Flipdish Taps Tiger Global For €40m

11 Feb 2021 | 08.58 am

Flipdish Taps Tiger Global For €40m

Food ordering platform cuts out the middlemen

11 Feb 2021 | 08.58 am

Tiger Global Management has invested €40m in Flipdish, the Irish online ordering and loyalty platform for takeaways and restaurants.

Tiger Global is an investment firm focused on global internet, software, consumer-tech and fin-tech companies. Its previous early-stage investments include Facebook, LinkedIn, Uber, Airbnb, Peloton, Stripe and Flipkart.

Partner John Curtius commented: “Flipdish is the European leader in the restaurant tech market, powering thousands of restaurants and QSRs across the region. The investment fits our strategy of investing in high quality companies that are benefiting from powerful secular growth trends and are led by excellent management teams.”

Tiger Global will join existing Flipdish investors Global Founders Capital, Elkstone, Enterprise Ireland and Growing Capital.

Founded by brothers Conor and James McCarthy in 2015, Flipdish’s digital ordering and marketing system gives restaurants, cafes and takeaways an alternative to intermediaries such as Just Eat and Deliveroo which charge large commissions.

The company says revenues have increased by a factor of ten since its previous funding round in 2018. Most staff are currently working remotely (pic below).

Co-founder and CEO Conor McCarthy stated: “The pandemic has brought home to restaurants how critical it is to build a direct digital relationship with their customers. Many are fed up of competing with the food delivery marketplaces for that customer relationship, and worry that they are planning to siphon away their customers by building a network of competing brands and virtual restaurants in their local area.”

McCarthy added that the funding will enable Flipdish to grow its international footprint, continue to build a world class product for its restaurant partners, and attract new customers from independents to large food chains.

“We are delighted that Tiger Global has selected Flipdish as the best investment opportunity in this space in Europe. Flipdish’s mission is to protect and power a diverse, independent food sector, and every cent of this investment will go towards realising that goal.”

Flipdish says it has customers in 15 countries, including Yamamori, Wowburger, Sprout & Co, Base Pizza, Romayos, Dunnes Stores and Eddie Rockets.

In December 2020, Flipdish announced the creation of 300 jobs over the next 12 months as part of its rapid expansion. The majority are technology roles such as software architects, data scientists, mobile engineers and product designers. Others include customer success, customer support, marketing and sales.

Aggregator Commissions

Covid has been great for online food delivery marketplaces Just Eat and Deliveroo. Research conducted by Amarach in July 2020 found that six out of ten consumers order restaurant or takeaway food online at least once a month.

Just Eat was doing very well anyway before the pandemic, while Deliveroo has some catching up to do. Just Eat Ireland’s 2019 accounts filing shows turnover growth of 13% to €31m and operating profit of €11m. At Deliveroo Ireland, turnover advanced by 50% to €13.8m. Excluding a transfer from the UK parent, the operating loss was €2.1m.

Just Eat’s operating profit margin of 35% points to its market power. Takeaway food vendors can sell directly online if they want to, but the punters are reaching for the Just Eat app to source what they want. So if you’re not on the platform you’re losing out, despite the aggregator commissions.

Those commissions are sizeable. If the aggregator is organising the delivery, the commission on the value of the order can be c.30% or more. When Just Eat first entered the Irish market in 2008 its base commission was 8%, and this has increased to 14%.

The Amarach research, commissioned by Flipdish, also found that three out of four people who use Just Eat and Deliveroo are unaware of what restaurants are charged. Flipdish’s hope is that if more consumers were aware of these charges they would be more inclined to order directly from the restaurant.

According to Conor McCarthy: “It’s very easy for people to order from an online marketplace with the understanding that they’re supporting a local business. However, the majority of people are unaware that these marketplaces can charge restaurants up to 30% commission per order. We would hope to see a shift in people ordering directly from their local restaurants to make sure they receive the maximum amount of their revenue.”

The Flipdish technology enables restaurants to facilitate online orders, and it’s not free either. As with the aggregators, there’s a sign-up fee (€395) and a bespoke mobile app is priced at €805. The Dublin firm is as coy as Just Eat about its commission structure, stating that it is ‘volume based’.

The dilemma for restaurants fed up with aggregator commissions is that it’s hard to buck the power of marketing. Just Eat’s new owner Takeaway.com spends one third of its revenue on advertising and marketing, and neighbourhood restaurants and takeaways can never compete with that.

Photo: Conor McCarthy (right) and James McCarthy. (Pic: Conor McCabe)

 

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