20VC: The Insane Story of DeliveryHero: Losing $200M on a Gorillas Investment | Winning the Emerging Markets Delivery War with 35 Acquisitions | Competing with Uber and Doordash in a Capital Arms Race with Niklas Östberg

What I've learned over the years is 80% our own execution. That is going to matter for how big we get and how much money we make. And maybe 20% driven by competition. Yeah, we put in close to $200 million. Most of that was lost in the end. When you look at cohorts use requisitions and the data in depth, it's almost like gravity. It always works. Cohorts are incredibly strong. They don't change. If anything, they get better. With the only one exception when you screw up.

This is 20 VC with me, Harry Stebbings. And today we sit down with one of the great entrepreneurs of Europe. He has built the juggernaut in food and logistics, in delivery hero. Now in Q4, 2024, the company announced GMV of $49 billion. With $12.8 billion in revenue and $750 million in EBITDA. They've made an astonishing 35 plus, including the $2 billion acquisition for Glovo, through which we got this introduction for the show. But before we dive in today, here are two fun facts about our newest brand sponsor, Kajabi. First, their customers just crossed a collective $8 billion in total revenue. Wow. Second, Kajabi's users keep 100% of their earnings, with the average Kajabi creator bringing in over $30,000 per year. In case you didn't know, Kajabi is the leading creator commerce platform with an all in one suite of tools including websites, email, market marketing, digital products, payment processing and analytics for as low as $69 per month. Whether you are looking to build a private community, write a paid newsletter or launch a course, Kajabi is the only platform that will enable you to build and grow your online business without taking a cut of your revenue. 20VC listeners can try Kajabi for free for 30 days by going to kajabi.com 20VC that's kajabi.com K-A-A-B-I.com 20VC once you've built your creator empire with Kajabi, take your insights and decision making to the next level with AlphaSense, the ultimate platform for uncovering trusted research and expert perspectives. As an investor, I'm always on the lookout for tools that really transform how I work. Tools that don't just save time, but fundamentally change how I uncover insights. That's exactly what AlphaSense does. With the acquisition of Tagus, AlphaSense is now the ultimate research platform built for professionals who need insights they can trust fast. I've used Teagus before for company Deep dives right here on the podcast. It's been an incredible resource for expert insights, but now with AlphaSense leading the way, it combines those insights with premium content, top broker research and cutting edge generative AI. The result? A platform that works like a supercharged junior analyst delivering trusted insights and analysis on demand. AlphaSense has completely reimagined fundamental research, helping you uncover opportunities from perspectives you didn't even know how they existed. It's faster, it's smarter, and it's built to give you the edge in every decision you make. To any VC listener, don't miss your chance to try AlphaSense for free. Visit AlphaSense.com 20 to unlock your trial. That's AlphaSense.com 20 and speaking of incredible products, when you're building a business, you're going to encounter obstacles. Your banking doesn't have to be one of them though. Just talk to a founder who uses Mercury. Like Sanpei Omichi, the founder of Ellis.com, a modern immigration law firm, helping startups and their employees immigrate to the US and they're a 20 VC portfolio company. And Sanpe says using Mercury was a no brainer for me. When I started my company I was able to get an account open immediately and using treasury and the checking account has been a breeze. So you need to visit mercury.com to see why. Founders like Sanpay use Mercury to help them hit the ground running, make the most of their money and see all their business moves in one place. Mercury is a financial technology company, not a bank. Banking services provided by Choice Financial Group, Column NA and Evolve bank and Trust, members of the fdic, the provider of this testimonial, not Compensated and is a client of Mercury Advisory llc.

You have now arrived at your destination, Niklas. This is such a joy for me to do. I mean, when we look at Delivery Hero today, it is one of the generational defining companies of Europe. So thank you so much for joining me today.

Thank you very much. Very kind of you.

Now I heard from some of your friends that you are the most resilient person they've ever met and I heard stories of spraining ankles and cycling 100 km the next day. I think that a lot goes back to our earlier years. Where do you get this unwavering determination and resilience from, do you think?

I think some of it comes back to my childhood. I was a cross country skier and for anyone who is not a cross country skier, it's exhausting. You train every day, you Go out in the dark. 2 hours interval training in the dark forest of Sweden. That's kind of how a regular day look like. And I think you build some resilience there. That came from there. But I think the other thing that also builds resilience is if you feel like you have a purpose and you actually do something where you add value. And I think over the years I've also learned to focus on what I can impact rather than all other things. And I know that it's hard, but I really try to stop caring for what other people think or pleasing others. So that helps.

One of my biggest weaknesses is I care far too much about what other people think. Does success help in terms of reducing the importance of others opinions?

Probably. It probably builds a certain confidence that what you're doing is right and you have to be careful that you don't. That doesn't take you off your feet, off the ground. But. But I do think that some level of success is probably helpful as well. Yeah.

Can I ask, was there ever a time when your feet did get off the ground or you know, we call it getting too big ahead. I remember when I was like 21 and I raised my first fund. I thought I was hot shit. And Niklas, I was not hot shit. Did you ever have a time and how did that go?

Yeah, probably was that many times. I remember back in the 99 I was investing in stock market. I thought it was amazing. I made a lot of money. I lost it very quickly and realized that maybe I'm not that great after all. I think we all thought that we were better than we were back in the COVID pandemic business was going through the roof. Probably also a time when we felt that we were better than we actually were. You constantly get reminders that maybe you have to stay on the ground. You're not as good as you think you are in the good times and probably not as bad as you think in the bad times.

