20VC：DeliveryHero 的疯狂故事：在 Gorillas 投资上亏损2亿美元｜凭35次收购赢下新兴市场配送战争｜与 Uber 和 Doordash 参与资本军备竞赛，Niklas Östberg 讲述

What I've learned over the years is that 80% of our own execution is going to matter for how big we get and how much money we make, and maybe 20% is driven by competition. We put in close to $200 million. Most of that was lost.

In the end, when you look at cohorts, user acquisition, 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 only one exception: when you screw up.

Niklas, this is such a joy for me to do. When we look at Delivery Hero today, it is one of the generationally defining companies of Europe, so thank you so much for joining me today.

Thank you very much. Very kind of you.

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

1. Resilience Comes From Purpose

I think some of it comes back to my childhood. I was a cross-country skier, and for anyone who's not a cross-country skier, it's exhausting. You train every day. You go out in the dark and do 2 hours of interval training in the dark forest of Sweden. That's what regular days looked like. I think you build some resilience there. That came from there.

The other thing that builds resilience is if you feel like you have a purpose and you actually do something where you add value. Over the years, I've also learned to focus on what I can impact rather than everything else. I know that is hard, but I really try to stop caring about what other people think or pleasing others. So that helps.

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

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

Can I ask, was there ever a time when your feet did get off the ground? We call it getting too big-headed. I remember when I was 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 like that, and how did it go?

Oh, yeah, probably many times. I remember back in the '99s, I was investing in the stock market. I thought I was amazing. I made a lot of money, 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 are. During the COVID pandemic, business was going through the roof. That was probably also a time when we felt that we were better than we actually were. You constantly get reminders that you have to stay grounded. You're not as good as you think you are in the good times, and probably not as bad as you think you are in the bad times.

What did you do during COVID that you wish you hadn't done?

2. COVID Exposed The Cost Of Debt

It's hard to say. Of course, it's easy to say with the benefit of hindsight because it wasn't only that COVID ended. It was also that the whole capital market, interest rates, and many other things that happened when COVID died out all came together at one point. That, of course, put a lot of pressure on companies to cut costs and so on.

If we had known that, we would have cut costs faster and earlier. We would probably have taken down risk a little bit. We would have saved as much money as we could. We probably would have raised equity instead of debt during the time when we thought we should be worth hundreds of billions and felt we were undervalued when we were at 35. So, of course, it would have helped if we had taken on equity instead of debt.

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

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 and unstoppable, and therefore felt it was a clear path to being a $100 billion company. So why would we want to dilute at $30 billion?

We got greedy and didn't want to dilute those couple of percentage points that it would have cost us to raise $1 billion or $2 billion. We were about to do it, but then the stock fell 5% and we felt, "Well, now it's too late." Then the stock dropped another 10% or 15%, and we felt, "Now it's definitely too late." 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 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 stock drops like the ones you experienced?

I think it wasn't that hard in the beginning because everyone thought it was just temporary and all the numbers and KPIs were good. I think we took fairly fast action as well. At the end of 2021, we felt a little bit worried about the market. We shut down Germany and Japan, and we cut $100–200 million from our budget before the year even started.

We did that, and then things crashed down in January, February, and March, a few months later. I'm lucky we did that. I think the morale of the company was still very good. People felt it was temporary. They felt that we had taken the action we should have taken already, ahead of time.

I think the hard part was not growing our valuation for another 3 years. We're almost where we were 3 years ago if you look at our stock today. At some point, some people started to lose hope.

Were you overpriced 3 years ago, or underpriced today?

I think it depends on how you see it.

I think what the public market often does is value things 1 or 2 years forward, and of course, it compares them with other companies. We were definitely overvalued if you just look at it a couple of years down the line, fast-forward. For anyone who’d 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’re probably undervalued today. Maybe the 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 about how you think about this specifically with regard to your leadership?

Great leaders 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. If they have good judgment—and great leaders have good judgment—then they usually come out very strong afterward. Every time they succeed, they build their following and trust.

I think it’s very dangerous when leaders don’t follow their beliefs. It drives skepticism in the organization. They usually will not get respect, and 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?

3. Contrarian Bets Reshaped Delivery Hero

A few things come to mind as big differences, one of them being logistics. No one believed in logistics back then. This was back in 2015, and we doubled down on logistics. The first initiative we did lost €6 million. It looked terrible, and most people would probably have given up there.

