CNBC Transcript: Will Shu, Co-founder and CEO, Deliveroo

Following is the transcript of a CNBC interview with Will Shu, Co-founder and CEO of Deliveroo. The interview will play out in CNBC's latest episode of Managing Asia on 27 April 2018, 5.30PM SG/HK time.

All references must be sourced to a "CNBC Interview'.

Interviewed by Christine Tan, Anchor, CNBC.

Part 1

Christine Tan (CT): So Will, in five years, you've managed to grow Deliveroo from a small startup in your London flat in 2013 to a company valued at 2 billion dollars. Looking back, did you ever think you would grow this fast in such a short space of time?

Will Shu: We started the company because we wanted to work with great restaurants and get food to people quickly. I was trying to solve a personal problem. My first job out of college in 2001, I was an investment banking analyst in New York and I was used to ordering every single meal in the office because I was working a hundred hours a week. Now in New York, almost every restaurant delivers and you would get the food pretty quickly. And then in 2004 I was transferred to London, and I was working in Canary Wharf and I was working long hours, but the same sort of availability of delivery wasn't there. I found that pretty frustrating so literally within a week of moving from New York to London, I was like, "there needs to be better delivery here." Obviously, the problem we're solving resonated with a lot of different people and today we're really proud of what we've accomplished but that wasn't the original intent.

CT: What did you enjoy most when you look back over the past five years building up the company?

Will Shu: I think just seeing members of the team succeed, seeing members of the team grow with the company, that part is really rewarding. I think also just seeing a problem I wanted to solve actually come to fruition is pretty exciting.

CT: So actually building something from scratch, literally?

Will Shu: Yeah, I mean that part is incredible and also seeing that manifest itself across 12 countries as well.

CT: Are you amazed you've come this far? Do you ever pinch yourself and go wow you've made it?

Will Shu: No, I don't, we still have a long way to go, and I think that this industry is in its infancy, and there are a lot of things that we want to improve on. I'm very proud of where we've gotten to so far, but there's a lot more work to do.

CT: We're now doing this interview at Deliveroo Editions, which is one of your physical outlets. From food delivery you're now operating central kitchens, and now to dining in. Are you changing your business model?

Will Shu: We're not changing it, so we're a food company and we view delivery as a mechanism by which we're feeding people. I think, traditionally Deliveroo Editions is our delivery-only kitchen concept and what that means is restauranteurs can enter into new areas in which they don't have a physical restaurant presence at minimal cost. Now this iteration of Deliveroo Editions in Singapore allows people to pick up food on the site as well as to dine in, and the reason we chose Singapore for this is because of the hawker centre culture in Singapore, a lot of customers like the dining-in aspect. But we think that this is a model that we might roll out in the rest of the world as well.

CT: How long will it take for you to roll out this dining concept?

Will Shu: Well we have over 100 Editions kitchens today, so I think some of the new Editions kitchens we're opening very soon will feature dining concepts, so we're excited about that.

CT: This whole idea of operating kitchens, dining areas, is actually a deviation from your previous asset-like model. It means investment in dining, kitchen equipment, not to mention hiring staff and paying rent. How do you recoup your investment? How long does it take to break even?

Will Shu: Well, what we think about is what we offer our customers. We offer customers price, selection and service, and Editions is the investment we're making in order to give our customers what they need, and also to help our restaurant partners expand to more sites. So I think it's one of these things where it's not a change in business model per se, it's a tool we're using to accomplish our ultimate aims.

CT: But how are you pulling in the revenue to make up for these investments you're making in these outlets?

Will Shu: I mean Editions has been a huge success. Remember, what Editions is, we look at our data and we look at a particular neighborhood, and we say what are the missing cuisines that people really, really, really want. So these restaurants are handpicked, they're not just random restaurants, they're restaurants we know will succeed in a particular area. So we look at a particular area, we say what are the missing cuisines, we then establish partnerships with let's say the top Italian brand, the top Greek brand, the top Japanese brand et cetera, et cetera and then they come in here. These are partners we have a pre-existing relationship with.

CT: The only way you can make up for it is if the increase in volume actually makes up for the investment. Have you seen that happen so far?

Will Shu: We've seen huge increases in volume from our restaurant partners, that that we work with in our traditional business model versus editions, huge increases.

CT: So as I understand it, the restauranteurs who have their kitchens here don't pay rent at all. You're actually paying for the rent. So are you actually taking a cut from the number of orders that are ordered in this delivery Edition?

Will Shu: It's our traditional revenue model which is a commission from the restaurant as well as a user fee from the consumer.

CT: Right now you have about 100 of these so called Deliveroo Editions in Middle East, Europe and Asia. What's your pipeline looking like? How many of these physical outlets could you have?