What did you do in Covid that you wish you hadn't done?

It's hard to say. Of course, it's easy to say we benefited hindsight because it was not only that Covid ended, it was also that the whole capital market and the interest rate and many other things that happened when Covid died out, that all came together at one point. And that of course put a lot of pressure into companies to cut costs and so on. If we would have known that we would have cut cost faster earlier, we would have probably taken down risk a little bit. We would have Saved as much money as we can. We probably would have raised equity instead of debt during the time when we thought that we should be worth hundreds of billions. And we felt we were undervalued back then when we were at 35. So of course it would have helped if we were taking on equity instead of debt.

Raising debt is not something that's spoken about a lot, but a lot do it. What's your biggest lessons or advice on raising debt and using debt as an instrument instead of equity?

Yeah, I think that the learning for me is that you have to be careful with it. Coming back to the point, before we thought that we were unbeatable, unstoppable and therefore we felt there was a clear path to being a hundred billion company. So why would we want to dilute on 30 billion? We get greedy and didn't want to dilute those couple of percentages that would have cost us to raise a billion or two. And we were about to do it, but then stock fell 5% and felt well, now it's too late. Then the stock dropped 10 or 15% and we felt now it's definitely too late. And then shortly after the stock fell more than 50% and then it was truly too late. It's easy to get greedy in those times. You feel like you're on top of it and yeah, you have to be careful. It's better to dilute and not think too much about it.

How do you maintain morale when you have stop drops as you did?

I think it wasn't that hard in the beginning because I think everyone thought that it was just temporarily and it would come back and all the numbers, all KPIs were good. I think we took fairly fast action as well. Back in end of 2021, we felt a little bit worried about the market. We shut down Germany and Japan. We cut 100, 200 million out of our budget before the year even. We actually came in and I think things crashed down in January, February, March. So a few months later after we did that. So I'm lucky we did that. But I think the moral of the company was that still very good. They felt it was temporary. They felt they had taken the action we should have taken already before ahead of time. I think the hard part was to not grow valuation for another three years. And we're almost where we were three years ago. If you look at our stock today, and I think at some point some people start to lose hope.

Were you overpriced three years ago or underpriced today?

I think depends how you see it, I think what public market often what it does is that it values things one or two year forward and of course it compares with other companies. And I think yeah, we were definitely overvalued. If you just look at it from a couple of years down the line, fast forward for anyone who rather think of it as a DCF cost of capital over X number of years, maybe we were not that overvalued back then and we are probably undervalued today. Maybe truth is a little in between. I definitely think that we're undervalued today though.

We mentioned confidence and having the courage of convictions. I do want to talk about something you said to me before which is daring to be contrarian, making decisions not everyone believes in. Can you talk to me? How do you think about this specifically with regards to your leadership?

Great leaders that follow their beliefs and when they do, people follow them. That also means that they will be contrary. There will be occasions when they go against the stream. And if they have a good judgment and great leaders have good judgments, then they are usually coming out very strong afterwards. And every time they succeed there they will build the follow base and trust. And I think it's very dangerous when leaders don't follow their belief. It drives skepticism. Organization, I think usually will not be getting the respect. It will be inconsistent. The leadership will not be consistent when they don't do what they think and what they believe in.

When did you have the strongest belief that most people disagreed with you on?

A few that comes to mind as big differences was around logistics. No one believed in logistics back then. This was back in 2015 and we doubled down on logistics. The first initiative we did, we lost 6 million. It looked terrible and most people have probably given up there. But we shut down that company and rebuilt it again and invested tens and hundreds of million in logistics. And I think everyone say now that that is a better customer experience. It's clearly better for customers. And I had a strong belief that we used to have to figure out how to make the economics to work the same. Selling our home market was clearly a contrarian decision. Maybe some investors thought it was okay, but I think in the company there was a very contrarian view to sell your home market.

Why did you sell your home market? It's a massive market in terms of population. It's not got the volatility that emerging markets do have. It seems from the outset bluntly a very contrarian decision.

Yeah, so back then. So this was 2017 and I felt that the market is not as big as it as it looks, it has a strong comparator there and there would be no way of consolidate that market later on given regulation around M and A and so on. So I think I thought this is going to be value maximizing. And then I did believe that we could use that money to actually double down in markets which I consider to be much larger. And I think it turned out to be larger markets outside of Germany. I also believed in a different thing, which is I felt we will be a stronger operator internationally. If you are not getting distracted by our home market back then, everything we did, as soon as something happened in Germany, we will drop the ball on everything else because it's so close to our heart where we sit. So I felt we were very mediocre executor outside of our home market because of that. And once we sold Germany there was no excuse for not delivering outside of the like in the rest of the world. So I think we became much stronger in our execution operations outside of Germany once we sold Germany.

It's so interesting you said that you didn't see a market where consolidation could happen. One of my biggest questions when investing today is bluntly, is this a winner take all market? And what does the distribution of gains look like in an eventual outcome in this market? Is this a market where you have to see consolidation as the ultimate outcome?

No, I don't think it's winner takes all market. I probably changed my view there. Proven wrong, frankly. I know you see in US that there are two players making a lot of money. Look at uk, there are three players making a lot of money, all of them France. Two player making good money.

When you say that, I don't mean to jump in, but the UK, who have you got? You've got delivery, you've got UberEats and Just Eat them.

