We explore why Delivery Hero is making a $235 million investment

German food delivery company, Delivery Hero (ETR: DHER), is investing $235 million in online grocery company, Gorillas. The investment is part of a $1 billion financing round. Gorillas launched in May 2020, but demand for the service, which delivers food to people’s doors in less than 10 minutes, skyrocketed during the COVID-19 outbreak.

The firm is one of several European startups vying for attention in a crowded market. Getir, a Turkish firm, Zapp, a British firm, and Flink, a German firm, are among its competitors.

Delivery Hero holds 8% stake in Gorillas

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Delivery Hero spearheaded Gorillas’ most recent investment round and now has an 8% share in the startup.  Other investors involved in the funding round include Tencent, DST, Coatue, and Dragoneer.

Delivery Hero competes with the likes of Deliveroo and Just Eat Takeaway.com as one of Europe’s largest online meal delivery businesses. It has its own goals to thrive in the burgeoning grocery delivery, having launched many delivery-only “dark stores” across the globe.

Following the capital injection, Gorillas is currently valued at $3.1 billion, a considerable decrease from the $6 billion market value the company reportedly sought earlier in the year.

Interestingly, the startup was also negotiating with US food delivery company DoorDash regarding investment, but the talks didn’t materialize. When CNBC asked them about it, Gorillas didn’t offer a comment. Delivery Hero’s Founder ad CEI Niklas Ostberg said:

Delivery Hero is on a mission to advance quick commerce globally and we see Gorillas as one of the leaders in Europe and the US.The Gorillas team has an exceptional customer focus driving the highest retention rates we have seen in the industry.

Gorillas has a $300 million run rate

Gorillas claim to have a $300 million run rate, which means it plans to produce that much money per year. That’s no small achievement for a company that’s only been around for a little over a year.

It needs to be observed whether Gorillas can maintain their wild development as Covid-19 limits are lifted. Meanwhile, delivery couriers have been voicing their dissatisfaction with the company’s working conditions.