Postmates
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Asian food delivery startup Chowbus raises $4M
When one food delivery startup fails, another gets funded.
Chowbus, an Asian food ordering platform headquartered in Chicago, has brought in a $4 million “seed” funding led by Greycroft Partners and FJ Labs, with participation from Hyde Park Angels and Fika Ventures. The startup, aware of the challenges that plague startups in this space, says offering exclusive access to restaurants and eliminating service fees sets it apart from big-name competitors like Uber Eats, Grubhub, DoorDash and Postmates.
The Chowbus platform focuses on meals rather than restaurants. While scrolling through the mobile app, a user is connected to various independent restaurants depending on what particular dish they’re seeking. Chowbus says only a small portion of the restaurants on its platform, 15 percent, are also available on Grubhub and Uber Eats.
The app is currently available in Chicago, Boston, New York City, Philadelphia, Champaign, Ill. and Lansing, Mich. With the new investment, which brings Chowbus’ total raised to just over $5 million, the startup will launch in up to 20 additional markets. Eventually, Chowbus says it will expand into other cuisines, too, beginning with Mexican and Italian.
Chowbus was founded in 2016 by chief executive officer Linxin Wen and chief technology officer Suyu Zhang.
“When I first came to the U.S. five years ago, I found most restaurants I really liked [weren’t] on Grubhub nor other major delivery platforms and the delivery fees were quite high,” Wen told TechCrunch. “So I thought, maybe I can build a platform to support these restaurants,”
TechCrunch chatted with Wen and Zhang on Tuesday, the day after Munchery announced it was shutting down its prepared meal delivery business. Naturally, I asked the founders what made them think Chowbus can survive in an already crowded market, dominated by the likes of Uber.
“The central kitchen model doesn’t work; the cost is too high,” Zhang said, referring to Munchery’s business model, which prepared food for its meal service in-house rather than sourcing through local restaurants.
“We don’t own the kitchen or the chef, we just take advantage of the resources and help restaurants make more money,” Wen added. “The food delivery space is really huge and growing so quick.”
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Startups Weekly: Will Trump ruin the unicorn IPOs of our dreams?
The government shutdown entered its 21st day on Friday, upping concerns of potentially long-lasting impacts on the U.S. stock market. Private market investors around the country applauded when Uber finally filed documents with the SEC to go public. Others were giddy to hear Lyft, Pinterest, Postmates and Slack (via a direct listing, according to the latest reports) were likely to IPO in 2019, too.
Unfortunately, floats that seemed imminent may not actually surface until the second half of 2019 — that is unless President Donald Trump and other political leaders are able to reach an agreement on the federal budget ASAP. This week, we explored the government’s shutdown’s connection to tech IPOs, recounted the demise of a well-funded AR project and introduced readers to an AI-enabled self-checkout shopping cart.
1. Postmates gets pre-IPO cash
The company, an early entrant to the billion-dollar food delivery wars, raised what will likely be its last round of private capital. The $100 million cash infusion was led by BlackRock and valued Postmates at $1.85 billion, up from the $1.2 billion valuation it garnered with its unicorn round in 2018.
2. Uber’s IPO may not be as eye-popping as we expected
To be fair, I don’t think many of us really believed the ride-hailing giant could debut with a $120 billion initial market cap. And can speculate on Uber’s valuation for days (the latest reports estimate a $90 billion IPO), but ultimately Wall Street will determine just how high Uber will fly. For now, all we can do is sit and wait for the company to relinquish its S-1 to the masses.
N26, a German fintech startup, raised $300 million in a round led by Insight Venture Partners at a $2.7 billion valuation. TechCrunch’s Romain Dillet spoke with co-founder and CEO Valentin Stalf about the company’s global investors, financials and what the future holds for N26.
Bird is in the process of raising an additional $300 million on a flat pre-money valuation of $2 billion. The e-scooter startup has already raised a ton of capital in a very short time and a fresh financing would come at a time when many investors are losing faith in scooter startups’ claims to be the solution to the problem of last-mile transportation, as companies in the space display poor unit economics, faulty batteries and a general air of undependability. Plus, Aurora, the developer of a full-stack self-driving software system for automobile manufacturers, is raising at least $500 million in equity funding at more than a $2 billion valuation in a round expected to be led by new investor Sequoia Capital.
Here’s your weekly reminder to send me tips, suggestions and more to kate.clark@techcrunch.com or @KateClarkTweets.
WeWork, a co-working giant backed with billions, had planned on securing a $16 billion investment from existing backer SoftBank . Well, that’s not exactly what happened. And, oh yeah, they rebranded.
After 20 long years, augmented reality glasses pioneer ODG has been left with just a skeleton crew after acquisition deals from Facebook and Magic Leap fell through. Here’s a story of a startup with $58 million in venture capital backing that failed to deliver on its promises.
