same-day delivery

StrictlyVC: November 25, 2014

Good Tuesday morning, everyone! (Web visitors, you can click here for an easier-to-read version of today’s email newsletter.)

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Top News in the A.M.

Shares of Apple reached a major milestone this morning, crossing the $700 billion market capitalization threshold just after trading began on Wall Street.

There are now more than 3 billion people online, with two-thirds of them in the developing world. More here.

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Same-Delivery Takes One on the Chin

Over the weekend, eBay took down a standalone app for its $5 same-day delivery service “eBay Now.” The company, which continues to make the service available online, is “rethinking how it wants to handle the high costs associated with running same-day delivery services,” reported TechCrunch.

It would be a mistake to declare same-day delivery economically unfeasible because of eBay’s sudden ambivalence about it. It’s tempting, though.

Despite the glut of same-day delivery services to materialize in recent years – from Google and Amazon to Deliv and PostMates – same day delivery services continue to face major challenges.

The biggest hitch appears to be the limited base of customers who are willing to pay more for faster service. Bargain hunters on eBay may be especially averse to additional fees. (Only a fraction of a small retailer’s sales come from customers who also opt for same-day delivery, asReuters noted last week.) The same seems true of Walmart, which launched its same-day delivery pilot program in 2011 and is still testing it in just three markets.

But they’re hardly alone. According to a recent business intelligence reportby Business Insider, only 2 percent of all shoppers living in cities where same-day delivery is offered have availed themselves of the services. Meanwhile, 92 percent say they’re willing to wait four days or longer for their e-commerce packages to arrive.

Very possibly, not all of these consumers have been educated about the new offerings they could be using — dazzling applications through which mobile workforces are now mobilized with a few taps of a smart phone. And same-day delivery margins are surely better than during the dot.com era, when companies like Webvan invested heavily in infrastructure.

Whether they’re good enough appears to be an open question. For example, even with an extremely efficient fulfillment system, the same-day delivery company Instacart marks up its goods meaningfully over standard grocery store prices.

Someone seems likely to figure out how to bring the various pieces together at scale. Uber, whose logistics system grows more sophisticated by the day, may be the strongest candidate for the job.

EBay has piles of data at its fingertips, too, though. That it’s cooling to same-day delivery after two years of experimentation — and planning to focus more on helping shoppers buy items online that can be picked up in stores — is worth slowing down to consider.

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New Fundings

Accounting SaaS Japan, a five-year-old, Tokyo, Japan-based company that sells its cloud-based software to tax accountant firms and small and mid-size businesses, has raised $8.5 million in funding from Fidelity Growth Partners Japan, Arbor Ventures, and iMercury Capital, along with earlier backer Mobile Internet Capital. The outlet e27 has more here.

Apto, a two-year-old, Woodlands, Tx.-based company behind an enterprise commercial real estate deal management app, has raised $1.4 million in Series A funding led by Mercury Fund. The company has now raised $2.4 million altogether.

Boomtown Network, a 1.5-year-old, Tiburon, Ca.-based company that provides on-demand remote and on-site tech support for small businesses, has raised $3 million in funding, according to an SEC filing that lists investor Dave Samuel of Freestyle Capital as a director.

Cbazaar.com, a 16-year-old, Chennai, India-based e-commerce site focused on “Indian ethnic wear,” has raised an undisclosed amount of Series B funding led by Forum Synergies, with participation from earlier investors Inventus Capital Partners and Ojas Partners.

Elance-oDesk — the Mountain View, Ca.-based company formed by the merger last December of the freelance companies Elance and oDesk — has raised $30 million in new funding led by earlier backer Benchmark. T. Rowe Price, FirstMark Capital, Sigma West, New Enterprise Associates and the Stripes Group also participated in the round, and Benchmark partner Kevin Harvey tells Recode that an IPO is the next stop: “With the companies now merged, the next step is to prepare for an IPO, and we think this financing gets us to that point. The company has the financials to be a public company.”

Everything But The House, an eight-year-old, Cincinnati, Oh.-based online estate sale company, has raised $13 million in Series A funding from Spark Capital and Greycroft Partners. The company had raised an undisclosed amount of seed funding in January of this year, shows Crunchbase.

iHear Medical, a five-year-old, San Leandro, Ca.-based company that makes affordable hearing aids that users can customize at home, has raised $5 million in Series C funding led by Lighthouse Capital, a Shanghai-based venture capital firm. Japanese electronics maker Brother Industries and Ameritas Holding Company also participated in the round, which brings the company’s total funding to $7.8 million

Kensho Technologies, a 1.5-year-old, Cambridge, Ma.-based company that makes analytics tools for investment professionals, has raised $15 million from Goldman Sachs. Altogether, the company has now raised at least $25.5 million, shows Crunchbase. Its previous investors include Google Ventures, New Enterprise Associates, Accel Partners, and General Catalyst Partners, among others.

