Deliveroo rivals shudder as it chows down on Amazon investment

With cash in the bank and the big dog in its corner, competitors are right to feel nervous. But Deliveroo has issues when it comes to relations with its workforce, and Amazon isn't likely to be able to help much with them

Deliveroo has secured a big investment but will that benefit its deliverers? (PA Archive/PA Images)

There’s no more tasty a dish than the millions of dollars in Amazon cash Deliveroo is set to chow down on.

The US tech kingpin is the lead investor in the London based food delivery firm’s latest cash call, which raised $575m (£450m) in total.

Bad news for Uber. It has obviously had its attention on other things of late, such as a New York Flotation and the indigestion caused to investors by the lacklustre after market for its shares.

But Uber Eats remains an important part of its attempt to expand beyond its ride sharing app. It even reportedly looked at buying Deliveroo. The would be Amazon of transport now has to contend with the real Amazon backing a major rival in that space.

Amazon had a crack at the business itself, only to retreat. That isn’t unusual. The same thing happened with its attempt to break into ticket sales, for example. It’s a restless experimenter, something that plays a key role in its success. This means accepting that they’re not all going to work and being willing to move on when they don’t.

The interesting thing here is that Amazon is not moving on. It’s a case of if you can’t beat ‘em, buy in. The investment gives it a seat at the table and a chance to see what works and what doesn’t with a company that’s succeeding with a business it was interested in but couldn’t make fly.

“We’re excited to see what they do next,” said Amazon’s UK country manager Doug Gurr. And we’re just as excited to see what we can learn through watching the development of out new best pals’ “innovative technology and service”.

Amazon has also reportedly looked at buying Deliveroo outright and if founder Will Shu does come to see a sale rather than a flotation as the end game, it would now surely be in the box seat.

In the meantime Shu benefits from having the big dog in his corner and at the end of a phone line if he needs it. The market is taking that very seriously, with shares in rivals such as Just Eat falling sharply in response to the news.

The biggest challenge for Deliveroo, which has raised $1.5bn to date, is the same as that facing Uber, Lyft, and many of the other current generation of tech stars. It has to find a way of sustainably turning a profit.

Amazon has an excellent handle on how to prove the doubters wrong when it comes to moving from a loss making investment phase to making handsome profit. In the meantime, it will be more relaxed about Deliveroo’s losses than almost any other investor, more willing to give it the leeway to be aggressive. This helps to explain why rivals shuddered.

But Delivoo’s other big problem is handling the issues with its workforce, by which I mean the notionally self employed riders and drivers who deliver food for it.

It has faced protests and court cases over their treatment and pay, and the controversy created by those issues isn’t going anywhere. They must be addressed.

Amazon isn’t likely to be able to help much there. It has itself faced criticism over its labour practices, particularly at its warehouses, and that isn’t going away either.