7. Data point
Seed activity for U.S. startups has declined for the fourth straight year, as median deal sizes increased at every stage of venture capital.
Key takeaways:
1. Seed activity for U.S. startups declined for the fourth straight year
2. Median U.S. seed deal was the highest on record in Q4 at $2.1M
3. Seed activity as a % of deals shrunk to 25%
4. Companies securing seed deals are older than ever https://t.co/exr8DRQRAF— Kate Clark (@KateClarkTweets) January 9, 2019
8. Meanwhile, in startup land…
This week edtech startup Emeritus, a U.S.-Indian company that partners with universities to offer digital courses, landed a $40 million Series C round led by Sequoia India. Badi, which uses an algorithm to help millennials find roommates, brought in a $30 million Series B led by Goodwater Capital. And Mr Jeff, an on-demand laundry service startup, bagged a $12 million Series A.
9. Finally, Meet Caper, the AI self-checkout shopping cart
The startup, which makes a shopping cart with a built-in barcode scanner and credit card swiper, has revealed a total of $3 million, including a $2.15 million seed round led by First Round Capital .
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Postmates lines up another $100M ahead of IPO
Postmates, one of the earlier entrants to the billion-dollar food delivery wars, has raised an additional $100 million in equity funding at a $1.85 billion valuation, as first reported by Recode and confirmed to TechCrunch by Postmates. The round comes four months after the eight-year-old startup drove home a $300 million investment that finally knocked it into “unicorn” territory.
New investor BlackRock has joined the funding round alongside Tiger Global, which served as the lead investor of Postmates’ September financing. Led by co-founder and chief executive officer Bastian Lehmann, the company has garnered a total of $681 million in venture capital funding from investors, including Spark Capital, Founders Fund, Uncork Capital and Slow Ventures.
In line with several other tech unicorns, Postmates has begun prep for an initial public offering that could come this year, including tapping JPMorgan to advise the float. As Recode pointed out, the $100 million capital infusion was probably less of a necessary funding event but rather an opportunity for existing investors to liquidate stock ahead of an exit.
Postmates, which completes 3.5 million deliveries per month, reportedly expected to record $400 million in revenue in 2018 on food sales of $1.2 billion. The company has not confirmed that figure nor disclosed any other 2018 revenue numbers. The company currently operates in more than 500 cities, recently tacking on another 100 markets to reach an additional 50 million customers.
It will be interesting to see how Wall Street responds to a Postmates public listing. Though it was an early player in what has become an extremely crowded market, Postmates never emerged as the leader in food delivery. Now, with supergiants like Uber dominating via Uber Eats and SoftBank funneling loads of capital into Postmates competitor DoorDash, it shouldn’t count on an oversubscribed IPO.
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In emerging markets there are no copycats, just budding entrepreneurs
Federico Antoni
Contributor
Contributor
Federico Antoni is managing partner at ALLVP, an early-stage VC based in Mexico. He is a lecturer in management at the Stanford Graduate School of Business.
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Every year I teach an MBA course at Stanford about the exciting opportunities for tech investors and entrepreneurs in developing economies. When we designed the syllabus back in 2013, Rocket Internet was still firing on all cylinders on four continents. The unapologetic machine built to copy big American internet companies created billions of dollars for the Samwer brothers and its backers. During Rocket’s golden years, the best startups in the developing economies seemed to inevitably have an original reference in Silicon Valley.
Accordingly, we added a class about the opportunity of replicating business models to seize this information arbitrage. Call it the second-mover advantage.
Despite my conviction about the model, the copycat word — short for replicating startups and attached to these ventures — annoyed me from the start. More than a term to describe a straightforward recipe to launch, I see it as an unconscious way to belittle an entire group of hard-charging founders and investors.
Indeed, while in foreign eyes, we have been building a Mexican Kickstarter, a Middle Eastern Uber, an Indian Amazon or a Colombian Postmates, I argue visionary founders are taking a simple idea that already exists and creating new worlds.
On the internet, there are Einsteins and there are Bob the Builders. I’m Bob the Builder. Oliver Samwer, founder of Rocket Internet
Gateway to entrepreneurship
While impact is the final goal, founders can approach the journey in different ways. The most common approach in the startup world is to use the business method, or more pompously, the design thinking methodology. “Fall in love with the problem, not the solution,” mentors keep telling a succession of startup clusters in acceleration programs. The best and “leanest” way to product market fit is by starting small then keep iterating the solution until you nail it.
A second way to start is favored by engineers and scientists: Take a new promising technology or a forgotten molecule, then find a big problem. Keep iterating until you find a problem worth solving, like a hammer looking for a nail.
A third way is starting like painters create, building skills by copying classics, or like a new chef cooks by starting with iconic recipes: replicate a proven idea and iterate until you find traction.