Will Shu: You know we think it could be a very substantial part of our business. We recently raised about 500 million dollars and a lot of that really is to commit to building these up. I also want to point out, it's not just the physical infrastructure. We build kitchen management software, supply chain management software and labor management software that we're rolling out to our restaurant partners. So it is meant to be a turnkey solution, the creativity of the industry is really what we're trying to tap into, but we're trying to make it as easy as possible for restauranteurs.

CT: Your co-founder was Greg Orlowski who was a software engineer, what was it like in the beginning getting the software and technology right? Was it a challenge?

Will Shu: Well, Greg, Greg built all the initial parts of the software and so it was just me and him and we were just figuring stuff out. It was a really fun time, it's really, really different today, I would say. We have a team of data scientists, guys that are much smarter than me and all they do is build machine learning models, to optimize our logistics algorithm so if you look at what's happened over the last year and a half, the customer experience has gotten substantially better. Rider earnings have gone up substantially on a per hour basis and we generate much more profits than we did over the last year as well, so I think this type of thing is just incredible and the teams of data scientists have done a great job on that.

CT: What are your revenues like last year, 2017?

Will Shu: We're a private company so we don't disclose that but all I can say is that they were up enormously on the year before which I do think you have public records of. In 2016, we grew revenue of 650 per cent on 2015 so it's been a lot of hyper growth for us.

CT: So you're in Europe, you're in Asia, you're in the Middle East but you're not in the US yet. Why?

Will Shu: I think the US market is an amazing market, we continually monitor all different…all, all different markets and we'll be expanding to few, few new markets by the end of the year.

CT: Which markets are you looking at?

Will Shu: Can't tell you right now but…in time, I'll definitely, you'll be the first to know.

CT: But you're venturing into the US by the end of this year, that's confirmed?

Will Shu: That's not what I said, no, what I said was we'll be entering a few new different markets by the end of the year, I just can't talk about which ones they are yet.

CT: But not the US?

Will Shu: I don't know, I'll tell you, I'll tell you when the time's right.

CT: Could one of them be China, because you're not yet in China yet as well?

Will Shu: Again, China is a great market as well. But… right now all I can say is that we will be expanding into a few new markets, and when the time's right we'll let you guys know.

CT: So there is a possibility that you could tap the potential coming from the Mainland market?

Will Shu: There's a potential we going into a lot of different markets, so…

CT: When you look at a market like China where it, the food delivery market is dominated by two main players backed by Tencent and Alibaba, does it worry you? I mean a lot of people are getting burnt in China right now, when you look at Uber when you look at Google and what they're going through does it worry you?

Will Shu: I think it's an exciting opportunity. I think it's really unprecedented what's happening in China in terms of all types of technology, not just ride sharing, not just food delivery, just an amazing thing that's happening.

CT: Competition-wise, I mean these new markets, whether its old or new, you're seeing a lot of competition from UberEats, Foodpanda, even the local delivery, food delivery companies. What are you doing to compete? What are you doing to stay ahead?

Will Shu: Well, I'd say the number one thing is that we are obsessed with food, food is the only thing we do and because of this singular obsession, we've come up with concepts such as Editions, and I think about food every day, everyone on our team thinks about food every day and that's our mindset.

I think the second point is at the end of the day, competition comes and goes. We've seen players enter markets, leave markets, really, the things we obsess about is our riders, our restaurants and our consumers, and although we obviously pay attention to competition, the singular focus on those three things is ultimately how you have to spend the your day otherwise it's a bit of a waste of time.

CT: Well in terms of funding you've raised 500 million US dollars in September last year, how long before your next capital-raising exercise?

Will Shu: We're not focused on that right now, right now we're really well capitalized, we're focusing on building up more Editions kitchens and um building up new software for riders, restaurants and customers.

CT: You've managed to bring in these high profile investors like Fidelity, as a former investment banker, did you know how to press the right buttons to bring in these big funders?

Will Shu: No, actually not really. I think the investors liked what we were doing…and I was lucky enough to work with some great investors throughout this journey so far and they've been very helpful.

CT: What about time frame for listing, is it something you're considering?

Will Shu: A listing is a practical outcome at some point. It's not something that we're focused on in the near term though, so it's not something that takes up my, my agenda day to day.

CT: But as a UK startup, just for the sake of argument, where would you list if you had the opportunity?

Will Shu: You know honestly it's not something I'm super familiar with, but when the time comes I'm sure it'll be a big topic of discussion.

CT: But the time will come for you to list? You see that as a possibility?

Will Shu: I think so, I definitely see that as a possibility and I, and I think that's a good thing… but it's not going to happen any time soon.

CT: But if someone came along and made you an offer to buy up Deliveroo, would you be open to the idea?

Will Shu: I'm not very open to the idea, to the idea now.