Just eat Delivery and Uber eats and they all make money in uk. I would say decently so. Same with France. I think both Deliveroo and Uber is making money there and a delivery also operate a few markets where we have two or three players making money in that market.

How do you think about the opportunity cost of being interesting enough? And I'm going to get in trouble for this because Will's a dear friend of mine at delivery. But you know, delivery is valued at 1 billion 5 I think it is. It's not a huge amount. Respectfully, when you look at where Delivery Hero is today, that it takes a lot of resources, a lot of attention and is that a large enough outcome for it to be interesting?

Enough so, and we can argue if delivery is correctly valued today, I would, I would argue they are too low value today. It's a profitable business, it's growing and will continue to grow and it will make more money. It's clear value in that business. You can argue would it be even more valued if it would be possible to consolidate now? I don't think that there is. It's possible to consolidate UK and a few other market due to antitrust reasons. So you can probably not consolidate Deliveroo and just eat Uber and Deliveroo and so on. So anyone who would buy Deliveroo, they will still have a three market market in UK and it wouldn't really resolve. It wouldn't really change anything there. The only thing would be that someone else is operating than Deliveroo. Then it's more a question of can someone else operating it better than Deliveroo themselves? Can someone else pay more money for it than what it's worth? Probably. Would it make sense for Deliveroo to sell if someone offers a higher price but still a lower price than what the business is long term worth? Probably not. It's a tricky question.

Why is it not a win and take all market? When you think about like, you know, scale really providing better, you know, unitycon, the density of drivers, density of customers, it seems to me like a winner take all market. Why is it not there is a clear advantage?

So the big advantage is being large and if you're large, customers stay incredibly loyal to your product. They are not as price sensitive as people think. So we don't see that customers move because they get a €5 voucher somewhere or €10 voucher. They might do it one order but then they go back to where they usually order and what is top of mind for them. Therefore I do think there is a strong lock in on customers as long as you deliver a good service. The day you don't deliver a good service, yeah. Well then it can be disrupted fast. And we have disrupted a lot of companies in Spain, Italy, Poland, Norway. We entered as a number two and number three, number four player in those markets and we are now the largest. There are occasions when the leader is not delivering good quality, but if they do, it's incredibly hard to gain the customer base of someone else. I think there is important in the early stage that you get a strong lead, but then once you get scale, it doesn't really matter if someone else also has scale. It's not that if a competitor is half our size or double our size doesn't make it smaller, it doesn't make our economics worse if they're bigger or smaller. So it's more relevant that we have scale and that we deliver a good service. I think in the past I saw it more as 80% competition, 20% our own execution. What I've learned over the years is 80% our own execution. That is going to matter for how big we get and how much money we make. And maybe 20% driven by competition. It's not vice versa. So yeah, as long as you get scale, you will make money regardless if you're number two or number one. Of course, if you're number two, you will have less scale, you will make less money, but you will still be able to make money.

What else have you changed your mind on significantly where you did or didn't believe something that over time you have shifted your opinion on?

I think one thing that I realized over time is the importance of simplicity. I think in the past it was a tendency. I wanted to do more than what the organization can actually handle. And I think focus on a few things and really doubling down on those makes a world of difference. So complexity is a killer opportunity of speed.

I mean, that's such an interesting lesson because I always hear the statement that the best CEOs are the best resource allocators. And simplicity kind of boils into that. Do you agree with the statement that the best CEOs are the best resource allocators? And what have been your best lessons or most poignant lessons on resource allocation as a CEO?

I do agree that the best CEOs are exceptionally good capital allocators. But I don't think it's the most important part of a CEO's job. I think it is an important job, but by far not the most important. I think more important is that you drive the culture to drive the speed of the organization. You drive the organization in direction of pace and data and direction. And if you do that right, capital allocation will be very easy. And capital allocation is also decision everyday type of topic. Most decision on capital allocation could be should we invest more in this product? Should we invest more in this area? Should we invest more in this country? And if you have good data and if you have good culture, it will be obvious what is the right investments. You just have to look at the returns and so on. That's probably more important that you drive the organization. The speed of organization and the culture of it is more important allocation itself. Then of course there comes times when there are big decision where you actually have to make a bet. You don't have the data, you don't have the information and you just have to make a bet. Are we going to go in this direction or that direction? That's what. But good CEOs have a good feeling. They know their industry, they know their organization, they know the strength of the organization and they will dare to make sometimes the bold decision.

When you think about those bold decision moments when you're sitting there and you know it's one of those moments. Can you take me to a time where you got the decision wrong?

I think yeah, Quick commerce is an interesting space. I think we have been exceptionally happy with the performance of how we have been able to scale the whole quickcommerce side. And that was also contrarian believe to double down on this. It was not a very popular one. But we felt that if we want to build what the customers really want and what they're asking and demanding, then we have to be able to deliver groceries and other items in a short fashion. Now that's a big part of our business and long term is going to be more than 50% of our business. So larger than food for sure. So that turned out to be right bet. At the same time, we also did a bet in a company called Gorillas because we felt we cannot do quick commerce ourselves in every geography we can't afford it, it's too expensive to build up. So we rather felt let's take some of the money, put it in another company and see how we can learn and see how they can succeed and potentially certain opportunities in the future. Unfortunately, the business model probably could have worked out and OSFOR guerrillas, but the challenge is that the market changed. It was not possible to raise capital anymore for these companies and they burned too much.

How much money did you put in and what did you learn from that going south?