Until a few years ago it was ostensibly the only way to scale in developing economies. The model helped raise local capital from risk-averse investors who needed reassurance. The playbook to scale was unfolding a couple of years ahead and served as a guide to founders without previous startup experience and no local role models. The potential acquirer was identified and sometimes contacted in advance. Founders weren’t crazy and investors weren’t dumb.
Replicating a business model has served in emerging ecosystems as the gateway to entrepreneurship and venture investing.
Photo courtesy of Flickr/A_Marga
Riding the next wave
According to conventional wisdom, new ecosystems around the world grow through the following three stages, be them in developing economies or more developed countries. First, local and foreign entrepreneurs replicate successful models focused on local markets. Then as the ecosystem evolves, founders start applying existing technologies to solve local problems. Finally, as the tech space matures, new technologies begin to flourish.
In my opinion, those stages never happen sequentially as stated by ecosystem observers. Successful startups that started with a foreign inspiration can outgrow the master. If they are not bought into submission by the first mover, some of the most famous copycats reinvented the original and made it better: Mercado Libre is much more relevant in the e-commerce space than eBay . Flipkart is hardly an Amazon, not to mention WeChat. These companies are in turn some of the most prolific tech innovators on the globe. Truly ecosystems evolve organically in unique ways reflecting their history, geopolitical environment, economic structure and cultural features.
Two ways to defend the status quo: “It’s been done before” and “It’s never been done before.” –Thibault @Kpaxs
In defense of talent
Recently, it’s hard to hear American observers use the word copycat to describe any American company. After all, Guilt replicated VentesPrivees and Lime, Chinese dockless bike sharing and many more examples. All American startups are treated as innovators while the rest as mere followers.
Recently, Chinese or Indian startups seem to be given the benefit of the doubt regarding their originality. Is it because these regions have become more innovative? Maybe. But it’s also because these ecosystems have gained the respect of Silicon Valley. Indeed, Chinese consumer tech surpassed decisively the U.S. as the most important country in terms of investments.
So here’s my humble suggestion to our wealthier and more accomplished colleagues: stop using the c-word with founders. It’s offensive. Most probably, these founders are facing more challenges to build their companies and lower odds for success that the first mover. If anything, they have more merit than the originals.
As for founders, when they call you a me-too, remember all teams started somewhere, somehow. In fact, most started like Bob the Builder before turning into Einsteins. The truth is, it doesn’t matter where you start. You can start by applying a new technology or protocol. You can start with a problem you feel passionate about. You can start by replicating a business model. It doesn’t really matter if you take a big swing at the future and trust you will figure out how to make it happen. It doesn’t matter what label they use while you change the world for the better.
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Postmates unveils Serve, a friendlier autonomous delivery robot
San Francisco partially banned delivery robots because they obstructed pedestrians, so Postmates built one with eyes, turn signals and a mandate to yield. Serve is Postmates’ new cooler-meet-autonomous-stroller that it hopes can cut costs and speed up deliveries. The semi-autonomous rover uses cameras and Lidar to navigate sidewalks, but always has a human pilot remotely monitoring a fleet of Serves who can take control if there’s a problem. There’s even a “Help” button, touchscreen and video chat display customers or passers-by can use to summon assistance.
Serve will be rolling out in various cities over the next year, starting in Los Angeles. It does deliveries to customers that unlock its cargo hatch with their phone or a passcode, but it also can grab food from restaurants in congested areas and bring them to a Postmates dispatch hub from which delivery people can take packages the last mile. That could save Postmates money on delivery labor, but the company didn’t provide any information on how it might help transition couriers to other roles or careers.
“Somehow as a society we’re OK with moving a 2-pound burrito with a 2-ton car. All the energy is used to move the car, not the burrito, and there’s all the congestion it introduces” says Ali Kashani, VP of Postmates X special projects. So Postmates spent the last couple of years piloting autonomous rovers built by Starship and Robby before deciding only it had the on-demand experience to build the right bot.
Ready to share the sidewalk with this little guy?
Serve can carry 50 pounds of goods for 25 miles on a single charge — enough to make around a dozen deliveries per day. Thanks to a low center of gravity achieved by building the battery into the bottom of the chassis, it’s less likely to get cow-tipped. It uses Velodyne Lidar and a NVIDIA XAVIER processor to tell where it’s going. A Postmates spokesperson tells me, of the scalability and efficiency of the rovers, that “ultimately we believe that there will be a world where goods move rapidly at almost zero cost to the consumer.”
“We took time to figure out what is the language for the rover and pedestrians to interact with each other. If a robot is at a sidewalk and wants to be able to cross the street, it needs to show its intent to cross,” Kashani tells me. Thanks to a light ring around the top with turn signals and eyes that can indicate where it’s trying to go, Kashani believes Serve can be a respectful and natural part of the urban environment.
