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Florida-based logistics provider ShipMonk raises $290 million on the back of rising eCommerce demand

Jan Bednar started ShipMonk with $70,000 in winnings from a string of student business plan competitions and launched the business that just closed on $290 million in new funding from a small warehouse with no air conditioning in the middle of Florida.

While Bednar’s new offices are still inside the warehouse his company operates, they now have air conditioning… and a $290 million financing round from Summit Partners to grow its business.

The Ft. Lauderdale, Fla.-based ShipMonk provides a slew of shipping and logistics services for small to medium-sized eCommerce businesses and right now — given the continuing COVID-19 pandemic — business is good.

We help SMBs and mid-market direct to consumer companies manage their supply chains. Help get their products from suppliers to facilities and connect with all of their sales channels including B2B … order management, transportation management, reverse logistics,” said Bednar. 

The company’s largest customers can book anywhere from $150 million to $250 million in revenue, but most of ShipMonk’s customers are actually small businesses pulling in between $1 million and $10 million on average.

It’s for these businesses that ShipMonk will fill its warehouses in Pennsylvania, California and Florida with 60,000 stock keeping units — managing around 50 different items for each customer it serves.

Bednar said ShipMonk would use the new cash to continue to upgrade its automation services and increase its staffing while also looking to expand internationally.

Profitable from the outset, ShipMonk just came off one of its best years, taking in upwards of $140 million in revenue. 

Bednar began the business alone, but quickly brought on co-founders Kevin Seitz, who handles marketing for the business, and Bosch Jares, a fellow native of the Czech Republic (like Bednar) who serves as the company’s chief technology officer.

The story of how Jares joined the business is indicative of the type of hustle that’s allowed Bednar to grow a booming tech and logistics business from the Ft. Lauderdale beaches.

It was the Florida weather that sold Jares, a college student from one of the Czech Republic’s top technical institutions, on the move to ShipMonk. Bednar had posted an internship opportunity to work (unpaid, but offering room and board) at his company on a college job board in the middle of January. The applications came pouring in, but it was Jares, a programmer who had been working with computers since age 14 who took the slot.

The rest… is ShipMonk history. Jares built the bulk of the backend for the company’s initial services spending nearly 20 hours a day coding.

 The thriftiness and hard work has won ShipMonk a booming business that has grown from 15,000 square feet of warehousing space into nearly 1 million square feet of storage space and a logistics service that spans the U.S. 

Timing for the new round couldn’t be better, as National Retail Federation estimates are banking on a 20% bump in new online sales — which could reach $202 billion this year. 

Black Friday alone raked in $9 billion in online purchases, according to data from Adobe Analytics provided by the company, and consumer spending is only going to continue to move online as the pandemic continues to threaten the health and safety of American consumers.  

ShipMonk’s technology integrates with shopping cart and marketplace platforms like Shopify to import orders across sales channels, which are then processed at the company’s warehouse locations. Customers can save up to 50% on their operational costs, according to the company.

“We believe ShipMonk truly demonstrates the power of a bootstrapped, durable growth mindset. Jan identified a significant gap in the market and, together with the ShipMonk team, has scaled the business in a deliberate and capital efficient manner to address that need. The results have been impressive,” said Christopher Dean, a Managing Director at Summit Partners who is taking a seat on the company’s board. 

 

If we let the US Postal Service die, we’ll be killing small businesses with it

Since moving to the United States, I’ve come to appreciate and admire the United States Postal Service as a symbol of American ingenuity and resilience.

Like electricity, telephones and the freeway system, it’s part of our greater story and what binds the United States together. But it’s also something that’s easy to take for granted. USPS delivers 181.9 million pieces of First Class mail each day without charging an arm and a leg to do so. If you have an address, you are being served by the USPS — and no one’s asking you for cash up front.

As CEO of Shippo, an e-commerce technology platform that helps businesses optimize their shipping, I have a unique vantage point into the USPS and its impact on e-commerce. The USPS has been a key partner since the early days of Shippo in making shipping more accessible for growing businesses. As a result of our work with the USPS, along with several other emerging technologies (like site builders, e-commerce platforms and payment processing), e-commerce is more accessible than ever for small businesses.

And while my opinion on the importance of the USPS is not based on my company’s business relationship with the Postal Service, I want to be upfront about the fact that Shippo generates part of its revenue from the purchase of shipping labels through our platform from the USPS along with several other carriers. If the USPS were to stop operations, it would have an impact on Shippo’s revenue. That said, the negative impact would be far greater for many thousands of small businesses.

I know this because at Shippo, we see firsthand how over 35,000 online businesses operate and how they reach their customers. We see and support everything from what options merchants show their customers at checkout through how they handle returns — and everything in between. And while each and every business is unique with different products, customers operations and strategies, they all need to ship.