PocketMath, a three-year-old, San Francisco-based self-service mobile demand-side ad platform, has raised $10 million in Series A funding from Rakuten Ventures, the VC arm of Japanese e-commerce giant Rakuten. TechCrunch has more here.

Promethera Biosciences, a five-year-old, Mont-Saint-Guibert, Belgium-based company that’s developing a cell-based therapy to treat in-born errors of metabolism and acquired liver diseases, has raised €25.33 million ($31.4 million) in Series C funding from SFPI-FPIM, the Belgian Federal Holding and Investment Company, and SMS Investments, along with earlier backers. The company has now raised roughly $53 million altogether.

RealView Imaging, a six-year-old, Israel-based company whose 3-D holographic display and interface system is used in medical procedures, has raised $10 million in new funding led by the Chinese firm LongTec China Ventures.

Recsolu, a six-year-old, Chicago-based company that sells cloud-based recruiting software, has raised $6 million in Series A funding from the Chicago-based venture fund First Analysis, along with earlier investor Generations Capital.

Roomer, a three-year-old, New York-based online marketplace for people looking to sell their hotel reservations in case of cancellation, has raised $5 million in Series A funding. Disruptive led the round, joined by earlier investor BRM Group. The company has raised $12 million to date, shows Crunchbase.

Spreecast, the three-year-old, San Francisco-based social video-broadcasting platform, has raised $3.1 million, shows an SEC filing. The company was cofounded by StubHub founder Jeff Fluhr; its newest funding brings the amount of capital it has raised to date to $16.4 million. Its backers include Great Oaks Venture Capital, Meakem Becker Venture Capital, GGV Capital, and MentorTech Ventures.

Vouchr, a two-year-old, Toronto-based company behind a peer-to-peer payment platform used for gift giving, among other things, has raised $1.5 million in seed funding from earlier investor Kima Ventures and other angel investors. The company has raised $3 million to date, shows Crunchbase.

Zendrive, a year-old, San Francisco-based data analysis company focused on making its customers’ on-demand fleets scale safely and efficiently, has raised an undisclosed amount of funding from new strategic investors, including BMW i Ventures, Fontinalis Partners, Expansion Capital and earlier backer First Round Capital. Venture Capital Dispatch has more on the company here.

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IPOs

Bloomberg takes a quick look at the Israeli IPO market.

Despite sizable market opportunities within the digital health care sector, the public “seems confused about what digital health is,” reports Forbes, which looks at eight related venture-backed IPOs, just two of which are trading above their IPO price.

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Exits

Cooliris, an eight-year-old, San Francisco-based mobile photo app maker, has been acquired by Yahoo for undisclosed terms. Cooliris had raised roughly $28 million from investors, shows Crunchbase. Its backers include Kleiner Perkins Caufield & Byers, T-Venture, The Westly Group, and DAG Ventures.

Unroll.Me, an app that lets users manage email subscriptions and unsubscribe to those they no longer want to receive, has been acquired by Slice, a shopping and package tracking app that was itself acquired earlier this year by Rakuten. Terms of the deal are not being disclosed. Unroll.Me was bootstrapped. TechCrunch has the story here.

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People

Sequoia Capital‘s Doug Leone, one of the most power venture capitalists in the industry, spoke openly about his life recently at the Stanford Graduate School of Business, telling students of his “pretty rough” high school years and their motivating effect on him: “I have to catch myself from letting my ego and my insecurities get the best of me, as I want my high school friends who I haven’t seen for 40 years realize how wrong they were. And I think it’s humorous that at the age of 57, I still think about the high school friends. Those are the little things that make me want to achieve.”

Twitter’s finance chief Anthony Noto suffered a direct messaging “fail” yesterday while trying to message another Twitter executive about buying a company. Anthony Weiner, who knows DM fails, was quick to step in with a joke about it.

Aaron Sorkin‘s Steve Jobs movie will get made after all. Probably.

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Job Listings

Capital One is looking for a director of business development to join its Growth Ventures unit. The job is in San Francisco.