Postmates could offer Serve not only to its customers, but to companies like Instacart for which it handles outsourced deliveries. That business could pit Serve against delivery robot startups like $42 million-funded Starship, $10 million-funded Marble and $5 million-funded Robby.
A good robo-citizen
Avoiding becoming an obstacle to seniors, children and people in wheelchairs will be critical if cities are going to allow robots like Serve to operate. In December, San Francisco nearly banned the bots by limiting companies to three robots each with only nine total in the city that are relegated to low-population areas, can’t travel more than three miles per hour and must be supervised remotely by humans.
Postmates tells me it’s been working with the SF board of supervisors, including Norman Yee, and a coalition of logistics companies to develop a regulatory framework for issuing permits allowing limited autonomous deliveries. Postmates’ permit application is under review by the City of SF. Postmates is working with SF’s Emerging Technology Working Group, local merchant associations and pedestrian safety groups to figure out how to balance innovative tools that could increase local retail sales and reduce traffic with the public’s need for right of way on the sidewalks.
There’s also the question of what happens to the labor Serve replaces. A Postmates spokesperson claims that Serve is about augmenting its fleet with super powers rather than replacing its fleet. The company does 4 million deliveries per month total in more than 550 cities, and some might not ever be within the scope of robots. But it’d be nice to see Postmates spin up some training courses or offer transitions to behind-the-scenes operations and customer service roles to deliverers that eventually feel the squeeze.
Interestingly, Kashani hinted at how Postmates might end up moving to an “Uber X, Uber Black Car” model where you’d pay more to have a human take your delivery upstairs and directly to your door, while you might pay less if you’re willing to grab your order from the Serve robot out on the curb. Essentially, Postmates Serve is poised to turn human delivery into a luxury.
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Postmates raises another $300M, reportedly valued at $1.2B
On-demand delivery service Postmates announced this morning that it has raised $300 million in additional funding led by Tiger Global Management.
While the company’s press release doesn’t mention this, Fortune reports that the deal valued Postmates at $1.2 billion. Tiger’s Scott Schleifer is joining the board of directors.
Postmates does say that it’s completing “millions” of deliveries every month and is profitable in 90 percent of its markets, and that over the past four years, gross margins have “improved dramatically to nearly 50%.”
Over the past few months, Postmates expanded into more than 100 new cities (it’s now available in more than 400 U.S. cities, as well as Mexico City) and also announced partnerships with companies like Instacart and Walmart.
Postmates previously raised a $140 million round at a $600 million valuation in 2016. More broadly, it looks like VCs aren’t backing away from the on-demand delivery market — DoorDash, for example, recently raised $250 million at a $4 billion valuation.
“The transformation of how commerce moves in cities demands that we build the most innovative tools for businesses to keep up and distribute their products to the modern consumer — efficiently and cost effectively,” said Postmates CEO Bastian Lehmann in the release. “Postmates is proud to be the first and largest on-demand network that is enabling the growth of retail across the country, and today’s investment accelerates our ability to pair technology with the vitality of our neighborhoods.”
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Snapchat launches privacy-safe Snap Kit, the un-Facebook platform
Today Snapchat finally gets a true developer platform, confirming TechCrunch’s scoop from last month about Snap Kit. This set of APIs lets other apps piggyback on Snap’s login for sign up, build Bitmoji avatars into their keyboards, display public Our Stories and Snap Map content, and generate branded stickers with referral links users can share back inside Snapchat.
Snap Kit’s big selling point is privacy — a differentiator from Facebook. It doesn’t even let you share your social graph with apps to prevent a Cambridge Analytica-style scandal.
Launch partners include Tinder bringing Bitmojis to your chats with matches, Patreon letting fans watch creators’ Stories from within its app, and Postmates offering order ETA stickers you can share in Snapchat that open the restaurant’s page in the delivery app. Developers that want to join the platform can sign up here.
Snap Kit could help the stumbling public company colonize the mobile app ecosystem with its buttons and content, which might inspire Snapchat signups from new users and reengagement from old ones. “Growth is one of our three goals for 2018, so we absolutely hope it can contribute to that, and continue to strengthen engagement, which has always been a key metric for us” Snap’s VP of product Jacob Andreou tells me. That’s critical since Snapchat sunk to its lowest user growth rate ever last quarter under the weight of competition from Instagram and WhatsApp.
“There have been areas inside of our products where we’ve really set standards” Andreou explains. “Early, that was seen in examples like Stories, but today with things like how we treat user data, what we collect, what we share when people login and register for our service . . . Snap Kit is a set of developer tools that really allow people to take the best parts of our products and the standards that we’ve set in a few of these areas, and bring them into their apps.”
