German food delivery startup Delivery Hero, which has the largest global food network (outside of China) with 600,000+ restaurants on their platform, is now both expanding and diversifying its business by acquiring MENA grocery delivery startup InstaShop.
As the world continues to see a greater demand for grocery delivery services in a COVID-19 world, we are witnessing growing interest in businesses operating in this sector.
Now, German food delivery startup Delivery Hero, which has the largest global food network (outside of China) with 600,000+ restaurants on their platform, will be both expanding and diversifying its business by acquiring MENA grocery delivery startup InstaShop.
Delivery Hero said that it has acquired all of the outstanding shares of InstaShop based on a valuation of $360 million. The initial purchase price amounts to approximately $270 million and the size of the deferred component to the founding team is dependent on the growth and profitability of the business in the following years, it said.
InstaShop was founded in Dubai in 2015, and has around 500,000 users in five markets: the UAE, Bahrain, Qatar, Lebanon and Greece, the country that the company founders John Tsioris and Ioanna Angelidaki hail from.
Meanwhile, Delivery Hero has a strong presence in 39 out of 44 countries in which it is operating across Europe, Latin America, Asia, the Middle East and North Africa.
John Tsioris, CEO and Co-Founder of InstaShop, said:
"The partnership with Delivery Hero is a great opportunity for us to continue to grow our business and put the group’s expertise to use. I really enjoyed working with Delivery Hero on this deal and am thrilled to continue to further expand the reach and quality of our service at InstaShop."
InstaShop will continue to operate as an independent brand alongside Delivery Hero’s current quick commerce strategy in the region. While InstaShop’s immediate focus lies on driving growth within its current geographies, joining Delivery Hero also opens up future complementary opportunities of expanding its footprint globally, the German firm said.
Financial success stories
Both companies are profitable, with InstaShop generating approximately $300 million in gross revenue in Q2 2020, "up c. 330% year-on-year, [with] a positive EBITDA margin," Delivery Hero said. With Delivery Hero’s support, the plan is to launch new markets and invest into further growth.
Delivery Hero, on the other hand, disclosed its H1 2020 earnings, showing remarkable growth. Its segment revenues grew 93.7% on a year-on-year basis to around 1.1 billion Euros ($1.3 billion). Despite an initial dip in earnings following the onset of COVID-19, company performance shot back up, and is now on a continued climb following easing restrictions.
In terms of profitability, gross profit dipped slightly year-on-year (EUR 167.2 million in H1 2020 compared to EUR 168.3 million) due to lost revenues and their corresponding profit contribution from the MENA segment due to COVID-19-related restrictions.
Delivery Hero has a market cap of nearly $22 billion, and is publicly traded on the German DAX index.
The MENA continues to see high-profile exits and investments in startupsDelivery Hero acquiring InstaShop is the latest in a series of high profile exits the region has seen in the past few years, and one of the largest for a startup created by Greek founders.
To this date, one of the most notable transactions remains Uber's purchase of ride-hailing unicorn Careem, which was bought for $3.1 billion last year.
2019 as a whole was a notable year for successful exits. According to a report by startup directory MAGNiTT, 2019 saw more exits take place in the region than ever before, counting 27.
"2019 saw a record 564 startup investments take place across the MENA, amounting to $704M in total funding," MAGNiTT's report revealed. "That’s an increase of 31% in number of deals and 12% in total funding compared to 2018, if you exclude previous funding in the now exited Careem & Souq."
"With those 564 deals and $704M in funding, 2019 marks a strong end to a great decade. To put it into perspective: 2009 saw $15M of funding in 5 venture deals, which means that total funding has had a compound annual growth rate (CAGR) of 47%, whilst deals increased by a 60% CAGR over the last 10 years."