A food delivery courier, working for Just Eat Plc, travels in London, U.K., on Thursday, Dec. 22, 2016. The food delivery business model has proven attractive to venture capitalists, who last year poured $5.5 billion into food-delivery companies globally, according to research firm CB Insights. Photographer: Simon Dawson/Bloomberg
Shares in Just Eat fell as much as 10% on Friday morning after Deliveroo unveiled Amazon will be the largest investor in a $575m fundraising round © Bloomberg

Shares in rivals to food delivery group Deliveroo fell sharply on Friday after it was revealed that Amazon was backing the UK-based start-up.

The $940bn US tech group is set to be the largest investor in a $575m fundraising by Deliveroo, sparking fears among shareholders in competitors that one of the world’s largest companies could pour near-unlimited resources into the group.

Food delivery stocks were some of the worst performers on Europe’s Stoxx 600 index in the wake of the announcement.

Shares in Just Eat, the UK’s largest food marketplace, dropped as much as 10 per cent to trade at 605p early on Friday, while Berlin-based Delivery Hero lost as much as 6 per cent to trade at €40.45. Dutch group Takeaway fell 6 per cent to €73.50.

Deliveroo, already one of Europe’s best-funded start-ups, plans to use the funds to “invest heavily” in its technology team at its London headquarters and to build new products. This latest fundraising round takes the total the group has raised to date to $1.53bn.

Amazon operates its own food service, Amazon Restaurants, which offers one-hour restaurant delivery for paying customers of its Prime subscription service in some US cities, although it pulled out of the UK at the end of last year.

The food delivery sector has been marked by intense competition between various players vying for ascendancy in recent years, putting companies under increasing pressure to stand out from the crowd.

The flotation of ride-hailing app Uber last week will provide funding to its food delivery business Uber Eats, another key player in the industry.

“While Deliveroo is still in its pre-profit (strategically loss making) phase, as it invests for growth, if any company knows about the benefit of that strategy it is Amazon,” said James Locker, an analyst at Peel Hunt.

“After Uber’s IPO last week that raised $8.1bn and now Amazon’s investment today — both in aid of the more expensive delivery side of the takeaway market — these two [groups] will put more pressure on Just Eat which has only recently started out on that journey,” he said.

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