But we shut down that company, rebuilt it again, and invested tens and hundreds of millions in logistics. I think everyone says now that it provides a better customer experience. It’s clearly better for customers, and we had a strong belief that we just had to figure out how to make the economics work.

The same was true of selling our home market. It was clearly a contrarian decision. Maybe some investors thought it was okay, but I think within the company there was a very contrarian view toward selling your home market.

Why did you sell your home market? It’s a massive market in terms of population. It doesn’t have the volatility that emerging markets do. From the outset, it seems, bluntly, like a very contrarian decision.

Back then, in 2017, I felt that the market was not as big as it looked. It had a strong competitor there, and there would be no way to consolidate that market later on, given the regulation around M&A and so on. I thought this was going to be value-maximizing.

I believed that we could use that money to double down in markets that I considered to be much larger. I think it turned out that the markets outside of Germany were larger. I also believed in something else: I felt we would be a stronger operator internationally if we were not getting distracted by our home market.

Back then, everything we did, as soon as something happened in Germany, we would drop the ball on everything else because it was so close to our heart, where we sat. I felt we were very mediocre executors outside of our home market because of that. Once we sold Germany, there was no excuse for not delivering outside of the rest of the world. I think we became much stronger in our execution and operations outside of Germany once we sold Germany.

It’s so interesting that 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? 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?

4. Execution Beats Competition

No, I don’t think it’s a winner-take-all market. I probably changed my view there and was proven wrong, frankly. You see in the US that there are 2 players making a lot of money. Look at the UK: there are 3 players making a lot of money, all of them. In France, there are 2 players making good money.

When you say that, I don’t mean to jump in, but in the UK, who have you got? You’ve got Deliveroo, you’ve got Uber Eats, and—

Just Eat.

—and Just Eat.

Just Eat, Deliveroo, and Uber Eats. They all make money in the UK, I would say, decently so. It’s the same with France. I think both Deliveroo and Uber are making money there. Delivery Hero also operates in a few markets where we have 2 or 3 players making money in that market.

How do you think about the opportunity cost of being interesting enough? I’m going to get in trouble for this because Will’s a dear friend of mine at Deliveroo, but Deliveroo is valued at £1.5 billion, I think it is. It’s not a huge amount, respectfully. When you look at where Delivery Hero is today, it takes a lot of resources and a lot of attention. Is that a large enough outcome for it to be interesting enough?

We can argue about whether Deliveroo is correctly valued today. I would argue that it’s valued too low today. It’s a profitable business that’s growing, will continue to grow, and will make more money. There’s clear value in that business.

You can argue whether it would be valued even more if it were possible to consolidate. I don’t think it’s possible to consolidate the UK and a few other markets due to antitrust reasons. You probably cannot consolidate Deliveroo and Just Eat, or Uber and Deliveroo, and so on.

Anyone who bought Deliveroo would still have a 3-player market in the UK, and it wouldn’t really resolve or change anything there. The only thing would be that someone else would be operating it instead of Deliveroo. That’s more a question of whether someone else could operate it better than Deliveroo themselves, and whether someone else could pay more money for it than what it’s worth. Probably.

Would it make sense for Deliveroo to sell if someone offered a higher price, but still a lower price than what the business is worth in the long term? Probably not. It’s a tricky question.

Why is it not a winner-take-all market? When you think about scale really providing better unit economics, the density of drivers, and the density of customers, it seems to me like a winner-take-all market. Why is it not?

The big advantage is being large. If you’re large, customers stay incredibly loyal to your product. They’re not as price-sensitive as people think. We don’t see customers move because they get a €5 voucher somewhere or a €10 voucher. They might do it for 1 order, but then they go back to where they usually order and what is top of mind for them.

Therefore, I do think there’s a strong lock-in with customers as long as you deliver a good service. The day you don’t deliver a good service, it can be disrupted fast. We have disrupted a lot of companies. In Spain, Italy, Poland, and Norway, we entered as the number 2, number 3, or number 4 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 it’s 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, that makes us smaller. It doesn’t make our economics worse if they are bigger or smaller. It’s more relevant that we have scale and that we deliver a good service.

In the past, I saw it more as 80% competition and 20% our own execution. What I’ve learned over the years is that 80% is our own execution. That’s going to matter for how big we get and how much money we make, and maybe 20% is driven by competition. It’s not vice versa.