Yeah, we put in close to $200 million. We got some of it back, a small portion back, but yeah, most of that was lost. The big learning I've made there, as well as a few occasions before, is in the end, when you look at cohorts use requisitions and the data in depth, it's almost like gravity. It always works. It always works. But for some reason they kept acquiring more customers than I thought every month. They kept course coming up every month and therefore also growth coming up faster than I expected. So when I looked at a few months earlier, I felt this makes no sense, they will never make it. And then the outpaced expectation I had and I felt, ah, maybe I was wrong, but now it's too late. And then it happened again and again and the next month and next month. And at some point I felt maybe I'm wrong, maybe my models don't work, maybe the data somehow it seems to work because I've been wrong so many times now that maybe I'm just wrong. And that's when we made the investment in the end, as I said, it's almost like gravity in the end. Cohorts model work, acquisition models work, prediction there works temporarily. You can boost it through vouchers, discount and other means. But in the end you have to look at the core of the business and see. And I've done that mistake many times where also in some markets, they have a market in Asia where they beat their plan every month. And at some point I realized like, maybe I'm not a good forecaster, maybe I'm just wrong, maybe they are right. But then it turned out it was built on a little bit light foundation and eventually what comes up needs to come down. I've seen the other way around. Sometimes you keep investing, you feel like everything is right, but the business doesn't grow, and you feel like maybe I'm just wrong, but eventually that tailwind that you're building in, it's eventually kicking off. I think the learning there is to stick to what you believe or stick to your core principle on investing, stick to your core belief in what works and what doesn't work. And don't get too excited by. By the outside environment and getting dragged into something that kind of goes against what you believe in. Truly.

I always think back to John Maynard Keynes, the economist, who said, when the facts change, I change my mind. And I very often think about how long do you keep pushing on a belief where all of the data tells you otherwise? That is a very hard question.

Yeah, probably shouldn't. And of course you have a lot of momentum traders and they make a lot of money by just staying with the momentum. So if you're not part of that, that momentum, you're also going to lose out. So there are occasions when you also have to play along. When the music is there, you dance, but you got to be careful.

You mentioned that investing in gorillas as a lesson. You know, I spoke to so many of our friends who said literally Niklas is the master of M and A. When you say about investing in gorillas, that to the extent you get 200 million, it's a loss. How do you think about that? Buy versus build, given your incredibly effective M and A strategy as well, and.

Of course going back to this 200 million mistake also done here that we were at 35 billion companies, so this was back then less than a percent. It was a half a percent of our market cap that we felt like we are willing to take this bet on this. Of course if that valuation falls from 35 billion to 5 or 10 billion, then of course losing 200 million is a lot. Especially if you don't have the cash and the balance or that you have enough cash in the balance. You. I think that is also part of the learning that you have to take yourself a little bit out of this speed mode and think it through on a more fundamental basis than getting too caught up with your current value or your current growth.

Stick on that. Sorry, before we do the buy versus build you mentioned take yourself out of that speed mode. We chatted before and you said speed of execution is the only thing that matters. How do you think about balancing speed of execution is the only thing that matters with having the wisdom to remove yourself from the day to day speed mode for those decisions?

Yeah. So I do think for an organization itself, speed is really what matters. But the good part is that for most organizations and most decisions are revertible. So you move, you take a decision, you, you get data and you change direction. And the faster you can iterate and do that, the faster organization is going to move. And in the end there is a saying that that's the only thing that matters is is that all the speed and all the things that you're building towards customers or other things that are priorities is compounding. If you can get 25% more of your organization in a year, that feels like yeah, that's good. But it's not game changing. If you do that for 10 years, you effectively compounding up a 10 times better product. So I believe in this moving fast and driving organization fast and kind of compounding that is key. Then there are of course those non reversible doors where you have to be very careful that you think it through and so on. And I guess making large investments is non reversible. So I think you have to be a little bit more cautious there.

How do you retain speed at scale? DeliveryHero is a monster of a business with a huge team. How do you make sure that everyone in the org feels urgency and there is nothing Bluntly, a little bit of European apathy and slowness.

I think you have to divide the organ, responsibility and ownership very carefully and making sure that everyone can see their impact very clearly. So the setup we have for example to make sure that there's a clear ownership on the country level and making sure that they have that autonomy and that ownership. So for them, they can really make an impact in that country. It's very tangible what they do and outcomes. If we set the goal of driving overall business to a size, then each individual cannot make really that impact and cannot be that visible what they do. So you have to find a way that you can actually divide the goals in a way that is clearly measurable what you do and every part of the organization, every person in that organization, and making sure that you drive that accountability and visibility and clarity. And if you do that, I think it's very easy to manage the organization. It's very clear who is a strong performer, who's not. If goals are very tightly aligned to what the people actually do and the organization set up such that you have that accountability responsibility on a smaller basis and smaller buckets. What you see in many companies over time is that they get too big, the goals are too large. It's not divided in. It's very intransparent what everyone does and how they contribute to their goals. And they start getting inwards looking. They don't look at what the actual output that they're driving. They rather look at how much they work to what they deliver. But it can be for, not for consumer customers, but for maintaining the organization. So I think building a culture with output really matters and making sure that you divide organizations such that they have ownership and accountability on very low level.

We mentioned the buy versus build earlier. I do want to go back to that. As the master of Emanate. How many acquisitions have you made in a class?

I don't know.

It's been a lot, but I think over 35 though.