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Essential Reads

Slack, the fast-growing workplace communication tool, will begin selling a new tier of service in January aimed at large enterprises. But there’s one feature about which Slack users should be aware: companies that subscribe will be able to request every message that employees have sent on the service, including direct messages to coworkers and a history of any changes made to messages, reports The Verge.

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Detours

Meet Nathan Sawaya, the most famous Lego artist in the world.

How the world’s first computer was rescued from the scrap heap.

Confessions of a private eye.

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Retail Therapy

A cutting-edge surfboard, made entirely of cork.

The 2016 Mercedes-Maybach S600. We love that champagne flutes come standard.

Same-Day Delivery Takes One On the Chin

It would be a mistake to declare same-day delivery economically unfeasible because of eBay’s sudden ambivalence about it. It’s tempting, though.

Despite the glut of same-day delivery services to materialize in recent years – from Google and Amazon to Deliv and PostMates – same day delivery services continue to face major challenges.

The biggest hitch appears to be the limited base of customers who are willing to pay more for faster service. Bargain hunters on eBay may be especially averse to additional fees. (Only a fraction of a small retailer’s sales come from customers who also opt for same-day delivery, as Reuters noted last week.) The same seems true of Walmart, which launched its same-day delivery pilot program in 2011 and is still testing it in just three markets.

But they’re hardly alone. According to a recent business intelligence report by Business Insider, only 2 percent of all shoppers living in cities where same-day delivery is offered have availed themselves of the services. Meanwhile, 92 percent say they’re willing to wait four days or longer for their e-commerce packages to arrive.

Very possibly, not all of these consumers have been educated about the new offerings they could be using — dazzling applications through which workforces are now mobilized with a few taps of a smart phone. And same-day delivery margins are surely better than during the dot.com era, when companies like Webvan invested heavily in infrastructure.

Someone seems likely to figure out how to bring the various pieces together at scale. Uber, whose logistics system grows more sophisticated by the day, may be the strongest candidate for the job.

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A Startup Tackles Express B2B Delivery (and Tens of Rivals)

Sean Spector is a brave soul. Spector is the CEO and cofounder of year-old, Austin-based Dropoff, a same-day delivery service that’s targeting small and mid-size businesses that don’t necessarily want their sensitive documents being delivered by a harried bike messenger who has other places to be. Customers pay a bit more than they might to a traditional courier company but they get a high-touch service in return, from screened “agents” to a slick mobile app that providers customers real-time tracking and the ability to rate their messenger, among other things.

The company, which is launching today with $1.85 million from Austin Ventures, Silverton Partners, Mucker Capital and others, says it’s targeting an underserved niche in the $8.7 billion same-day delivery market. While it’s making food deliveries, for example, it isn’t dropping off sandwiches to office workers but rather hauling over the catering to the 200-person office party. While it’s delivering flowers, its messengers aren’t bringing them to consumers’ doorsteps but to wedding venues.

Still, Dropoff — which has made “thousands” of same-day business-to-business deliveries since it began testing its service in spring — has a good many competitors, including 39 that are listed on AngelList alone. I talked yesterday with Spector — who previously cofounded the online game rental service Gamefly — about how Dropoff breaks through the noise. Our chat has been edited for length.

How many employees do you have? Are your messengers full-time employees? How are they paid? And who owns their modes of transport?

We have 16 full-time employees, across marketing, finance, technology and sales. Our couriers are independent contractors who get a percentage of each delivery. Most of them work a full day, eight hours, seven days a week and they can earn $20 or more per hour. They own their own bikes, cars, and vans, which we use depending on the speed required of the delivery and its size; they also [pay for their] own insurance, though we [provide them with additional] insurance. All are thoroughly screened and vetted and arrive in uniform.

You’ve chosen a tough business to enter. Everyone is jumping into same-day delivery.

It may seem that way, but once you look behind the curtain, it’s very different, what we’re doing. If you think about sensitive documents, expensive medications, floral arrangements for a big wedding, different types of mission-critical things that need to be delivered and tracked, it’s a whole different process.

How do you come up with your rates?

We did a ton of research to understand how the current industry works, then modified it based on what makes the most sense for our model. But loosely, it depends on how quickly you need something, the distance we’re traveling, and the weight of what we’re delivering.

I want catering trays, I’m five miles away and I want them in two hours.

It will cost you under $20.

You raised $1.85 million in April, though you’re just announcing it today, and you have plans to expand nationally from Austin. Are you actively seeking an A round yet?

It’s fair to say we’ll be in the market in 2015.

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