As long as you get scale, you will make money, regardless of whether you’re number 2 or number 1. Of course, if you’re number 2, you will have less scale and 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?

5. Simplicity Accelerates Execution

One thing that I realized over time is the importance of simplicity. In the past, there was a tendency for me to want to do more than what the organization could actually handle. Focusing on a few things and really doubling down on those makes a world of difference. Complexity is a killer of speed.

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? 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. It’s an important job, but by far not the most important. I think it’s more important that you drive the culture and the speed of the organization. You drive the organization in the direction of pace, data, and direction. If you do that right, capital allocation will be very easy.

Capital allocation is also an everyday type of decision. Most capital allocation decisions could be: Should we invest more in this product? Should we invest more in this area? Should we invest more in this country? If you have good data and good culture, it will be obvious what the right investments are. You just have to look at the returns and so on.

The fact that you drive the organization, the speed of the organization, and its culture is more important than allocation itself. Then, of course, there come times when there are big decisions where you actually have to make a bet. You don't have the data or the information, and you just have to make a bet that we're going to go in this direction or that direction. 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 the bold decision sometimes.

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?

6. Quick Commerce Became The Big Bet

I think quick commerce is an interesting space. I think we've been exceptionally happy with how we've been able to scale the whole quick-commerce side, and that was also a contrarian belief to double down on this. It was not a very popular one. But we felt that if we want to build what customers really want and what they're asking and demanding, then we have to be able to deliver groceries and other items quickly. Now that's a big part of our business, and long term it's going to be more than 50% of our business, so larger than food, for sure. So that turned out to be the right bet.

At the same time, we also made a bet in a company called Gorillas because we felt we couldn't do quick commerce ourselves in every geography. We couldn't afford it; it was too expensive to build up. We felt, rather, let's take some of the money, put it in another company, and see how we can learn, see how they can succeed, and potentially find certain opportunities in the future. Unfortunately, the business model probably could have worked out for Gorillas as well, but the challenge was that the market changed. It was no longer possible for these companies to raise capital, and they burned too much.

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

We put in close to $200 million. We got some of it back, a small portion. But most of that was lost. The big learning I've made there, as well as on a few occasions before, is that in the end, when you look at cohorts, user acquisition, and the data in depth, it's almost like gravity. It always works.

For some reason, they kept acquiring more customers than I thought every month. They kept cohorts coming up every month, and therefore also growth coming up faster than I expected. So when I looked at it a few months earlier, I felt, “This makes no sense. They'll never make it.” Then they outpaced the expectation I had, and I felt, “Maybe I was wrong.” But now it was too late, and then it happened again and again, the next month and the month after.

At some point I felt, “Maybe I'm wrong. Maybe my models don't work. Maybe the data somehow 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. Cohort models work, acquisition models work, and the predictions work.

Temporarily, you can boost it through vouchers, discounts, and other means. But in the end, you have to look at the core of the business and see. I've made that mistake many times. In one market in Asia, they beat their plan every month. At some point I realized, “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 somewhat 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 you're just wrong. But eventually, that tailwind that you're building in eventually kicks in.

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 the outside environment or get dragged into something that goes against what you truly believe in.

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

Probably shouldn't. 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 momentum, you're also going to lose out. There are occasions when you also have to play along. When the music is there, you dance, but you've got to be careful.

You mentioned investing in Gorillas as a lesson. I spoke to so many of our friends who said, literally, Niklas is the master of M&A. When you talk about investing in Gorillas, to the extent you did—$200 million—that's a lot. How do you think about that buy versus build, given your incredibly effective M&A strategy as well?

And, of course, going back to this $200 million mistake, we were also a $35 billion company, so this was back then less than 1%. It was 0.5% of our market cap, and we felt like we were willing to take this bet. Of course, if that valuation falls from, I don't know, $35 billion to, I don't know, $5 billion or $10 billion, then losing $200 million is a lot, especially if you don't have enough cash on the balance sheet.

I think that is also part of the learning: you have to take yourself a little bit out of this speed mode and think it through on a more fundamental basis, rather 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 taking 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?

I do think that for an organization itself, speed is really what matters. But the good part is that for most organizations, most decisions are reversible. So you make a decision, get data, and change direction, and the faster you can iterate and do that, the faster the organization is going to move.