This focus on privacy manifests as a limit of 90 days of inactivity before your connection with an app is severed. And the login feature only requires you bring along your changeable Snapchat display name, and optionally, your Bitmoji. Snap Kit apps can’t even ask for your email, phone number, gender, age, location, who you follow, or who you’re friends with.
“It really became challenging for us to see our users then use other products throughout their day and have to lower their expectations. . . having to be okay with the fact that all of their information and data would be shared” Andreou gripes. This messaging is a stark turnaround from four years ago when it took 10 days for CEO Evan Spiegel to apologize for security laziness causing the leak of 4 million users’ phone numbers. But now with Facebook as everyone’s favorite privacy punching bag, Snapchat is seizing the PR opportunity.
“I think one of the parts that [Spiegel] was really excited about with this release is how much better our approach to our users in that way really is — without relying on things like policy or developer’s best intentions or them writing perfect bug free code, but instead by design, not even exposing these things to begin with.”
Yet judging by Facebook’s continued growth and recovered share price, privacy is too abstract of a concept for many people to grasp. Snap Kit will have to win on the merits of what it brings other apps, and the strength of its partnerships team. Done right, Snapchat could gain an army of allies to battle the blue menace.
Snapvengers Assemble
Snap’s desire to maintain an iron grip on its ‘cool’ brand has kept its work with developers minimal until now. Its first accidental brush with a developer platform was actually a massive security hazard.
Third-party apps promising a method to secretly screenshot messages asked users to login with their Snapchat usernames and passwords, then proceeded to get hacked, exposing some users’ risqué photos. Snap later cut off an innocent music video app called Mindie for finding a way to share to users’ Stories. Last year I wrote how A year ago I urged it to build a platform in my article “Snap’s anti-developer attitude is an augmented liability”, as it needs help to populate the physical world with AR.
2017 saw Snap cautiously extend the drawbridge, inviting in ads, analytics, and marketing developer partners to help brands be hip, and letting hacker/designers make their own AR lenses. But the real transition moment was when Spiegel said on the Q4 2017 earnings call that “We feel strongly that Snapchat should not be confined to our mobile application—the amazing Snaps created by our community deserve wider distribution so they can be enjoyed by everyone.”
At the time that meant Snaps on the web, embedded in news sites, and on Jumbotrons. Today it means in other apps. But Snap will avoid one of the key pitfalls of the Facebook platform: over-promising. Snap Deputy General Counsel for Privacy Katherine Tassi tells me “It was also very important to us that there wasn’t going to be the exchange of the friends graph as part of the value proposition to third party developers.”
How Snap Kit Works
Snap Kit breaks down to four core pieces of functionality that will appeal to different apps looking to simplify signup, make communication visual, host eye-catching content, or score referral traffic. Developers that want access to Snap Kit must pass a human review and approval process. Snap will review their functionality to ensure they’re not doing anything shady.
Once authorized, they’ll have access to these APIs:
- Login Kit is the foundation of Snap Kit. It’s an OAuth-style alternative to Facebook Login that lets users skip creating a proprietary username and password by instead using their Snapchat credentials. But all the app gets is their changeable, pseudonym-allowed Snapchat display name, and optionally, their Bitmoji avatar to use as a profile pic if the user approves. Getting that login button in lots of apps could remind people Snapchat exists, and turn it into a fundamental identity utility people will be loath to abandon.
- Creative Kit is how apps will get a chance to create stickers and filters for use back in the Snapchat camera. Similar to April’s F8 launch of the ability to share from other apps to Instagram and Facebook Stories, developers can turn content like high scores, workout stats and more into stickers that users can overlay on their Snaps to drive awareness of the source app. Developers can also set a deep link where those stickers send people to generate referral traffic, which could be appealing to those looking to tap Snap’s 191 million teens.
- Bitmoji Kit lets developers integrate Snapchat’s personalized avatars directly into their app’s keyboard. It’s an easy path to making chat more visually expressive without having to reinvent the wheel. This follows the expansion of Friendmoji that illustrate you and a pal rolling out to the iOS keyboard. But Bitmoji Kit means developers do the integration work instead of having to depend on users installing anything extra.
- Story Kit allows developers to embed Snapchat Stories into their apps and websites. Beyond specific Stories, apps can also search through public Stories submitted to Our Story or Snap Map by location, time, or captions. A journalism app could surface first-hand reports from the scene of breaking news or a meme app could pull in puppy Snaps. The company will add extra reminders to the Our Story submission process to ensure users know their Stories could appear outside of Snapchat’s own app.
One thing that’s not in Snap Kit, at least yet, is the ability to embed Snapchat’s whole software camera into other apps which TechCrunch erroneously reported. Our sources mistakenly confused Creative Kit’s ability to generate stickers as opposed to sharing whole stories, which Andreou called “an interesting first step” for making Snapchat the broadcast channel for other apps.
