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Deliveroo raises $275 million to expand food delivery

Food delivery start-up Deliveroo has raised $275 million in a round that involved early investors in Facebook and Airbnb, as it looks to expand its service to more markets.

Private equity firm Bridgepoint led the round, while existing investor DST Global, which has also invested in the likes of Spotify, and General Catalyst, which counts Airbnb and Snapchat among its investments, also joined. Greenoaks Capital also invested.

Deliveroo partners with restaurants in cities allowing them to deliver to customers. They are often mid-priced restaurants rather than cheap takeaways.

The U.K. start-up has seen strong growth with revenues rising around 20 percent month-over-month. It currently operates in 84 cities across 12 countries and the founder and chief executive is looking to expand with the fresh injection of capital.

"We want to expand more in markets we have a presence in and into other new markets," Will Shu, CEO of Deliveroo, told CNBC by phone on Friday, without naming specific cities or countries.

Mike Kemp | In Pictures | Getty Images

The company is also trialing a project to allow restaurants to expand. Earlier this year, Deliveroo began investing and opening up its own kitchen spaces nearer to places out of reach to a restaurant. For example, if a single restaurant in the center of London wanted to deliver to the suburbs, this wouldn't be possible via Deliveroo at the moment as the logistics wouldn't work. But having a kitchen away from the main restaurant could allow the establishment to cook food closer to areas where it previously couldn't deliver.

Shu said we are now at "food delivery 4.0".

"Food delivery 4.0 in my mind is us solving the harder problem for restaurants, physical infrastructure. We want to own more of the supply chain and it's really critical to help restaurants solve what is the toughest problem," Shu told CNBC, adding that building these off-site kitchens will be a "substantial investment" with the new funds.

But food delivery is a very competitive and hot space. Rivals such as Delivery Hero and even Uber, which recently expanded its food delivery service to London, are putting up a fight. Uber, which has valuation of around $62.5 billion, has deep pockets and is known to sink money into projects it is trying to get market share in. In China, the company lost $2 billion over two years trying to catch up with local taxi app Didi Chuxing. Uber's China unit was earlier this week bought by Didi however.

But Shu does not fear Uber and a potentially race to the bottom which could happen if Uber steps up its investment.

"As long as we are heads down focused and obsessed with food delivery then we will be just fine," Shu said, adding that the company is profitable in some markets.


'Harder' to raise fund post-Brexit

Deliveroo is reportedly one of the U.K.'s unicorns – a start-up valued over $1 billion – though Shu declined to comment on the valuation of his company. It managed to raise the money in a post-Brexit environement where venture capitalists have been more cautious with their cash. Total capital invested in European start-ups plunged 27 percent year-on-year to 5.42 billion euros in the first-half of 2016, according to data from Pitchbook. Shu said it was a difficult time to raise funds.

"You have a lot of different things going on, it's not just Brexit. The tech financing environment has changed over the last year, you couple that with Brexit, and couple that with the problems in Europe, it was harder," Shu told CNBC.