Dive Brief:

• London-based delivery company Deliveroo is reportedly looking to raise up to $500 million from investors, according to Sky News. This news comes about three months after rumors began swirling about an Uber acquisition of Deliveroo.
• The funding round is an effort to strengthen Deliveroo’s valuation from its current $2 billion to as much as $4 billion prior to any potential negotiations, according to Skift Table. 
• The rumors come on the heels of Uber’s “dramatic expansion” across Britain that includes tripling staff and expanding its footprint throughout the next year, according to The Times of London. 

Dive Insight:

A survey conducted by TechCrunch found that a company has a higher chance of getting acquired after landing funding and the more funding, the better. Bloomberg opines that Deliveroo CEO Will​ Shu — a former investment banker — is leveraging the Uber acquisition rumors to generate a higher valuation.

Even though it’s not an unusual scenario for startups looking to scale quickly, ​Deliveroo —  like many other food delivery giants — has yet to make a profit. This could turn off investors as tech stocks start to get a little shaky.  

Uber Eats, however, may not be deterred, especially as Uber CEO Dara Khosrowshahi expects to position the company as the largest food delivery service in the world this year. Morgan Stanley and Goldman Sachs have valued Uber Eats at $20 billion and expect the food delivery business to become profitable before the company’s ride-sharing business, according to the Wall Street Journal. 

On paper, Deliveroo seems like a solid strategic fit for Uber Eats’ objectives. The company has five years of experience under its belt and plans to add 5,000 restaurants by the end of the year on top of its current 10,000 restaurants. Additionally, it was recently named the fastest-growing tech company for the second year in a row in the U.K. by Deloitte.  

An acquisition would give Uber, barely two years into the U.K. market, the necessary infrastructure to gain a formidable share in Europe. Other than Just Eat, which typically serves a different market but is larger, there isn’t much competition in the U.K. market for Deliveroo and Uber Eats, especially after Amazon pulled out last week. 

Even without the added Deliveroo footprint, Uber Eats is well on its way to a strong presence in the U.K., as reported by the Times of London. In addition to tripling staff to support its expansion, Uber Eats also is planning to grow its “virtual restaurant” model, which has proven successful in that market. Uber’s Khosrowshahi hasn’t been shy about his plans to make the company’s food delivery business a top priority prior to an expected IPO next year, and the company is reportedly in talks toward other acquisitions, including Middle Eastern ride-sharing company Careem. As bullish as Uber seems to be about acquiring other companies, the Deliveroo rumor has been stagnant for quite some time. Perhaps a new round of funding will kick it back into motion.