CT: You just want to continue building the company?

Will Shu: Yes.

CT: You're still passionate?

Will Shu: I, I, no, no I want to, look, what I care about is running this company and fulfilling the vision of the company, that's ultimately what I think about every day.

CT: So you been growing your revenues but at the same time you're still posting losses because you've been burning cash to expand, that's logical for a startup like you. Do you have a timeframe in mind when you hope to be profitable?

Will Shu: Well, yes we do. We have internal budgets; the way we think about it is probably a little bit different than what's been portrayed in the media. So because we're in 12 countries and they weren't launched all at the same time, we actually look at the maturity of the market, versus when we expect that to be profitable and we're on track for everything that we're supposed to be doing right now.

CT: Which markets are your most profitable?

Will Shu: What I can say is that our most mature markets are the ones that are most profitable but we're also on track to hit all our financial targets.

Part 2

CT: As a startup in the fast growing gig economy, you've come under a lot of scrutiny for the way you classify your riders, which you say are self-employed and not actual employees. Now this was part of the workers litigation process that you had to go through. What was the outcome?

Will Shu: Well I presume you're talking about the UK because obviously these issues differ country to country. Maybe it's worth me just talking about generally how we think about riders. So when we think about riders, and I was the first Deliveroo rider, I did that job for an entire year, every single day, I got to know the initial group of riders extremely well and today they're still my friends. I still do deliveries about once every two weeks and since no one recognizes me I can talk to riders, I can talk to restaurants to see what's going on. I think the most important thing for riders, and this is really uniformly across the 12 countries we operate, is flexibility.

What I mean by flexibility is the ability to log in and out, the ability to work whenever you want, and it's really the ability to fit work around your life versus the opposite. The average Deliveroo rider works about 12 hours a week, so it's not really a fulltime job for many people. What this means is, a lot people are students, a lot of people are actors, you know, taking care of the elderly that type of thing.

So number one is flexibility, number two is of course pay, people care about pay. And then number three which is really critical for me personally is benefits as well. I think in Europe traditionally there's been this almost black and white battle between flexibility and security and we're trying to end that trade-off right now. So we've been speaking to a lot of governments to say we also want to offer benefits but we need that flexible working model to, to remain. That's why there's 35,000 people working with us today, that part's really important.

CT: Well, the real basis of the argument is that these self-employed people do not have benefits, do not have basic protection, but is this something you're addressing internally for your 35,000 odd Deliveroo riders?

Will Shu: Well, so, so we are. I mean we're talking to the governments about how Deliveroo can offer benefits at the same time as retaining that flexible working model. So right now, the way it works is if we were to offer benefits, basically people would not become self-employed anymore; they would become employees which mean they cannot work in the same flexible manner.

CT: So the rule, the law needs to change? Is that what you're asking?

Will Shu: That's what I'm saying, that's what we're working with governments on that.

CT: Are you making any headway?

Will Shu: We are. I think governments, now look the whole gig economy is a relatively new phenomenon right, I guess probably five or six years old or something like that, so this way of working is new and I understand why people are cautious of it, but I think governments now, many of them understand that this is here to stay, and this is something that, that workers actually want. And so we want to work with governments to come up with a system that works for both flexibility and security.

CT: Can you talk about the workers litigation process? What's the outcome?

Will Shu: Well, so we've recently had a decision at the CAC which ruled in Deliveroo's favor, but I want to point out this isn't us winning, this is about what the riders want, so retaining that flexibility for the riders is the most important thing, and that outcome affirmed our opinion.

CT: If the ruling didn't go in your favor, and you had to classify your riders as actual employees, would you have to take a big hit cost wise?

Will Shu: No, because right now we pay very significantly above minimum wage, that's not really the point. The point is that people wouldn't sign up for a job in which they had to work on fixed shifts, or in a very, very stringent operating manner. People want the ability to show up whenever they want and this is the whole point of the gig economy, this is the most important thing.

CT: What are you paying? Are you paying per delivery or are you paying per hour? And what are the rates like?

Will Shu: So without going into too much detail, generally we pay per delivery but again every market is really different so I don't want to confuse everyone because we have 12 different markets going on.

CT: But it's something you're really addressing seriously?

Will Shu: Absolutely, we're talking to governments about how we can offer benefits n flexibility all around the world.

CT: And you want to be part of that debate process?

Will Shu: We want to be part of that debate, in fact we are part of that debate, that's why we're engaging with governments and speaking to them, because I understand how people are like "Oh what's going on here", it's a really new thing, and so governments want to learn more about it, the general public wants to learn more about it, the media wants to learn more about it, and we're really happy to have that discussion.

Part 3

CT: Well Will, you've come a long way since you co-founded the company back in February 2013, in your London flat. Tell me honestly, were you really obsessed with the food delivery system because you can't cook?