In the end, the reason for saying that that's the only thing that matters is that all the speed and all the things that we're building toward for customers, or other things that are priorities, are compounding. If you can get 25% more from your organization in a year, that feels like, yes, that's good, but it's not game-changing. If you do that for 10 years, you're effectively compounding to a 10-times-better product.

Then there are, of course, those non-reversible doors where you have to be very careful and think it through. 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? Delivery Hero is a monster of a business with a huge team. How do you make sure that everyone in the organization feels urgency and there isn't, bluntly, a little bit of European apathy and slowness?

I think you have to divide the organization, its responsibilities, and ownership very carefully, and make sure that everyone can see their impact very clearly. The setup we have, for example, makes sure that there's clear ownership at the country level, and that they have that autonomy and ownership. For them, they can really make an impact in that country. It's very tangible what they do and the outcome.

If we set the goal of driving the overall business to a certain size, then each individual cannot really make that impact, and it 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 makes it clearly measurable what you do, for every part of the organization or every person in that organization, and make sure that you drive that accountability, visibility, and clarity.

If you do that, I think it's very easy to manage the organization. It's very clear who's a strong performer and who is not, if goals are very tightly aligned to what the people actually do and the organization is set up such that you have that accountability and responsibility on a smaller basis, in smaller buckets.

What you see in many companies over time is that they get too big. The goals are too large; they're not divided. It's very opaque what everyone does and how they contribute to their goals. They start getting inward-looking. They don't look at the actual output that they're driving. They look instead at how much they work relative to what they deliver, but it can be for—not for consumers or customers, but for maintaining the organization.

So I think it's important to build a culture where output really matters and make sure that you divide the organization such that they have ownership and accountability at a very low level.

We mentioned the buy-versus-build question earlier, and I do want to go back to that. As the master of M&A, how many acquisitions have you made, Niklas?

I don't know. It's been a lot.

More than 35, though.

7. M&A Scales Local Expertise

Yes, we have done a lot, but most of them have been very, very small. What we believed in is the local entrepreneurs who know the market better than anyone. We can leverage the fact that we know how to scale things, how to measure things, and how to get good returns.

If I give some examples, PedidosYa was acquired when the company did 60,000 orders per month. Today, it does maybe 20 million orders per month, or close to that at least. So, of course, it was a very small business back then.

Or Talabat—I don't know, you know Talabat is a—

They IPO-ed.

—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: automating, driving efficiency, knowing how to invest, taking over, and building on and scaling that, while we felt that we had a big benefit from having those local entrepreneurs we could plug into.

I think that has been a big success of Delivery Hero. But we rarely made big M&A. There have been 1 or 2 big M&A deals, like Glovo, but most M&A has been rather small—more like acquiring a team and acquiring yourself a 1-year 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 with it. The hard part is not buying a company. The hard part is making something good out of that company. That's probably something Delivery Hero has been very good at. We have been good at fostering this entrepreneurship and getting those entrepreneurs on board, and that's probably been 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 with 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. There was this huge company that had been operating for 10 or 15 years when we started. We had another company called Takeaway, which is now one company, Just Eat Takeaway. But that was the gorilla back then, and we felt we would not stand a chance unless we scaled fast.

In order to scale fast, we just had to buy and build, and do that in aggregate. I think over time, the industry changed. Logistics came, and Uber and others entered the market and proved that you can start this business much later than we did. But we believed that the only way to build scale fast enough was to buy back then.

If you look at things right now, we probably prefer to build. The main logic for that is that buying something now will be extraordinarily expensive, given that we still consider Delivery Hero to be undervalued. But even if you buy yourself another 3, 4, or 5% in business size, if that distracts us by 2, 3, or 4%, then effectively we didn't achieve anything and only spent money on it.

In order for us to buy, it really needs to be something where we feel we have a very strong team, we can plug it into a machine, and it will make the rest of Delivery Hero better too.

To what extent do you let the attitudes of the public-market investors impact your buying mindset? When you're looking at an asset like Glovo, for example—and 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?

We can see the cohorts, the acquisition growth, 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 Glovo as an example, it was very clear for 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 an 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 is very simple. As I said, we see the cohorts. We see the repeat rate of our customers, how many customers we're acquiring per month, and how the existing base evolves over time. Then we see how many customers we add to that. That would very clearly give you a certain growth trajectory.

Does that not assume that cohorts are identical? 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. The cohorts may behave differently. Do you see what I mean?