Yes, yes, we have done a lot, but most of them have been very, very small. And what we believed in is that we believe in those local entrepreneurs who knows the market better than anyone. And we can leverage the fact that we know how to scale things and we know how to measure things and we know how to get good returns. So if I give some other examples, Peridot was acquired when the company did 60,000 orders per month. Today it does maybe 20 million orders per month or close to at least. So. So of course it was very small businesses back then. Or Talabat, I don't know. You know, Talabat is a company. Back then I think they did 70,000 orders per month. So literally nothing. But we were good at leveraging what we were good at, which automate, drive, efficiency Knowing how to invest, taking over, building on, scaling that while we felt that we had a big benefit of having those local entrepreneurs and that we can plug into. And I think that has been a big success at Delivery Europe. But we rarely made big M and A. That's been one or two big M and A like Global. But most M and A have been rather small and rather being like you're acquiring a team and you require yourself one year of head start.

Is it easier to buy a company versus build a company?

I think for most companies it's harder to buy a company and be successful there. I think that the hard part is not buying a company. The hard part is to make make something good out of that company. That's probably something delivery has been very good at. They've been good at fostering this entrepreneurship and getting them on board and that's probably a success.

We're going to get to how you retain entrepreneurs in a way that no one else manages to do. I just want to stick on the pre buy process. Do you always like to invest first or will you buy straight? What's the preference?

I think in the past we knew that we had to build scale very fast and probably wrongly so. We looked at just eat back then. It was this huge company when we started, had been operating for 10, 15 years. We had another company called Takeaway that is now one company, Just Eat Takeaway. But that was the gorilla back then. And we felt we will not stand a chance unless we scale fast. In order to scale fast we just have to buy and we have to build and we have to do that in aggregate. I think over times the industry changed, logistics came. Uber and others entered the market and proved that it can start this business way later than we did. But we believe that the only way to build scale fast enough was to buy back then. I think if we look at things right now we probably prefer to build. The main logic for that is buying something now will be well at the time would be extraordinarily expensive given that we still consider delivery to be undervalued. But. But also even if you buy ourselves another 3, 4, 5% business and size, if that distract us with 2, 3, 4% then effectively didn't achieve anything and we only spend money on it. So in order for us to buy it really needs to be something where we feel here we have a very strong team and we can plug it into a machine and it will make rest of delivery here a better too.

To what extent do you let the attitudes of the street public Market investors impact your buying mindset when you're looking in an asset like Glovo, for example. I'm not picking on them, I'm just choosing it as a well known asset that we got introduced through the public market. May love it or they may hate it, I'm not sure, but they will have a feeling. To what extent do you let that permeate into your buying mindset?

I think we, we can see the cohorts, we can see the acquisition growth, we can see the customer experience, we can see all the data in the world to know if this is a good acquisition or not. If you take Clover as an example, it was very clear from us from the very first day that this would be an unbelievably profitable company.

Why was that clear for you from the first day? Respectfully, it is a expensive business to run. It's a tough business. We both know these businesses well.

It's not obvious to everyone.

Why was it obvious to you?

It's very simple. As I said, we see the cohorts, we see like what is the repeat rate of our customers and then how many customers are requiring per month and how is that? But yes, how do the existing base evolve over time and how many do we add to that? And that would very clearly give you a certain growth trajectory.

Does that not assume that cohorts are identical? And what I mean by that is, as you expand cohorts, you will get less and less close to your ideal customer profile. They will be further away from your target market, as naturally happens with customers. And so the cohorts may behave differently. Do you see what I mean?

Yeah, I do. But the benefit we have here is that we also owner of assets in delivery hero with more than 20 years of cohort development, where we have enormous amount of predictability from 70 different markets. And we have seen in every single market not a single exception where it has deviated over time.

What are the big lessons? I'm so sorry to interrupt you, Niklas. What are those big lessons from those cohort databases? Behavioral trends.

Cohorts are incredibly strong. They don't change. If anything, they get better. With the only one exception, when you screw up, when you start not looking at the customers, or when you start missing a trend. So I mentioned logistics. So you've done a couple of mistakes. But we're not fast enough with our logistic implementing our own delivery fleet and then someone else comes. Then of course our cohort will deteriorate. Or multi vertical. We have built out a very good multi vertical offering to give further value to our customers. But we didn't do that fast enough in Colombia as a good example and we got disrupted by Rappi. So then the cohorts deteriorated big time or if we acquired a lot of customer based on Varshas discounts, promotions then of course we also see a deterioration in cohort once we start pulling that out of the system. But if you look at where we operate, where we do things right and where we care for the customers and where the strength of the cores are not coming from vouchers and discounts, we have enormous amount of predictability. So if you take the example of Glovo, it was very easy for us to see how this business is going to grow over the next 10 years and we are only a couple of years down the line here. So we still have many, many years of that growth trajectory and we know how much margin we're going to make in an order that's also very predictable for us because we set the price. So in the end we know that the margin on the business is going to grow to 10, 10 to 13% over time. So based on that you can very quickly calculate your gross profit and you know your base cost, the marketing as well as the overhead that you have to have in order to run a certain size organization. So if you take global it's incredibly easy to see how profitable that business is going to be over the next 10 years. And for us it was therefore clearly a good acquisition for an investor. They don't see that data. The only thing they see is where's the top line and what is the bottom line and what the growth rate is. And of course when we acquired Glovo that was a bad timing. Probably it was end of 2021 before the whole market collapsed where everything is about profitability. And Glovum lost 330 million when we acquired it. So of course adding another negative 330 million getting into 2022 was not very pleasant but in the end that was painful. But I think everyone start realizing how much value Clovo is going to be worth and how much is already worth. If we extrapolate where we stand now.