Additional launch partners include bringing Bitmoji to Quip’s word processor, RSVP stickers from Eventbrite, GIF-enhanced Stories search in Giphy, Stories from touring musicians in Bands In Town, storytelling about your dinner reservation on Quandoo, music discovery sharing from SoundHound, and real-time sports score sharing from ScoreStream.
While other platforms have escaped their host’s control, like Facebook’s viral game spam outbreak in 2009 or Twitter having to shut down errant clients, Snapchat’s approval process will let it direct the destiny of its integrations.
Bitmoji Kit in Tinder
When asked why Snapchat was building Snap Kit, Andreou explained that “We think that giving people more tools to be able to express themselves freely, have fun and be creative, both on Snapchat and other apps is a good thing. We also think that helping more people outside of Snapchat learn about our platform and our features is a good thing. And most importantly, being able to do this in a way that doesn’t compromise our users’ privacy is very good thing.”
Without much data sharing, there’s a lot less risk here for Snapchat. But the platform won’t have the same draw that Facebook can dangle with its massive user base and extensive personal info access. Instead, Snapchat will have to leverage the fear of being left out of the visual communication era and tout itself as the catalyst for apps to evolve. The biggest driver of the platform might be youngins demanding their Bitmoji everywhere.
Snap needs all the help it can get right now. If other apps are willing to be a billboard for it in exchange for some of its teen-approved functionality, Snapchat could find new growth channels amidst stiff competition. Platforms can entrench apps. And after its user count shrunk in March, Snap has to find a way to keep from disappearing
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Order-ahead app Ritual picks up $70M to rethink the social office lunch break
While DoorDash, Postmates and other apps are looking to reimagine what the food delivery experience looks like, Ray Reddy says he wants to figure out what the next generation of a food court looks like. Sort of.
Reddy’s startup, Ritual, aims to remake the whole process of leaving your office and walking around five minutes to a nearby deli or cafe to pick up food for lunch. But Reddy and his Ritual founders, Larry Stinson and Robert Kim, wanted to focus first on getting that experience right for a single building that leaves to go pick up coffee or food — and has that daily ritual of getting lunch with the team, or something along those lines. The whole process boils down to an app for consumers to order food or drinks as well as have coworkers piggyback onto that order to create a more socialized experience around getting up and going around the corner for a snack. Ritual said it has raised a new $70 million round led by Georgian Partners, with existing investors Greylock Partners, Insight Ventures, and Mistral Venture Partners all participating.
“If we [couldn’t] build something that is compelling for the 300 people who work at this single building, it’s not gonna work period,” Redddy said. “That helped us define the problem narrowly. We thought, here are the 12 or 14 spots within a five minute walk of this building, let’s focus on simulating what would happen. Let’s not worry about financials or economics, let’s prove this works. Just like Uber’s a remote control for the real world, we viewed this in a similar way where ultimately the app is a remote control for a real world experience.”
Ritual’s main flow is probably something the typical user is accustomed to at this point when it comes to food. They pick a place they like, place an order for food (or coffee), and then go pick it up. But the whole background process involves not only getting restaurants on board with the specific things they want while still trying to calibrate a consistent experience that users at this point expect when it comes to ordering something online after being trained on that simplicity for years by Postmates, DoorDash, or even apps by companies like Starbucks.
But over the past year or so, the company has increasingly tuned itself to employees jumping aboard the same order when considering what to pick up for a snack or a meal. The whole process aims at emulating that experience of figuring out where you want to eat in a Slack channel or arguing over a Seamless order, and in the end whoever has time to run out and grab something will be able to bring things back for teammates (or, of course, everyone can leave at the same time). That whole process is called “piggybacking,” a feature the company introduced around 18 months ago. The company has around 44,500 teams using the app, Reddy said.
All this is aimed to help restaurants adapt to the same changes in user behavior that retail has seen in the past decade, Reddy said. Amazon trained users to buy things online, forcing retailers to shift their strategies, just as Postmates and DoorDash have trained users to order food delivery through apps and immediately have access to a ton of options. With all that comes more and more data, which has helped those industries slowly tune their models over time and try to keep up with the increase in demand that has come with reducing friction around the whole experience.
“What restaurants are seeing are right now the same challenges retailers saw 10 years ago,” Reddy said. “What does it mean to become omni-channel, how do you go from one customer segment to dealing with walk-ins plus digital orders. Retailers faced a lot of those challenges 10 years ago, they faced challenges around pricing, fulfillment, and how do they build new capabilities. They are dealing with a new source of demand, and fundamentally the problem was a lot of stores weren’t designed for accepting multi-channel origins.”
