deliveroo won a similar case, brought by 45 of its riders, but who knows what an appeal — or a change of law from government — might bring.
On the other hand, things couldn’t look better for Britain’s biggest unicorn: It has taken a staggering $US865 million (£659 million) in investment funding, suggesting that its official valuation of $US2 billion severely underestimates its true value (technology venture capital investors prefer returns on their money that are five or 10 times the cash they put in). He has 1,000 employees in 150 cities globally.
And Shu is nowhere near done — Deliveroo has yet to launch in the US, even though America is perhaps the biggest, most lucrative, and most friendly country for food delivery ideas. It is the place that will likely fuel Deliveroo’ future growth.
Shu built all that in just five years.
Business Insider sat down with Shu in Lisbon at Web Summit, the giant tech conference. He told us what he’s doing to protect Deliveroo riders from London’s fearsome moped gangs, who target his riders with knives and acid in order to steal their vehicles.
We talked about his preferred solution to the employment lawsuit, and how he’d like to work with the government to offer gig economy workers pension plans that can accrue the same way their wages do. Finally, we discussed the early days of Deliveroo, when he was germinating the idea for the company: he worked undercover at Just Eat, the publicly traded company that is his greatest rival, delivering Chinese food in London’s Pimlico neighbourhood for two weeks in order to see what he was up against.
On the problem of Deliveroo drivers being attacked by moped thieves…
JE: What is Deliveroo doing about the problem of attacks on its drivers?
WS: It’s a problem for sure. In the last – I don’t know the stats – but it’s of the utmost concern for us.
We’ve done a few things. We’ve given a lot of helmet cams to riders that they can just attach on their bike helmet or on their scooter helmet. So this way at least they have a record of what’s going on, and also, hopefully, that can deter people from trying to steal their scooters.
JE: Do helmet cams deter criminals?
WS: Don’t know for sure. This is something we’ve launched two months ago, it’s a relatively new thing. It’s anecdotal feedback it’s not statistical. I think the other thing that we’ve done is in the app itself, in the rider app, there’s a button they can press if there is an emergency.
JE: Does that go to the police?
WS: That actually goes internally, and then we can liaise with the police. Of course, the first thing is if something is happening that’s dramatic they should, of course, call the police first. But they can let us know with the press of a button what’s going on.
We’re taking feedback from the riders, we have drop-in sessions, and these two things were really a result of them coming to us and also having a discussion with them and thinking what’s a good solution. Of course, it’s a problem, I do Deliveroos myself. I do it on a bicycle now, not on a scooter, because I do it more for fitness. But I did it for a year on a scooter.
JE: Have you ever been attacked?
WS: No. Never. Nothing like what I’ve seen. There’s aggressive drivers and things like that, but nothing on that line.
JE: Can riders refuse to go to an address or neighbourhood if they are worried about the crime?
WS: They [riders] have the right reject anyone that comes to them, it’s a button on the app. So if they don’t feel safe they don’t have to do any order … For us the safety is of the utmost importance.
On doing deliveries himself…
JE: You famously do deliveries yourself. You used to do them about once a week. Do you still do that?
WS: Maybe not once a week but every once every few weeks. I’ll do it on a Sunday, that’s when we’re busiest usually in central London so I’ll do it near my house or near the office.
JE: Do customers ever recognise you?
WS: Um, no. Definitely not customers. The customers don’t care. They want their food right, they’re not looking at what this delivery guy looks like. Sometimes the other riders do. And I chat to them.
One time I would say I was in Pho in Wardour Street [in London] and … I had done this conference with Wagamama [the trendy Mexican restaurant chain].
Wagamama have this general manager conference, all the store managers, they had this big thing in Manchester, like 400 people. So they said, hey can you speak? I said sure, I talked about how I do deliveries … a week later I’m in Pho on Wardour Street and I’m taking the food out and these two women stop me and they’re like, hey are you Will and I’m like, yes how can I help you? And they’re like, oh we work at Wagamama, we were at that conference a week ago, we heard you talking about doing deliveries and we just figured you were just telling stories. But here you are actually doing it! They thought it was kinda cool. That was about the only time.
“I’m pretty sure Will delivered a pizza to me a few weeks ago, and there’s no explanation.”
The only other time I would say was at the very beginning, when I delivered to my ex-colleague. I hadn’t talked to him in like three years … He didn’t understand that I started the company he just thought I was a delivery guy … He was just like, hey what are you doing? I didn’t have time to talk to him I said hey, I gotta go. And this was like a big story for a while because he then contacted other people. “I’m pretty sure Will delivered a pizza to me a few weeks ago, and there’s no explanation.”