In the United States, the majority of this shipping is facilitated by the USPS, especially for small and medium businesses. For context, the USPS handles almost half of the world’s total mail and delivers more than the top private carriers do in aggregate, annually, in just 16 days. And, it does all of this without tax dollars, while offering healthcare and pension benefits to its employees.

As has been the case for many organizations, COVID-19 has significantly impacted the USPS. While e-commerce package shipments continue to rise (+30% since early March based on Shippo data), it has not been enough to overcome the drastic drop in letter mail. With this, I’ve heard opinions of supposed “inefficiency,” calls for privatization, pushes for significant pricing and structural changes, and even indifference to the possibility of the USPS shutting down.

Amid this crisis, we all need the USPS and its vital services now more than ever. In a world with a diminished or dismantled USPS, it won’t be Amazon, other major enterprises, or even Shippo that suffer. If we let the USPS die, we’ll be killing small businesses along with it.

Quite often, opinions on the efficiency (or lack thereof) of the USPS are very narrow in scope. Yes, the USPS could pivot to improve its balance sheet and turn operating losses into profits by axing cumbersome routes, increasing prices and being more selective in who they serve.

However, this omits the bigger picture and the true value of the USPS. What some have dubbed inefficient operations are actually key catalysts to small business growth in the United States. The USPS gives businesses across the country, regardless of size, location or financial resources, the ability to reach their customers.

We shouldn’t evaluate the USPS strictly on balance sheet efficiency, or even as a “public good” in the abstract. We should look at how many thousands of small businesses have been able to get started thanks to the USPS, how hundreds of billions of dollars of commerce is made possible by the USPS annually and how many millions of customers, who otherwise may not have access to goods, have been served by the USPS.

In the U.S., e-commerce accounts for over half a trillion dollars in sales annually, and is growing at double-digit rates each year. When I hear people talk about the growth of e-commerce, Amazon is often the first thing that comes up. What doesn’t shine through as often is the massive growth of small business — which is essential to the health of commerce in general (no one needs a monopoly!). In fact, the SMB segment has been growing steadily alongside Amazon. And with the challenges that traditional businesses face with COVID-19, more small businesses than ever are moving online.

USPS Priority Mail gets packages almost anywhere in the U.S. in two to three days (average transit time is 2.5 days based on Shippo data) and starts at around $7 per shipment, with full service: tracking, insurance, free pickups and even free packaging that they will bring to you.

In a time when we as consumers have become accustomed to free and fast shipping on all of our online purchases, the USPS is essential for small businesses to keep up. As consumers we rarely see behind the curtain, so to speak, when we interact with e-commerce businesses. We don’t see the small business owner fulfilling orders out of their home or out of a small storefront, we just see an e-commerce website. Without the USPS’ support, it would be even harder, in some cases near impossible, for small business owners to live up to these sky-high expectations. For context, 89% of U.S.-based SMBs (under $10,000 in monthly volume) on the Shippo platform rely on the USPS.

I’ve seen a lot of talk about the USPS’s partnership with Amazon, how it is to blame for the current situation, and how under a private model, things would improve. While we have our own strong opinions on Amazon and its impact on the e-commerce market, Amazon is not the driver of USPS’s challenges. In fact, Amazon is a major contributor in the continued growth of the USPS’s most profitable revenue stream: package delivery.

While I don’t know the exact economics of the deal between the USPS and Amazon, significant discounting for volume and efficiency is common in e-commerce shipping. Part of Amazon’s pricing is a result of it actually being cheaper and easier for the USPS to fulfill Amazon orders, compared to the average shipper. For this process, Amazon delivers shipments to USPS distribution centers in bulk, which significantly cuts costs and logistical challenges for the USPS.

Without the USPS, Amazon would be able to negotiate similar processes and efficiencies with private carriers — small businesses would not. Given the drastic differences in daily operations and infrastructure between the USPS and private carriers, small businesses would see shipping costs increase significantly, in some cases by more than double. On top of this, small businesses would see a new operational burden when it comes to getting their packages into the carriers’ systems in the absence of daily routes by the USPS.

Overall, I would expect to see the level of entrepreneurship in e-commerce slow in the United States without the USPS or with a private version of the USPS that operates with a profit-first mindset. The barriers to entry would be higher, with greater costs and larger infrastructure investments required up-front for new businesses. For Shippo, I’d expect to see a much greater diversity of carriers used by our customers. Our technology that allows businesses to optimize across several carriers would become even more critical for businesses. Though, even with optimization, small businesses would still be the group that suffers the most.

Today, most SMB e-commerce brands, based on Shippo data, spend between 10-15% of their revenue on shipping, which is already a large expense. This could rise well north of 20%, especially when you take into account surcharges and pick-up fees, creating an additional burden for businesses in an already challenging space.

I urge our lawmakers and leaders to see the full picture: that the USPS is a critical service that enables small businesses to survive and thrive in tough times, and gives citizens access to essential services, no matter where they reside.