While an order-ahead app might be one way to connect online users to a physical location, there’s still plenty of work to do as most restaurants, coffee shops or typical stores aren’t tuned for a digital-first experience, Reddy said. That extends to even not having enough counter space to hold coffee cups that customers have ordered ahead of time, much less including things like NFC readers or QR codes — the latter of which has proved wildly popular and effective throughout Asia thanks to services like Alipay and WeChat. And that’s largely a result of iOS and Android, the main platforms in North America, not really doing a lot with QR codes for a very long time. Reddy said that North America was making some progress, especially when it came to NFC, but for now the company still has to figure out unique ways to connect users to those restaurants.
That can take a lot of different forms. While Ritual has to figure out how to create a seamless experience that covers a lot of different restaurants or shops, Reddy said the startup still has to offer those same stores some kind of control over the experience. That means giving those customers some value proposition beyond just telling them to sign up for another order-ahead app. Ritual, for example, lets restaurants who onboard Ritual customers themselves keep the full transaction for a purchase, while it takes a small slice off other transactions. That, in addition to other marketing options, helps restaurants control their own destiny, he said.
Of course, at its heart, it’s an order-ahead app — even with that social experience on top of it. And if you’ve ever looked at where to eat nearby with coworkers, you’ve probably checked Yelp or a few other places, and possibly even settled the argument with a giant order on an online ordering platform like DoorDash or Seamless. All these have already tapped that user experience, and it’s not clear if Ritual would be able to clear enough room should any one of them go after a similar experience while already having that customer and user relationship, in addition to being the spot customers go already. In the end, Reddy says that it’ll come down to users having a few apps, and hopes that by offering restaurants flexibility and focusing on the hyper-local idea of just a single office building will help build up that moat.
“The way that things have played out in Asia [with platforms like WeChat] is exactly striking the right balance between a platform and giving stores control,” Reddy said. “When you think of the consumer view, people — for the same reason you don’t have 10 retail apps — don’t have 10 food apps. You’re not gonna download an app for every neighborhood spot. It’s not that these apps are bad or don’t work well, people are just not gonna download 10 apps. There’s gonna be a handful of platforms people are going to use to access their neighborhoods. We have to have a unified platform, but give restaurant partners enough control, not only over being able to speak with their customers, but control for the look and feel of their storefront. That’s the middle ground we’re looking to find, which we think is a win for customers and our storefronts.”
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DoorDash makes a big push into grocery delivery through a pilot program with Walmart
DoorDash is about to make a huge move into grocery delivery, but instead of going all out as a delivery service on its own, it’s instead going to be working behind the scenes to power delivery networks for larger companies — with Walmart as its first big partner.
While Instacart looks to control the end-to-end customer experience for grocery delivery, and Amazon is off doing Amazon-y things with its Whole Foods delivery system, DoorDash is hoping it can build a network that any company that needs some delivery network can tap without giving up its direct relationship with their customers. DoorDash is rolling out grocery delivery with Walmart in Atlanta in the first of what may be a major move to become a back-end platform for companies like Walmart, which want a delivery button on their website but don’t want to build the entire network themselves. By doing that, it offers DoorDash a potentially nice neutral niche as grocery delivery heats up.
“You can use the term white label, but our drivers still will often wear the DoorDash shirt and have the DoorDash bag,” DoorDash COO Christopher Payne said. “But if you go to Walmart.com, and order from Walmart in Atlanta, you’ll have no idea it’s from DoorDash. We’re very supportive of that scenario, that’s the DoorDash Drive scenario. We’re excited to build a business with them and provide this capability.”
Payne said he hopes this will be one of the first of a major expansion of that DoorDash Drive initiative to become a tool that businesses can start tapping for local delivery. And while DoorDash may partly be giving up that direct relationship with users, it can start getting a lot more data when it comes to deliveries. That data then helps it become more and more efficient, ensuring that it can get deliveries done in the best matter and attract more customers, leading to the need for more drivers, and so on.
DoorDash also basically started the whole last-mile delivery business on hard mode with restaurant delivery, Payne said. What DoorDash loses in that direct user experience is paid back in data, Payne says, and that’s more than valuable enough. Walmart is also running a similar program with Postmates as it looks to get further into grocery delivery.
“It turns out restaurant delivery is probably one fo the hardest delivery use cases you have — you have to get a pizza somewhere in 20 or 30 minutes or it won’t be crisp, and you have to get an ice cream cone somewhere before it melts. Grocery delivery tends to be delivered earlier in the day, which is before dinner or before you go to work,” he said. “That works out perfectly for us, actually, because our drivers aren’t busy or are less busy than they would be otherwise. It’s a delivery window, as opposed to one that’s getting something to you at an exact moment and time. That’s actually much easier and less demanding than a real-time delivery.
