Tech

Becoming a billionaire thanks to the pandemic, after 2 years only being a millionaire, the danger of collapse already exists

Bloomberg reported that, since the beginning of the pandemic, people were stuck at home and had to order food online. This wave has created a new generation of billionaires: food delivery tycoons.

The three founders of the San Francisco-based DoorDash company were each worth $2.5 billion or even more. Jitse Groen – company founder Takeaway.com – a rival in Europe of Just Eat also has a net worth of 1.5 billion USD.

The quick riches of the owners of the food delivery companies: Becoming a billionaire thanks to the pandemic, after 2 years only being a millionaire, the danger of collapse already exists - Photo 1.

But, the above assets seem like a dream as the world gradually returns to normal, eating at restaurants instead of ordering food. Not to mention, technology stocks are falling significantly because they are no longer favored by investors when the macro environment is changing.

The value of the shares that Groen holds has dropped to just $350 million, while DoorDash’s Andy Fang and Stanley Tang are no longer dollar billionaires. CEO Tony Xu testified that his fortune fell to $1.1 billion according to Bloomberg’s statistics. Others suffered the same fate, including Will Shu of Deliveroo, whose shares in the company have fallen to $150 million from $620 million in August.

“The end of the lockdowns has shown us the limits of the food delivery industry,” said Mott Smith, a CEO of Amped Kitchens, a kitchen space rental company.

The quick riches of the owners of the food delivery companies: Becoming a billionaire thanks to the pandemic, after 2 years only being a millionaire, the danger of collapse already exists - Photo 1.

After posting huge profits in 2020 and last year, a drop in the stock prices of most food delivery companies has wiped out $100 billion in market capitalization. And while most are still struggling to increase revenue, the growth rate has also slowed compared to the rate of 2020.

The market’s downtrend as well as inflation have eroded consumers’ wallets, affecting how much they can spend to order. Fast-growing technology stocks have fallen sharply, with growth expectations falling amid rising interest rates and fears of a protracted recession.

β€œThe sector has never experienced a combination of both high inflation and demand uncertainty into the new normal.”

The current focus depends on cutting costs. Some investors are even forcing companies to make money instead of spending heavily just to gain market share. Shares of Just Eat jumped 12% following this week’s report that Grubhub founder Matt Maloney was considering buying back its US operations just a year after selling it to Just Eat for $7.3 billion.

Representatives at DoorDash, Just Eat and Deliveroo declined to comment on the matter.

The fortunes of food delivery founders take years to build and then blow up seemingly overnight. Xu and two other partners were inspired to create DoorDash when they were students at Stanford. Groen was also a student at the University of Twente in the Netherlands when he created Just Eat in 2000. Shu recently finished his education at Wharton before founding Deliveroo in London in 2013.

Before the pandemic, the growth rate of food delivery companies seemed limitless. When DoorDash went public in December 2020, their stock jumped 92% β€” the biggest first-day gain yet.

The DoorDash co-founders have already begun moving some of their wealth into banks. According to Bloomberg sources, Xu, Fang and Tang have sold 356 million shares in the past 17 months.

It’s worth mentioning that many of the food delivery companies that enjoyed the biggest growth – and then the biggest crash – are based in Europe. This used to be an uncommon place for a food delivery culture, and now these companies take a big risk as things slowly return to normal.

“This is a phenomenon unique to the US but then spread to the entire world for a period of time,” said Usha Haley, an expert at Wichita State University.

Founders of food delivery companies now face another challenge: Not every get-rich-quick billionaire will sustain their fortunes.

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