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ORDERING IN WITH A 'UNICORN'

Aruba, June 21, 2016 - Delivery Hero CEO Niklas Östberg describes how his company creates value. 

Niklas Östberg, an energetic 35-year-old Swede, is the CEO and cofounder of Delivery Hero. Based in Berlin and financed with venture-capital money, the company is built around an online platform that matches restaurants with hungry customers. Delivery Hero has grown to operate today in 33 markets across five continents, processing 14 million takeout orders each month and offering customers recommendations, as well as peer reviews of restaurants.
 
With a valuation of $3 billion, Delivery Hero is also one of about 170 “unicorns”: start-ups with valuations above $1 billion. Given the number of new companies that crashed when the turn-of-the-century tech bubble burst, many executives and investors have cast a skeptical eye on the unicorn phenomenon. Östberg recently discussed with McKinsey’s Thomas Schumacher and Dennis Swinford the start-up landscape, the importance of innovation grounded in data, and his company’s role as a “disruptor of an inefficient restaurant industry.”
 
The Quarterly: Valuations of pre-IPO tech companies have come under scrutiny lately, particularly the emergence of so-called unicorns. What’s going on, in your perception?
 
Niklas Östberg: I’m sure a number of those unicorns shouldn’t be unicorns. As always, earlier-stage businesses come at a higher risk. But I am also sure that the next Google or Apple is among them—and if only one or two of the current pool of unicorns get to that level, it justifies their valuations, collectively, from an investor point of view.But a lot has changed in the 15 years since the tech bubble of 2000. At that time, many valuations were based on what the future might look like, particularly in the Internet space, rather than on the returns a business could demonstrate. The supposition was that the world was changing and would probably change for the better as people went online. And although people did eventually go online, that happened much more slowly than predicted.
 
Today, there’s no doubt that online and Internet businesses are taking over. Some of the biggest businesses in the world, including Facebook, Amazon, Google, and Apple, are solidly grounded in the new world of technology. A lot of other companies also have large, tangible revenue growth and earnings. They don’t buy users or customers with the hope of making money when, maybe, those users eventually change their behavior. Delivery Hero, too, generates a lot of revenue—and earns a lot of profit in many markets. So valuations don’t depend on imaginary future earnings but on actual returns and EBITDA.
 
 

By orbitalnets.com