It’s still a significant step beyond its core competency, which is restaurant delivery. But while that has the potential to be a big business, it’s also going to top out at some point. GrubHub, for example, has a market cap of nearly $9 billion — but Amazon, the backbone of how many consumers engage with physical goods through the Internet, is a $700 billion-plus company. If DoorDash is going to continue to grow, it has to start expanding into new lines of revenue, and figuring out how to take all the data and tools it’s built and bring them to new businesses is going to be critical.
Amazon changed the calculus of last-mile grocery delivery, and it pretty much did it overnight — or at least over the span of a few months, which is the equivalent of overnight for a $700 billion company. Amazon acquired Whole Foods, and all of its locations in major metropolitan areas, for $13.7 billion and very quickly began offering two-hour delivery for prime customers for Whole Foods. On top of that, the company quickly started offering a credit card with an absurdly good reward system that’s tied directly to Prime purchases and Whole Foods (assuming you stay within the Prime ecosystem).
That’s meant that larger companies find themselves trying to figure out how to make such an agile move, and do it as soon as possible. For Walmart, getting this partnership with DoorDash allows it to just add a small segment to its typical customer flow without having to build out a full-on logistics delivery system. The opportunity to expand that to other businesses is pretty natural, and that’s the theme behind the Drive platform, and in theory offers businesses a way to quickly ramp up a delivery network without having to hand off the customer relationship to DoorDash. That may, in the end, be much more palatable for businesses.
“One of the other advantages of partnering with a company like Walmart isn’t just that they’re a leading grocer in the US,” Payne said. “They’re in a lot of other lines of businesses. As they want to expand and deliver more to their customers, they have physical assets to do that, so it provides a nice solution for us to test other items in the future. I would say grocery delivery is very much in its early days, it’s roughly equivalent to where food delivery was four years ago. We’re all going to be learning together, and it also means there’s gonna be a lot of other competition as there is in food delivery. But we believe our merchant operational excellence and quality of delivery will set us apart, and that’ll be proven in time.”
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On-demand shipping startup Shyp is shutting down
After rocketing to a $250 million valuation in 2015 amid a massive hype cycle for on-demand companies, on-demand startup Shyp is shutting down today.
CEO Kevin Gibbon announced that the company would be shutting down in a blog post this afternoon. The company is ending operations immediately after, like many on-demand companies, struggling to find a scalable model beyond its launching point in San Francisco. Shyp missed targets for expanding to cities beyond its core base as well as pulled back from Miami. In July, Shyp said it would be reducing its headcount and shutting down all operations beyond San Francisco.
The company raised $50 million in a deal led by John Doerr at Kleiner Perkins back in 2015, one of his last huge checks as a variety of firms jumped onto the on-demand space. The thesis at the time was pretty sound: look at a strip mall, and see which businesses can come to you first. Shipping was a natural one, but there was also food, and eventually groceries. Today, there are only a few left standing, with Postmates, Instacart and DoorDash among the most prominent ones. Even then, Instacart is now under threat from Amazon, which is ramping up its own two-hour delivery after buying Whole Foods.
“At the time, I approached everything I did as an engineer,” Gibbon wrote. “Rather than change direction, I tasked the team with expanding geographically and dreaming up innovative features and growth tactics to further penetrate the consumer market. To this day, I’m in awe of the vigor the team possessed in tackling a 200-year-old industry. But, growth at all costs is a dangerous trap that many startups fall into, mine included.”
Shyp is now a casualty of the delivery space. Where it originally sought to make up the cost of delivery in the form of cheaper bulk costs for those deliveries, Shyp’s one-size-fits-all delivery — where you could deliver a computer or a bike — eventually ended up being one of the most challenging and frustrating elements of its business. It began adding fees to its online returns business and changing prices for its bulk shipments. As it turns out, a $5 carte blanche for delivery was not a model that really made sense.
Indeed, that growth-at-all-costs directive has cost many startups, with companies like Sprig shutting down and many companies getting slapped on the wrist for aggressive growth tactics like text spamming. It also meant that startups had to very quickly develop an effective playbook that, in the end, might not actually translate to markets beyond their core competency. Shyp pivoted to focusing on businesses toward the tail end of its lifetime, including a big deal with eBay, which we had heard at the time was doing well.
“We decided to keep the popular-but-unprofitable parts of our business running, with small teams of their own behind them,” he wrote. “This was a mistake—my mistake. While large, established companies have the financial freedom to explore new product categories for the sake of exploring, for startups it can be irresponsible.”
But Gibbon said the company kept parts of its popular but challenged models online – which may have also contributed to its eventual shut-down. The company expected to be in cities like Boston, Seattle and Philadelphia in early 2016, but that didn’t end up panning out. And Shyp increasingly felt the challenges of an on-demand model, trying to push the cost to the consumer as low as possible while handling the overheads and logistical headaches of a delivery business.
“My early mistakes in Shyp’s business ended up being prohibitive to our survival,” Gibbon wrote. “For that, I am sorry.”
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