Yes, I do. But the benefit we have here is that we're also the owner of assets in Delivery Hero with more than 20 years of cohort development, where we have an enormous amount of predictability across 70 different markets. We have not seen 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 behavioral trends?

Cohorts are incredibly strong. They don't change. If anything, they get better, with the only exception being when you screw up—when you stop looking at the customers or when you start missing a trend.

I mentioned logistics. We've made a couple of mistakes where we weren't fast enough with implementing our own delivery fleet. Then someone else comes along, and of course our cohort will deteriorate. Or take 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. Then the cohorts deteriorated big time.

If we acquired a lot of customer base through vouchers, discounts, and promotions, then of course we also see a deterioration in the cohort once we start pulling that out of the system. But if you look at where we operate, where we do things right, where we care for the customers, and where the strength of the cohorts is not coming from vouchers and discounts, we have an enormous amount of predictability.

If you take Glovo as an example, it was very easy for us to see how this business was going to grow over the next 10 years. We're only a couple of years down the line here, so we still have many, many years of that growth trajectory. We know how much margin we're going to make on an order. That's also very predictable for us because we set the price.

In the end, we know that the margin on the business is going to grow to 10 to 13% over time. Based on that, you can very quickly calculate your gross profit, and you know your base costs, the marketing, as well as the overhead that you have to have in order to run an organization of a certain size.

If you take Glovo, 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. An investor doesn't see that data. The only thing they see is where the top line is, what the bottom line is, and what the growth rate is.

Of course, when we acquired Glovo—and that was probably bad timing; it was the end of 2021, before the whole market collapsed, when everything was about profitability—Glovo lost us 330 million when we acquired it. So, of course, adding another negative 330 million going into 2022 was not very pleasant.

But in the end, that was painful, and I think everyone started realizing how much value Glovo is going to be worth—and how much it already is worth—if you extrapolate from where we stand now.

Do you think $2 billion was the right price?

We paid with stock, so in the end, I think effectively, since our stock fell by 75%, we didn't dilute that much. We bought it when Delivery Hero was valued at more like $30 billion, so the dilution for Delivery Hero was more like 5 or 6%, maybe.

I think that was an incredible acquisition, only diluting a few percent—less than 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? You could have average order value being super high: twice a month, I spend a lot of money. Or it could be that 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?

In the end, you want to cater to customers being able to order as often and as conveniently as possible. If you set the minimum basket size such that you need to have 2 friends every time you order, that will take away a lot of occasions for you, because sometimes you're alone or you cannot afford it.

We have to find ways to drive economics for small baskets as well and make that work. However, if you do something that is not long-term sustainable, then of course the cohort is also not going to be sustainable. If, suddenly, you can only order if you order for €15 instead of being able to make a €5 order—which isn't economical today, obviously—you will start reducing your order behavior, and therefore the cohort is not sustainable.

So whatever we do, we always have to build on sustainable economics, even if, in the first instance, we might not have managed the business to achieve those economics. For example, with logistics, it took a couple of years before we broke even on a per-order basis, and with the whole quick-commerce business, it took us a couple of years to break even on a 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 for how you can make it sustainable long term. Otherwise, you should never offer that order.

Speaking of long-term sustainability, 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 core so much. Often, the impact on the business and its profitability is that you get nervous, start spending a lot of money, and start copying what they do. But I think our learning is that, as long as we keep delivering a good experience for our customers and keep pushing the boundaries for how we can make economics work on every single order, if someone is willing to make a loss per order without a trajectory toward profit, they might get some of the discount hunters. The low-value customer base might go to that competitor, but it’s not sustainable.

Eventually, they will have to take away those vouchers and discounts, and those customers will go to any platform. So I think the core is making sure that we have a service where our good customers are loyal. That’s what we see. Regardless of 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 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 that ultimately did produce advancements in logistics, consumer education, and consumer awareness? Or was it a bad bubble that, bluntly, burned 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 unsustainable behavior. If you look at the cohorts, we clearly saw a bump in the cohort. We thought that we would maybe maintain it at that higher level, but it turned out to go back to the trend line.

If you have a trend line, it went up temporarily, but then it went back to the trend line. So it really didn’t move the industry much. It just created a little bit of a bubble where we spent unnecessary money. I think, effectively, in the end, COVID was not a good thing for us.

