From Seed to IPO — 9 learnings by an early Delivery Hero investor

Hi there, we’re Point Nine Capital a VC firm focused on SaaS and marketplaces.

Today is a very special day for me as a startup investor. Delivery Hero had its IPO! From the company’s earliest days, through its seed financing to the IPO — it has been an incredible journey. I am very proud, fortunate and honoured to have been a small part of it.

First and foremost, big kudos and thanks to Niklas and the whole Delivery Hero team — both to the current and past team members and supporters. This company is the result of unbelievable entrepreneurial efforts and hard work of many people — you know who you are!

For Point Nine the adventure started in 2010, when Point Nine, operating as Team Europe Ventures Fund at the time, invested in Lieferheld’s first financing round, a seed round of €800k. Back then, this was considered to be a large seed round — times have changed! In 2011, Point Nine participated in Delivery Hero’s seed round and in some of its later rounds. In 2012, Delivery Hero and Lieferheld joined forces to build the global leader in the food ordering space.

Watching Delivery Hero grow from an idea to a global company, active in over 40 countries with over 6000 employees and generating hundreds of millions of orders and revenues, I have learnt quite a bit about startups, entrepreneurship, marketplaces and early stage investing. I will summarise some of it in the 9 learnings below.

1. It is possible to build a really large tech company (from scratch!) in Europe. Obviously we all know that almost every company is built from scratch and there have been many large European success stories in tech. But being a part of a growth story like this has been an incredible experience for me and it shaped my views on what’s possible.
2. Building a large company is a massive team effort. The list of individuals who have been critical to the success of Delivery Hero is long. Bringing these people together, aligning their goals and ambitions can be challenging for the leaders. But the right team is what is necessary for large projects to succeed and making it work is what leadership is all about.
3. Europe is THE place in the world to start and grow multi-country marketplaces. It is natural for Europeans to bring their businesses into new countries. Otherwise it is rather hard to build a large technology company in Europe. I wrote about it in the past and the story of Delivery Hero has been a validation of this for me. It was natural for Delivery Hero’s team to think about the world as its playground. Be it launching in Korea from scratch or acquiring a company in South America — it was part of the company’s DNA from the earliest days.
4. Entrepreneurs make mistakes, especially when they go fast. These are the speeding tickets. Sometimes they are high, but that’s OK, as long as you have clarity as to where you are going.
5. Some of Delivery Hero’s and Lieferheld’s fundraisings were a lesson in not getting discouraged by later stage VCs passing. The vast majority of the money Delivery Hero has ever raised did not come from traditional German or European VCs. It is not because Deliver Hero did not talk to them. They were just not interested, for many reasons. I hope it would be different today, with the European VC landscape having matured a lot, but who knows. I am sure there are many future successful companies out there struggling to raise their A or B rounds — don’t give up if you believe in what you are doing!
6. M&A and deal making skills are critical for rolling out a country by country marketplace business. The team at Delivery Hero perfected the art of M&A for startups. They were creative and aggressive in acquiring competitors, pursuing cooperations and fundraising.
7. I witnessed the power law in VC at work. Delivery Hero today accounts for about 50% of the total portfolio value of Point Nine Fund I. Classic power law — the fund’s biggest outcome will be bigger than all of the rest combined. It would be a significantly worse fund without this one company.
8. I also witnessed the power of dilution at work :-) The valuation of Lieferheld’s seed round was around 1000x smaller than the current company value. It does not, by any means, mean that Point Nine made a 1000x on its investment. Nothing any close to that.
9. Counterintuitively, lack of liquidity in startups can be an investor’s friend. If a VC only makes money because of occasional big outcomes (which is what I believe), then she should make sure not to sell out too quickly in the winners. Point Nine had held onto all of its Delivery Hero shares until the pre-IPO round with Naspers, when it sold a minority of its holding. There had been opportunities to sell on the way, but not many. Who knows, if the shares had always been very liquid, maybe we would have been tempted and sold earlier. It would have been a mistake. ‘Not trading’ was the best possible strategy throughout the Delivery Hero journey and I think it generally applies to the winners in a VC portfolio.

Other than being a great story and providing some invaluable learnings, I hope that Delivery Hero’s success will inspire European founders to be even more ambitious and aim higher. The team members and business angels who will have made money with Delivery Hero will most likely reinvest some of it into the (Berlin :-) ecosystem and thus fuel the next waves of startups with their funds and experience. Furthermore, a ‘Delivery Hero mafia’ is emerging and starting new things. Marley Spoon, Book A Tiger, LemonCat or Ontruck were all started by former Delivery Hero team members. I look forward to seeing more of it and backing the ‘next Delivery Hero’ early on!