Do you think 2 billion was the right price?

Well, we paid this stock so in the end I think effectively since our Stock fell with 75% that but we didn't dilute that much. We bought it when our delivery here was more like 30 billion. So the dilution for delivery here was more like 5, 6% maybe. So I think that was an incredible acquisition, only diluting a few percent less than a 10% for a business that is clearly going to outgrow the rest of the business.

When you look at cohorts, what is it that excites you? Is it like. Because you could have like AOV size, average order value size being super high twice a month I spend a lot of money. Or it could be I use it every single day, but for very small things. What is it in the cohort data that you've learned shows true cohort strength?

Yeah. So in the end you want to cater for customers being able to order as often as possible and as convenient as possible. If you set the basket, the minimum basket size such that you need to have two threads every time you order well you that will take away a lot of occasions for you because sometimes you're alone or you cannot afford. So we have to find ways. How can we drive economics also for small baskets and make that work? However, if you do something that is not long term sustainable, then of course the course was not going to be sustainable. Because the day I then move you from being able to do a five year order and that's not economical obviously today and suddenly you can only order if you order for €15, then you will start reducing your order behavior and therefore the core shall be sustainable. So whatever we do, and we always have to build on sustainable economics, even if it's in the first instant, we might not have managed a business to get economics. So for example, with logistic it took a couple of years before we broke even per order basis. And the whole quick commerce, it took us a couple of years to be break even per order basis. It was not because we charged too little, it was just because we hadn't optimized our own efficiencies. Therefore you can maybe be ahead of time in terms of what you offer to the consumer, but you have to find a clear path how you long term can make sustainable. Otherwise they should never offer you to do that order.

Speaking of long term sustainable, what do you do? You mentioned Rappi in Colombia there. What do you do when you have competitors who suddenly raise or have a lot of money and that could impact your cohorts?

The thing is that it doesn't impact our course so much. And often the impact on the business made profitability is rather that you get nervous and you start spending a lot of money and you start copying what they do. But I think our learning is that as long as we keep delivering good experience for our customers, keep pushing the boundaries for how we can make economics on every single order. If someone is willing to make a loss per order without that trajectory for getting profits, they might get some of the discount hunters that the low value customer base might go to that competitor, but it's not sustainable. So eventually they will have to take away those vouchers, those discounts and those customers will go to any platform then. So I think the core is to making sure that we, we have a service where our good customers are loyal. That's what we see. Regardless what someone invests, we see that our customers are exceptionally loyal.

You mentioned the word good there. It made me think we saw this bubble of capital going into the space whenever it was two to four years ago. Now when you get to my age, Niklas, the memory goes. But my question to you is, was that a good bubble ultimately that did produce advancements in logistics, consumer education, consumer awareness, or was it a bad bubble that Buntney burnt a lot of investor money and didn't really progress the space forward?

I don't think it moved the industry forward that much. I think it just drove some non sustainable behavior. Same here. If you look at the cohorts, we clearly saw a bump in the cord up. We thought that we would maybe maintain it at that bump, that higher level, but it turned out it went back to the trend line. So if you have a trend line of this, it went up temporarily, but then it went back to trend line. So it really didn't move much in the industry. It just created a little bit of a bubble where we spent unnecessary money. So I think effectively in the end Covid was not a good thing for us.

Do you see Doordash and do you see Uber Eats as your biggest competitors today? When you look at the capital that they have and the reserves that they have, is that the biggest threat?

Not really. Coming back to the point around competition, I think it's 80% about what we deliver and maybe 20% what a competitor does. And every single time when I see here we haven't grown fast enough, it was not because of competition, it was because we didn't deliver a good service. We were not moving fast enough. So I think it's 80% US and 20% competition. I don't think that the balance sheet matters in the end. That is not what limits any comparative spend money. It's going to be the return that is going to limit comparative spend money. So it's going to be hard for a doordash or Uber or somewhat sustainably make bad investments because they can. I don't think it's about balance sheet we're all profitable entities. You can argue who is going to move that profitability up faster or slower. It's not going to be the balance sheet. It's probably more the what cost can you have a good return.

Kras we saw get it scale inordinately very quickly and incredibly successful in Turkey and then roll out across Europe and then bluntly roll back with just the same speed. What did that teach you? What should we look at and learn from that?

Yeah, that comes back to the thing. When you do something that is not sustainable and you get customers to order because you get 20 bucks for free, of course you're not building a sustainable business. As soon as you pull that 20 bucks back you will lose a lot of customers. So it's a very expensive way of growing the same. Doing a lot of discount and vouchers. It can be good to do a discount for someone who's a good customer and getting them to try. But most customers who order a discount, it's over proportionately coming to very cost sensitive customer. Customers are always looking for finding a deal. It always going to drive a lot of fraud as well. So when you do too much of a voucher strategy, discount strategy, you're going to attract a bad customer base. It's going to be expensive and it's going to drive very little value. And I don't think ity is the only one. Let's speak about our mistakes. If you take our Thailand business, we scale from a couple of thousand orders a day up to 400,000 orders a day in less than a year. This is faster than I think I've seen anyone scale a business but it was not sustainable. The business is now back to doing way less. It's doing 25% of that today.

Was that predicated on a heavy discounting strategy?