Do you see DoorDash and Uber Eats as your biggest competitors today? When you look at the capital and reserves 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 200% what a competitor does. Every single time when I see that 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 the balance sheet matters in the end. That is not what limits any competitor from spending money. It’s going to be the return that limits a competitor from spending money.

It’s going to be hard for a DoorDash, Uber, or someone else to sustainably make bad investments just because they can. I don’t think it’s about the balance sheet. We’re all profitable entities. You can argue about who is going to move that profitability up faster or slower, but it’s not going to be the balance sheet. It’s probably more about what cost you can have a good return on.

Niklas, we saw Gett scale inordinately very quickly and become incredibly successful in Turkey, then roll out across Europe and, 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 point: when you do something that is not sustainable and get customers to order because they get $20 for free, of course you’re not building a sustainable business. As soon as you pull that $20 back, you will lose a lot of customers. So it’s a very expensive way of growing.

The same goes for doing a lot of discounts and vouchers. It can be good to give a discount to someone who is a good customer and get them to try. But most customers who order with a discount are disproportionately cost-sensitive customers. They’re always looking for a deal. It’s also always going to drive a lot of fraud.

So when you do too much of a voucher or 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. I don’t think Getir is the only one. Let’s speak about our mistakes.

If you take our Thailand business, we scaled 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 much less. It’s doing 25% of that today.

Was that predicated on a heavy discounting strategy?

Discounting, yeah. We drove it that way. It was very cheap to order food in Thailand with us. We didn’t care enough about the customer experience. It was just about price. Of course, when you try to move toward sustainability, most of those orders will fall off.

I would say the value of our Thailand business is not very high. 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’re self-sustainable.

So when we see other competitors do that, we really don’t mind that much. We know what it does over time. We saw the same in Turkey and 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—where it was actually pretty dead and the reception wasn’t great?

Yeah, it’s always hard in the beginning to get product-market fit. But I don’t think it’s about the market. I think every market in the world will probably work with this. It’s just a matter of getting that product-market fit right.

Secondly, is it worthwhile having another country, another set of regulations, and another set of challenges? A lot of markets might not make sense because there isn’t enough return, 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 fundamentals of the business work. Coming back to the cohorts: are the cohorts 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?

You need to get that to work, maybe in a year or so. 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, then it’s not going to cost a lot, because why would you invest in a business that has a bad lifetime-value return? In the end, sometimes the best markets could be the ones that are going to cost a lot of money for a number of years because you want to invest to grow them.

So it’s not necessarily that the best market will be the fastest to break even. It could be that the worst markets are the fastest to break even, but then they never generate any value.

How do you think about never generating any value with regard to emerging markets? One of the most important things I’ve learned is having pathways to liquidity, and emerging markets are much more challenging for getting liquidity. 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 whether we get a return when we invest in a customer, regardless of where they sit. In some markets, you can scale it in a certain way. You cannot scale it fast.

Coming back to the point I tried to make before, you can make this business break even after a year or maybe 2 in a country. But then you’re not going to invest a lot of money, and you’re just going to gradually scale it, maybe by a small percentage every year. Then you kind of run at break-even for 10 years.

I did that during the early days. I was part of starting OnlinePizza as well. It was completely bootstrapped, with no investors at all, so we were breaking 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, you want to buy as many customers as you can at the price at which you have a good return. That doesn’t really matter where they sit—whether they sit in developing markets or emerging markets. For us, it would be no big difference.

Well, it does, doesn’t it? Ultimately, it all flows back to the enterprise value of the entity. If people discount revenue from emerging markets, then that’s going to take a hit on the multiple that the 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 the market is evaluating it, and so on. If you're building a business because you want to drive shareholder return over time, 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 about 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&A you've done from an ROI perspective?

I think we have all of them because we bought them all very early. I look at PedidosYa from Latin America, what I mentioned before. There were maybe 50,000 or 60,000 orders a month. That business will be huge.

Look at Talabat. It was a little bit more expensive, but we were doing 70,000 or 80,000 monthly orders, and now that is a $10 billion business. So that is a 100-times return or so. We have a lot of 100-times returns or even 1,000-times returns, but most of them were small businesses, so of course it's a high return on a small amount.

If you take a business like Glovo, it might have an absolute, long-term return that is 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 convinced of its doom around the future of Europe. How do you feel when you look at the negativity and skepticism around Europe today?