I saw him later … He worked at an [investment] fund with me. He was a really nice guy. It was just really funny because I’m not close to him, and so he didn’t really expect to see that.
JE: Tell us about the “dark kitchens,” where Deliveroo sets up temporary huts or food trucks that can serve food from local restaurants.
WS: It’s a really, really cool concept. We are now live in a number of British cities, so we’re in London, Reading, Brighton, Nottingham … And we’re expanding to more, including multiple sites in different cities, and then internationally we’re in Dubai, Singapore, Hong Kong, Milan.
We call them Deliveroo Editions. By the end of 2018 we’ll have 450 operators probably … They’re employees of the restaurants so the way it works is that the restaurant takes up occupancy in the space, they bring their ingredients, they bring the staff. And it’s just an outpost of the restaurant.
On the potential for an IPO…
JE: Have you rejected many acquisition offers?
WS: There’s always strategic discussions, inbounds and outbounds, but we want to build one of the biggest companies in the world, that’s what we’re focused on so that stuff is not of super-interest. Especially after raising a lot of money as well.
JE: Are you going to IPO?
WS: We’re thinking about all kinds of possibilities. I think an IPO is somewhat logical given the lead investors in this last round, which are public market investors, T. Rowe Price and Fidelity.
I think an IPO is somewhat logical given the lead investors in this last round, which are public market investors, T. Rowe Price and Fidelity.
What I am focused on is running the company and winning and really building a product which means best restaurants for consumers, getting them food to them quickly, whether that’s in the private space or public space is there’s definitely differences but ultimately … There’s pros and cons to both, right? But I think that for me that’s my focus and whether that be in the public arena or private arena that’s just fine.
JE: When are you going to launch in the US?
WS: US is a market that I think if we want to go in we have to go into a lot of cities simultaneously, it’s such a big market. I think it’s one of the best markets in the world (the US), it’s just that we’re focused on what we’re doing right now in our 12 countries.
On workers’ rights litigation …
JE: What happens to Deliveroo if you ultimately lose this litigation or the law changes and drivers have to be classed as employees?
WS: First of all the whole on-demand space is just relatively new, talking about five years, six years. So there’s just a lot of misinformation and misunderstanding amongst, I’d say, politicians as well as journalists.
What I care about, what’s really important to me, is actually the riders themselves, right. And so there are surveys, everything we talk about to them overwhelmingly what they care about is, No.1, flexibility. And what flexibility actually means is log in, log out. Work around your life. The average Deliveroo rider in the UK works about 12 hours a week, something like that. So generally it’s not a full-time thing. It’s different than say, I don’t know if you take Uber cars, a lot of these guys it’s kind of their full-time thing. So this is different. We have a lot of students, we have a lot of people who are taking care of elderly, we have actors, so that the sort of population is very broad in terms of the people who want to do it. So flexibility is the most important thing to them.
No.2 is wages, earning a higher wage. And so right now in the UK approximately our average rate of pay per hour is about £10 per hour, which is still substantially higher than the minimum wage which I believe is now £7.50 nationally. So I think those two things are really important. That’s pretty obvious.
Our average rate of pay per hour is about £10 per hour, which is still substantially higher than the minimum wage which I believe is now £7.50 nationally.
JE: Is it possible to earn below minimum wage on Deliveroo?
WS: They’re independent contractors, and it’s not so much an hourly concept. The way our system works is you get assigned deliveries and most people get paid on a per-delivery basis. So when I say an hour, I’m referring to the number of deliveries people do in a particular hour, multiplied by the rate of pay on a per-order basis. So it can vary … which is on our app.
We know that a lot of riders also work for Uber Eats, Amazon, Just Eat. So it’s actually a very tough thing for us to know. Because let’s say Jim is working for four apps at once and you do one delivery on Deliveroo but you did two on Just Eat, and you did three on Uber Eats, in that one hour. I only know what you made with us, I won’t know what you made with the others. And if you talk to riders in London especially, because that’s kind of the biggest – and in Paris and a lot of these other cities – they will almost all tell you that, yep, they have got three, four apps open at the same time.
JE: If the law requires you to class them as employees they can’t do this anymore?
WS: That’s right. That’s not what they want, though.
JE: They want to arbitrage you, based on demand, by playing you off against Uber Eats or Just Eat.
WS: It’s the market. And I think if you provide them the best earnings and the most amount of jobs per hour, they will naturally gravitate towards you. And to me, that feels pretty fair.
