Delivery Hero’s $589m Yemeksepeti acquisition boosts Berlin’s startup cred

Yemeksepeti

Berlin has long been touted as a centre for Europe’s startup crowd. But yesterday’s purchase of Turkish firm Yemeksepeti by Delivery Hero for $589 million, has upped the ante considerably.

The food delivery service, founded in the German capital in 2011, is no stranger to breaking records: last year it became Berlin’s biggest deal by far when venture fund Rocket Internet, also from the city, injected $523 million, winning a 39% stake in the process. (2014’s second-largest round was $80 million, for similarly-positioned takeout firm Foodpanda – also a Rocket-owned company).

But yesterday’s deal, which will give Delivery Hero “tremendous growth potential” according to CEO Niklas Östberg, has blown other deals out of the Spree River. “Acquisitions of this size are, frankly, unheard of in Berlin – the deal will certainly make waves in the city’s tech scene,” said David Knight, co-founder and editor-in-chief of Silicon Allee, a news site named for Berlin’s Valley-aping nickname.

Turkey-based Yemeksepeti, which has 15 years of experience in the online delivery field, processes over 3 million orders per month, is growing at 60% yearly and – crucially – is profitable, will add considerable clout to Delivery Hero’s services, which now runs at 10 million orders per month.

The latter will now see a clear path to expansion in Yemeksepeti’s backyard, which includes Greece, Saudi Arabia, Jordan, the UAE, Oman and Qatar. “We are now leader in Latam, Continental Europe, Asia and Middle East,” Delivery Hero spokesman Bodo von Braunmühi told Red Herring. “Yemeksepeti is a strong company combined with a very strong fit to our emerging market operations.”

Yemeksepeti CEO and co-founder Nevzat Aydin will remain in charge of the company beyond the acquisition, and join Delivery Hero as a senior advisor. “Today, I am delighted to team up with a company whose global ambitions, corporate culture and way of doing business are so aligned with ours,” he said in a statement.

“The Yemeksepeti deal is patently a bit of a gamble, and only time will tell whether it works out – but in and of itself, it’s another sign of a growing and increasingly confident startup scene,” added Knight. Delivery Hero’s success and U.S.-style expansion might be the exception in a city that, despite a growing industry, does not enjoy numbers in the same universe as California.

But things are certainly changing in Germany’s capital – both inside and outside tech. Unemployment, debt and output are still far higher than in other parts of Germany. But bigger deals, and the draw of a ‘poor but sexy’ lifestyle is putting it on a more even keel with it compatriot cities.

Soundcloud and Etsy are just two examples of major companies with a big Berlin presence. And with Uber set to launch another assault on the local market, after regulators banned almost all of its services, the capital may soon shed the ‘poor’ part of its image.

Berlin startups this year raised $800 million, which put it on track to beat last year’s $1.1 billion by end of Q2. That figure was itself a 140% upturn on 2013. Funding deals increased from 57 to 77 between 2013 and 2014, and is well on course to beat that figure this year.

At the centre of all this is Rocket Internet, the Berliner fund founded in 2007 by three brothers, Alexander, Oliver and Marc Samwer. Yesterday’s news came amid a 77% rise in the firm’s loan portfolio value since an October IPO.

Modesty is not in Rocket’s locker: it aims to “become the world’s largest Internet platform outside the United States and China.” The company turned down requests to comment on this article, but its numbers are talking plenty: Rocket has operations in 71 companies with sales of $116 million this year from $81 million last. It has faced repeated criticism for a ‘copycat’ approach to the technology market. But yesterday’s news from Delivery Hero, of which Rocket owns a 39% stake, will go some way to silencing those doubters.

“Rocket Internet has been wildly successful as of late, especially after last year’s IPO which was the highest in Germany in the last seven years, and the consolidation of similar companies into a single group: Global Fashion Group,” said Kalie Moore, of BerlinStartupGirl. “(But) while these large, global acquisitions are interesting, I believe that Rocket’s acquisitions of Berlin startups, like Somuchmore, matter more to the Berlin ecosystem.”

Indeed, Berlin has prided itself in recent years on the opportunity for young entrepreneurs to start up cheap and innovative products. Rent in some parts can be as little as $350 per month for an apartment, and the cost of living is far below even fellow German cities – let alone competing tech hubs such as London.

Whether Rocket Internet, Delivery Hero and their big-money deals will bring added gentrification, homogenization and, eventually, a hampering of Berlin’s ‘sexiness’ remains to be seen. Few at either company will care greatly today.