This also means providing government support — both financially and in spirit — as we all navigate the COVID-19 crisis. This will allow the USPS to continue to serve both small businesses and citizens while protecting and keeping their employees safe — which includes ensuring that they are equipped to handle their front-line duties with proper safety and protective gear.

In the end, if we continue to view the USPS as simply a balance sheet and optimize for profitability in a vacuum, we ultimately stand to lose far more than we gain.

Combining StitchFix and Instagram, FlipFit ushers in the next phase of social retail

Nooruldeen Agha, has been thinking about what’s next for fashion retail for years.

The serial entrepreneur behind the Dubai-based online fashion retailer, Elabelz and marketing studio Elephant Nation had always wanted to redesign the shopping experience for how customers actually shopped in stores and online.

“If it was 1994 and we knew what technology is today and we want to reinvent this [shopping] experience… one thought was how we bought our whole life and how we go to the mall,” says Agha. 

Shopping is, for most people, a social activity. Friends go to the mall or department store together to try on clothes and ask each other for advice. Most online and offline shopping experiences are completely divorced from that, Agha said.

“Fashion shopping has always been a social experience,” said Agha, co-founder and co-CEO of Flip, in a statement. “The decision for today’s shoppers to buy happens once they receive validation from friends and family, but e-commerce has made shopping very isolating. We are connecting the social behaviors of shopping, which were previously only possible offline, with a virtual experience.”

So he wanted to take the social aspects of Instagram and the subscription box and retail elements of StitchFix to create the new Los Angeles-based startup, Flip Fit. 

But to do it, Agha needed a push. His businesses in Dubai were successful, he says, and there was no need for him to pursue another new venture — especially one in America.

Then he met Jonathan Ellman at the Summit conference in Los Angeles.

We met at a party.  At midnight,” Ellman says. “At 10 o clock the next morning we were sitting on a balcony talking to each other and  came to an understanding that Noor with his dynamics and understanding the industry… that he could not stay in Dubai.”

Ellman has a history as an investor and an operator. He was the founder of the scout program at GreatPoint Ventures and spent years at HoneyBook. And he knew immediately that Agha’s idea had legs.

For the next year, the two laid the foundation for the business. Noor had all of the connections already. Elabelz was pulling in $23 million in revenue off of the sale of 150,000 boxes of clothes — so the logistics and fulfillment and brand partnerships would be a breeze. The company has 200 brands that have already signed on as of today’s launch including: AG, JBrand, Hudson, Retrobrand, Boyish, MadeWorn, Junkfood, Mavi and Edwin.

FlipFit works by creating a social network based on friends and followers. The company isn’t borrowing from Facebook or Instagram, but instead is trying to build out its network from scratch. Users of the app are encouraged to take vote on selfies their friends take in different outfits. Each vote garners in-app cash that can be redeemed whenever someone purchases an item ($10 for each new voting user and $1 per vote).

As users vote on the styles they like, they can also add clothes to a virtual wardrobe. When they’re ready they can select a few styles from that closet to be shipped out to them to try on. If the user doesn’t like the clothes, then they just return it.

The mechanics aren’t that different from a number of other online retailers, but the difference is in the company’s decision to create an entirely new social graph.

Initially, Agha and Ellman are tapping influencers to hook in their target customers. Over the next 90 days roughly 500 influencers across social media will be encouraging their audiences to vote on different outfits using the FlipFit app. The influencers are getting $150 in store credit twice-a-month or getting paid sponsorships (depending on the size of their following). The outfits with the most votes are the ones that the influencers will keep… training their audiences on the mechanics of how to shop as they market the product.

Agha says that the user experience is most akin to TikTok or Snap,rather than Instagram. There’s a publicly available feed for those who want to use it or the feed can be made private and shared among friends. And the app is only available for children 13 and up.

On the business side, the company is keeping 33% of the cash from any item sold. It’s cut is higher, because FlipFit handles all of the back end logistics of shipping and returns, according to the co-founders. Every box the company ships includes the standard pre-printed return label.

“Returns are our default. While the rest of the industry is fighting this phenomena, we are leaning into it,” said Jonathan Ellman, co-founder and co-CEO of Flip. “Almost half of all fashion shoppers bracket their online purchases, buying several pieces to try on at home with the intention of returning what doesn’t fit or what doesn’t match what they saw online. We believe returns should be as easy as the purchase and by making the shopping process more efficient and effective, we’re keeping clothes out of landfills and in your closet.”

The company is, to date, backed by a $3.75 million seed round led by TLV Partners with participation from Lool Ventures.

“Flip is the evolution of social media and e-commerce — birthing the baby of Istagram and Amazon and creating the first physical product marketplace where your likes and actions impact the products you receive,” says Rona Segev, a general partner at TLV.