JE: Does it screw with your business model if you have to class them as employees?
WS: It’s not a cost thing. The issue is flexibility, right? Riders want the job because it’s flexible, and if we make that job inflexible less people are going to want to do the job even if you pay them the same. I am 100% sure of that.
JE: That would make life extremely difficult for the functioning of Deliveroo.
WS: I don’t know about extremely difficult, it would put us in a different position. We would have to figure out a way to do it but the whole point is flexibility is what people sign up for and if you take that away from them, yeah I think less people will want to do that job. Is there any doubt about it? I mean likewise, talk to any Uber car driver, ask them if they want to work on an hourly shift.
JE: I know they don’t. I talk to them all the time. They love the fact that they can just take the day off.
On offering pensions to Deliveroo riders…
WS: The reality is more and people are going to want this kind of work. So my third point, we talked about flexibility, we talked about earnings, is actually benefits.
We actually want to offer benefits but in a flexible working model. So for example, we want to work with the government to flesh all this stuff out, but picture a scenario where you are accruing pension on a per-delivery basis … If you’re able to do that on a flexible basis then that means our interests are aligned with yours, and then you can also work in that flexible manner. For us, that’s something that’s really important. But we understand why that hasn’t happened yet, this is a really new thing, and so it’s going to take time for governments and policymakers to think through all this stuff. But the reality is this is what people want to do. There’s no doubt.
We actually want to offer benefits … picture a scenario where you are accruing a pension on a per-delivery basis
JE: The gig economy is getting a bad name over time. Low wage jobs, low productivity. Uber and Deliveroo come up together because you guys are the biggest gig economy platforms. Do you worry about that? Do you worry that Deliveroo might become a totemic example of the dysfunctions of the gig economy?
WS: I don’t sit around worrying about the media all day honestly. I care about our riders, I care about customers, I care about restaurants. And not that I don’t care about you, but it’s just not the No.1 thing I think about every day to be honest. And again, I think a lot of the criticism that’s directed towards the gig economy is a result of it being a new thing that grew very very very quickly.
Five years ago you could not log in and out of a job. that’s just the reality so for a lot of people it is very very unknown and scary. but for the people that are actually doing the jobs I think those are the people you should actually talk to.
And of course you can always find the odd person who’s unhappy, journalists are very good at that, but if you look at our survey data, and we can share that with you at some point, it’s clear that overwhelmingly people want flexible work. And I hope the government can recognise that and work with us to not just offer flexible and high-earning work, but also benefits as well. And look, you talk about low wages, well on average it’s £10 an hour, approximately £10 an hour, which you know at the end of the year is a lot higher than £7.50 … It’s literally 33% better than McDonald’s. So I think that’s how we think about it. So we want to pay much higher.
On working undercover at Just Eat…
JE: You come to Web Summit to check out new startup ideas. Have you seen any good ones? Any terrible ones?
WS: A lot of people told me Deliveroo was a really terrible idea. I guess it still remains to be seen. But five years in, we have traction at least.
JE: Why did they tell you Deliveroo was a terrible idea?
WS: Because Just Eat was around.
JE: So what do you do better than Just Eat?
WS: They don’t deliver the food, they have the restaurants deliver the food. And so as a consequence the restaurant quality — it’s like all kebab shops, right? And then, No.2, you don’t know when you’re going to get your food, because there’s not a company doing it, it’s just a guy in a restaurant.
JE: So if I am a restaurant owner it’s easier for me to deal with Deliveroo because I don’t have to hire delivery guys.
At Just Eat you know you get paid, like £6 in cash, these guys sleep above the restaurants.
WS: That’s right. I worked in some of these Just Eat restaurants before I started Deliveroo just to kind of understand how the system worked. At Deliveroo we have a right to work check, we have background checks, you get an invoice, it’s all very clear what your taxes should be, and all that stuff. At Just Eat you know you get paid, like £6 in cash, these guys sleep above the restaurants. It’s very different type of thing.
JE: How long did you spend doing that?
WS: Two weeks. I worked at a place called [redacted] in Pimlico, it was a Chinese restaurant run by an Afghan guy. And he was super funny. He’s like ‘I’m going to tell you how to run a Chinese restaurant.’ He was just a funny guy.
JE: He had no idea you were from Morgan Stanley and had a lot of funding.
WS: I didn’t start up the company yet, I was just trying to learn, I was on my scooter delivering Chinese food for him. So I’ve seen a lot of those restaurants, the takeaway shops, you know.