Discount? Yeah. You, you drove. It was very cheap sort of food in, in Thailand with us we didn't care for that customer experience enough. It was just about price and of course when you, you try to move to sustainability most of those orders will fall off. And I would say the value of our Thailand business is not very high. It's, it's so you can scale very fast in our business you can grow to 400,000 daily orders in this case but it's not worth anything unless you have been something sustainable. So when we see other comparisons do that we really don't mind that much. We know what it does over time. We saw the same in Turkey, we saw the same in a few other places. Those customers come back to us as soon as they stop giving the vouchers and discounts.

Was there a market you launched where it just didn't go up?

It was actually just pretty dead.

Reception wasn't great.

Yeah, it's always hard in the beginning to get that product market fit. But I don't think it's about the market. I think every market in the world would probably work with this. It's just a matter of getting that product market fit. Right. And secondly, is it worthwhile having another country, another set of regulation, another set of. So a lot of markets might not make sense because it's not enough return, but. But I think they can all work.

How do you think about how long you're willing to lose money in a new market before it turns good?

I think you need to see that the fundamental of the business works. Coming back to that cohorts are the cores good enough. Can we see enough lifetime value in this? And can we see that the acquisition cost is getting to a place where we can actually scale it? So you need to get that to work maybe in a year or so. And. And if you get it to work, then of course you're going to spend money over the next couple of years because when you get it to work, you want to scale it. If you don't get it to work well, then it's not going to cost a lot because why would you invest in a business that has a bad lifetime value return? So in the end, sometimes it could be that the best markets are the ones that's going to cost a lot of money for a number of years because you want to invest to grow it. So it's not necessarily that the best market will be fastest to break even. It could be that the worst market are faster to break even, but then they never get any value.

How do you think about that? Never get any value. With regards to emerging markets, one of the most important things I've learned is kind of pathways to liquidity. And actually emerging markets are much more challenging to get liquidity from. There's just not much local liquidity. How do you think about that with emerging markets?

For us, it's not such a big difference. We would rather see do we have a return when investing this customer, regardless where they sit. And in some markets you can just scale it in a certain way. You cannot scale it fast. And coming back to the point, what I tried to make before, you can make this business break even on a year, after a year or maybe two in a country, but then you're going to not invest a lot of money and you're just going to gradually scale it in a small percentage every year and then you kind of run and break even for 10 years. And I did that during the, the early days. I was part of starting also online pizza. It was a completely bootstrap, no investors at all. So we were break even almost on the first day of business. But of course then it takes a very long time and you're not maximizing your business. If you have a good return on your customers, well, you want to buy as many customers as you can at the price at which you have a good return. And that doesn't really matter where they sit. If they sit in developing markets, emerging markets, for us, it will be.

Well, it does because ultimately it all flows back to enterprise value of the entity. And actually if people discount revenue from emerging markets, then that's going to take a hit on the multiple that your enterprise value of that core entity is going to be worth.

Yeah, it depends a little bit. If you're building a business to sell it, then of course you will have to look at the multiple and how markets are valuating and so on. If you're building a business because you want to drive shareholder return over time and driving cash flow and so on, then you might not care so much what investors think it's worth at a point in time you would rather care for what is the value of the business that you're building. That's the difference between price and value. We try to be focused more on driving value than driving price.

Totally understand that final one before we move on to Europe. And then a quick fire. What's the single best M and A you've done from an ROI perspective?

I think we had all of them because we bought them all very early. And I Look at Perius Ja from Latam, what I mentioned before, there were maybe 50, $60,000 a month. That business would be huge. Look at Talabat, it was a little bit more expensive, but we were doing 7 to 80,000 monthly orders. And now that is a 10 billion business. So that is a hundred times return or so you have a lot of hundred times returns or even 1000 times return. But. But most of them were small businesses. So of course there's a high return on a small amount. Then if you take a business like Glovo might have an absolute term, long term, equally large, but on a multiple basis, of course it's less. Given that it was still a larger acquisition.

I have to touch on Europe before we do a quick Fire. We both sit in Europe and the world has never been so convicted in their doom around the future of Europe. How do you feel when you look at the negativity and skepticism around Europe today?

There is some fair bashing. There are things that we surely could have done better and that I hope that we will do better. But in the end, I'm an entrepreneur, I'm an optimist, I believe we can do stuff. I believe we can build an amazing companies out of Europe. And I think there's a lot of strength in Europe as well. We are highly educated people, good infrastructure, welfare system, functioning democracy. We are a talent hub, decent balance sheet and all of that. So there's a lot of strength of Europe. There are also a lot of weaknesses of Europe and I hope we can address those. And if we can, I think Europe would be an amazing place for startup and companies.

What would you most like to change?

Yeah, make it easier, faster to get talent into Europe. Reduce some of the bureaucracy or certain regulation that can sometimes be a little bit overwhelming for a lot of companies. And we speak about gdpr, sustainability reporting, Pay Transparency Directive, Accessibility act and so on. And they all make stance and have good intention but collectively it's just a big burden on those European companies. And I think a little bit unfairly that there are not the same criteria for other companies competing in Europe. So I think this is proportionally adding to European companies. So if again, if you can do.

That then I mean, listen, I had Oscar on the show and he mentioned obviously the intense regulatory pressure that he's under from the Spanish government and it not being applied to bluntly Uber and foreign competitors. To what extent is Europe regulating itself into oblivion?