8. Europe Can Still Build Great Companies

There's some fair bashing. There are things that we surely could have done better and that I hope 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 amazing companies out of Europe.

I think there's a lot of strength in Europe as well. We have highly educated people, good infrastructure, a welfare system, a functioning democracy, a talent hub, a decent balance sheet, and all of that. There is a lot of strength in Europe.

There are also a lot of weaknesses in Europe, and I hope we can address those. If we can, I think Europe will be an amazing place for startups and companies.

What would you most like to change?

Make it easier and faster to get talent into Europe. Reduce some of the bureaucracy or certain regulations that can sometimes be a little bit overwhelming for a lot of companies. I know we speak about GDPR, sustainability reporting, the Pay Transparency Directive, the Accessibility Act, and so on.

They all make sense and have good intentions, but collectively it's just a big burden on those European companies. I think it's a little bit unfair that there are not the same criteria for other companies competing in Europe. So I think this is proportionally adding to European companies. If we can do that, then—

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

I do think that sometimes we are hard on European companies, and 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. We have to make sure that US and Chinese companies cannot circumvent regulation. We have to make 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 we also have to work on to make a level playing field, and I hope that will also happen.

What do you say to Oscar when he faces the pressure that he's under from a national and 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 trenches in the details. I will not step in there and just, I don't know, not be helpful and not know 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, be supportive, make 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 have affected him. But where we have collectively taken decisions that we think are right, then of course we also take shared responsibility for those topics.

Can I move into a quick-fire round? I say a short statement, and you give me your immediate thoughts. Does that sound okay?

Fantastic.

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

I think generative AI—or the largest beneficiary of AI—is going to be the average company deploying it, and not necessarily the Magnificent Seven, 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, but other companies haven't.

I do believe that the biggest beneficiary will be a company leveraging AI versus those building it.

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

No, but I feel pressure to make sure that we leverage AI to get more efficient. I'm working really hard on that. If you have a story or not, that's a little bit cosmetic. I don't care about the cosmetic aspect so much. I care about actually leveraging it and truly making 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 and holding, because I think it sets the right direction: What are the companies that cannot be disrupted over 10 years? 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 has gone up a lot, so you cannot count on multiple expansion.

The growth in those stocks will only be—or the value growth of those stocks would basically only be—the growth that they can generate. That's still probably going to be a fair amount, so maybe I 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 does what we believe in, so I do not think that we're holding back too much. Of course, I mentioned before that we are big believers in the whole quick-commerce, grocery-shopping type of thing. There are other verticals that we're expanding into as well, like health and beauty, and so on.

I mentioned before that 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 are too afraid of taking risks. We are willing to take risks as long as we have good data behind them.

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

There are many. You have Mark Zuckerberg, for the bravery that he has had over the years. He has been criticized many times but has stood by his beliefs. Jensen Huang, of course, with Nvidia. He's been taking bold decisions and been right many times.

When will drones take over deliveries?

It has 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, I don't know, 25% of deliveries or so could be done by drones. But it might be 10 years or something to actually build out that network to be there.

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 the business.

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

Of course, the challenge with drones is that it's hard to do in the city centers of cities because of noise, regulation, and having a place to land and take off from. So it's a little bit harder to do that in city centers and so on.

Robotics you can do in small cities, big cities, and city centers—you can do it everywhere. It's a little bit slower than drones. If you look at an average drone delivery, it's happening in three minutes, plus loading and offloading.

Robots cannot take the shortest way. They have to actually take the road. They have to wait for stop signs and so on, and they cannot drive at the same pace as a drone. So they're slower, but 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 a shared experience—that makes you happy. I've never really been thinking about it.

What's the secret to a happy marriage?

Conversation, honesty, understanding, forgiveness. Try to take your ego out rather than win every discussion and every argument; that's probably a good start. Also, try to see from every perspective. I think that is a challenge we have overall: We have our point of view, and we are not understanding enough that other people might have a different point of view, and both can be okay.

When we look at the next 10 years—the final one—what are you most excited for? For me, with AI, seeing the drug discoveries that will come for MS sufferers—my mother's got MS—is immensely exciting.

Mm.

What are you most excited for when you look forward over the next decade?

For me, it's even more exciting when there are things where I can drive things forward. Of course, the whole AI space will make us more efficient, will make us better, and will dramatically do so. I'm very excited to see that panning out.

Niklas, 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.