Will Shu: Yeah, yeah that's probably true, no I'm not a good cook, I can make an omelet. I make a very good omelet so it's probably the best omelet you can find, but that's about all I can make. So, yeah.

CT: When you look at the restaurants that you order from, which ones are your favorites? What do you order?

Will Shu: Well, it really depends what I'm trying to do, so when I'm in London and I'm in the office, I kind of eat the same thing because I try to maintain some semblance of eating healthy and so lately I've been ordering from Chipotle, the burrito brand from the US that we work with. I've been eating the chicken salad from there without beans, without rice, hot salsa, guacamole so that's good. And then when I'm in Singapore I've just been trying all different types of food, so I tried a place called Canton Paradise last night which was really, really good Cantonese food, so I'm always exploring different things, but when I'm in London I'm pretty rigid.

CT: So when you were doing your business in the early days, you were doing some of the deliveries yourself, what did you learn during that journey that helped you build up the business?

Will Shu: I learned a few very funny things. Number one, when I used to deliver food since I was the first delivery guy, I used to say "Hi I'm Will, I'm from Deliveroo, I just started this company", and everyone shut the door in my face after I delivered the food.

CT: They shut the door in your face?

Will Shu: They did and for a while I was like why are people so unwilling to speak to me? But then I realized they're just hungry, they don't want to talk to me and so I thought that was actually pretty funny.

CT: So you cut the small talk?

Will Shu: Well, I just, I think that's right though, you're hungry, you're sitting there, and you don't really necessarily want to talk to the delivery guy. I get that. So I learned that the hard way. Other thing I learned, the other kind of funny thing that happened was people used to just invite me in sometimes just to hang out which happened a few times which was kind of weird.

CT: You do the deliveries yourself these days as well, sometimes over the weekends in London?

Will Shu: Yeah, I do it on a bicycle now, instead of a scooter because it's actually like a great workout, it's fun, I really enjoy it, you get to be outside…

CT: Do people recognize you?

Will Shu: No, no, people don't recognize me. I mean, like very rarely they do.

CT: What's your record like? I'm curious, when you were doing the deliveries – what's your record like? How many deliveries could you do in an hour?

Will Shu: I've done eight orders in an hour.

CT: Eight orders? Were you cycling furiously?

Will Shu: I got, our algorithm's really good, so yeah.

CT: Or you're really good at the bicycle?

Will Shu: You know, I am an average cyclist but the algorithm worked pretty well. I think I got lucky that time.

CT: You're 38-years-old, you're American-Chinese, your parents are from Taiwan, you got an MBA from Wharton University, worked as an investment banker before jumping into the start-up world in 2013, spent the last five years building up Deliveroo. How would you describe your leadership and your management style?

Will Shu: I would describe it as evolving.

CT: Evolving?

Will Shu: Yeah, I mean look when I started this company over five years ago it was just me and Greg for the first year and so there wasn't much management going on and the jobs I worked in previously, I worked at a hedge fund and I worked at an investment bank, and the sort of management style at finance companies is pretty different, put it that way. And so I've had to learn, and that's the biggest challenge I face every day, how do I communicate with 1200 employees today, across 12 different countries across how many different offices and that's a learning process that evolves and evolves and evolves and I'm still trying to figure it out.

But I would say that generally I'm a very straightforward person, I tell people what's on my mind, I try to listen and I think that really importantly I've learnt how to tell a story of what we're trying to do to our employees and that took a bit of time.

CT: Today Deliveroo is valued at over two billion dollars, one of the most successful startups in Britain. What advice would you give other entrepreneurs on how to be successful?

Will Shu: You know, I don't know, you kind of have to figure it out on your own. I do have some advice for people that maybe want to start companies, as opposed to ongoing entrepreneurs, which is you should start a company because you want to solve a personal problem or because you work in an industry that you've worked in for a while. I think just trying to start a company for the sake of starting a company isn't a great idea.

CT: And finally, as the co-founder and CEO of Deliveroo, what's your ultimate ambition for the company? Where do you see it…five, ten years from now?

Will Shu: We want to feed people three times a day. That's our ultimate ambition.

CT: Only 3 times a day?

Will Shu: I think that's a pretty good number to start with.

CT: But where do you see the company three, five years, or five to 10 years from now?

Will Shu: We see ourselves going deeper into food, we see ourselves reaching a whole new set of customers, but we see ourselves firmly entrenched in food.

CT: Would you be listed by then?

Will Shu: Who knows? Hopefully, we'll see, I don't know, it's not really something I think about day to day right now, but I'm sure it's a very logical outcome.

CT: Will, thank you so much for talking to me.

Will Shu: Thank you, really appreciate your time.

END

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