I do think that sometimes we are harder on European companies and European companies there's more scrutiny on us. There's a lot of regulation that is circumvented or ignored by Chinese and US companies. I do think that we have to truly level the playing field in many ways. I think a lot of US players also leverage the dominance. Yeah, we have to make sure the US and Chinese companies cannot circumvent regulation. We have to making sure that we are not going after European companies more than US companies just because it's easier to approach us and reach us. There are a few things that I think that we have to also work on to making a level playing field and I hope that that will also happen.

What do you say to Oscar when he faces the pressure that he's under from a national and a government perspective? Is it like, hey, Dude, I'm here for you. Call me. Is it like, oh shit, that's a big fine. What does one say?

Generally the principle of Delivery hero is that we are in the details and we are in the chances in the details. So I will not step there and just not being helpful and not knowing the details. I'll be in the details. And the same thing I expect Oscar to be in the details. Of course, we collectively try to find the best path forward and how we can solve it and be supportive and making sure we take the right decisions and operate in a good way. But in the end, we can only do so much. In the end. I cannot blame Oscar for challenges that he is not responsible for that has affected him. But where we have collectively taken decisions that we think are right, then of course we also take shared responsibility on those topics.

Can I move into a quick fire round? So I say a short statement. You give me your immediate thoughts. Does that sound okay?

Fantastic.

Amazing. What do you believe that most around you disbelieve?

I think Gen AI or the largest beneficiary of AI is going to be the average company deploying it and not necessarily the Mag 7, the ones who are building it. I think that is probably contrarian. At least if I look at the stock market, we will see they have done tremendously well while other companies haven't. I do believe that the biggest beneficiary as a company leveraging AI versus toast building.

Do you feel pressure as a public company CEO to have an AI story?

No, but I feel pressure of making sure that we leverage AI to get more efficient. Working really hard on that. If you have a story or not, that's a little bit cosmetics. I don't care for that cosmetics so much. I care for actually leveraging and truly make our business better from it.

You can buy and hold one stock for the next 10 years. Other than Delivery Hero, which stock do you buy and hold?

I like the philosophy of thinking 10 years on hold because I think it sets the right direction of what are the companies that cannot be disrupted over 10 years. And I was always a big fan of Amazon and so on. I'm still a big fan of Amazon, but of course the valuation of those companies have gone up a lot. So you cannot count on multiple expansions. So the growth in those stocks will only be. Or the value growth of those stocks would basically only be the growth that it can generate. That's still probably going to be a fair amount. So maybe I'll stick with Amazon.

What would you do if you knew you couldn't fail.

Increase risk.

How would you increase risk?

Double down even more on things that are uncertain.

What uncertain thing would you most like to double down on?

Today we are a brave company that do what we believe in. So I do not think that we are holding back too much. Of course, I mentioned before, we are big believers in the whole quick commerce, grocery shopping type of thing. Other verticals that we're expanding into as well, health and beauty and so on. I mentioned before, I think that's easily more than 50% of our business long term. Today it's only a small portion, a small fraction. So that's something we are doubling down on, but I don't think we're too afraid of taking risk. We are willing to take risk as long as we have good data behind it.

Which other public company CEO do you most respect and admire and why them?

There are many. You have Mark Zuckerberg and for having the bravery that he has had over the years, has been criticized many times, but it stood by his beliefs. Janssen, of course with Nvidia has been taking bold decision and been right many times.

When will drones take over deliveries?

It already reached a point where you can actually make it work economically in some places. Regulation is also a part of it. It will take time to scale it, but over time, 25% of delivery or so could be done by drones. But it might be 10 years until they actually built out that work to be there. So we are, we are moving in that direction, but it's going to take a long time. I would say robotics will be faster and probably be able to cover a larger portion of business.

What do you mean it'll be able to cover a larger portion? It does pick and pack or it does delivery. What is that? Where do they own that segment?

Yeah. So of course the challenge with drones is that it's hard to do in the city center of cities because of noise and regulation and a place to land on and take off from. It's a little bit harder to do that in city centers and so on. And the robotics you can do in small cities, big cities, city centers, you can do it everywhere. It's a little bit slower than drones. So if you look at an average drone delivery, it's happening like three minutes plus loading. Offloading robots have, have, I don't know, they cannot do the shortest way. They have to actually take the road. They have to wait for stop sign and so on. And they cannot drive in the same pace as you have a drone. So they're slower. But they can, they can get you almost anywhere that will probably be large, much faster.

Does money make you happy?

No. I've never been thinking about it. I think having purpose and being in a team, having shared experience that makes her happy. I've never been thinking about it really.

What's the secret to a happy marriage.

Conversation? Honesty, Understanding, Forgiveness. Try to take your ego out and win. Every discussion and every argument is probably a good start. And also try to see from every perspective and I think there's a challenge we have overall that we have our point of view and we are not standing enough that other people might have different point of views and both being.

Okay when we look at the next 10 years final one, what are you most excited for? Like for me with AI, you know, seeing the drug discoveries that will come for like Ms. Sufferers, my mother's got Ms. Is immensely exciting. What are you most excited for when you look forward over the next decade?

For me it's even more exciting on things where I can drive things forward and of course all AI space will make us more efficient, will make us better dramatically. So I'm very excited to see that.

Adding out Niklas, listen, this has been so much fun. I'm sorry for going so off schedule with some of those questions, but this was fantastic. So thank you so much.

Thank you so much and thanks for a fantastic podcast.

I mean that was a really special show for me to do.

Niklas is such a hero of the.

European ecosystem and delivery hero has has paved the way for so many others. Huge thanks to Niklas for giving up the time.

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