Why ShipBob is the Most Important Midwestern Company You’ve Never Heard Of
A while back, a startup in Chicago raised $68 million in its Series D round, earmarking the capital to expand its logistics network and more than double its capacity. SoftBank led the round, following front page investors such as Menlo Ventures, Bain Capital Ventures, Hyde Park Venture Partners, Hyde Park Angels and Y Combinator.
The company is ShipBob and it is proof that COVID has forever upended the traditional logistics industry.
As SoftBank managing partner Ervin Tu said in a release following the investment: “Logistics is an enormous industry that has seen rapid growth alongside ecommerce adoption. ShipBob is leveraging data and innovative technology and operations to grow its business and drive significant increases in revenue and profits. The company is on track to be the market-leading solution for SMB and larger merchants around the world.”
ShipBobo integrates directly with ecommerce platforms and marketplaces such as Amazon, Walmart, Shopify, BigCommerce, Wix and Squarespace, allowing small sellers to tap into the kind of logistics tools that major retailers enjoy. The company also helps with returns management, inventory management, financing solutions and more. It’s on track to do $100M in revenue this year.
Founded in 2014, ShipBob now counts more than 3,600 small businesses as customers, with direct-to-consumer brands relying on ShipBob to deliver orders, manage returns, offer custom financing options and more.
The startup integrates with e-commerce platforms and marketplaces like Amazon, BigCommerce and Shopify. Before sending out orders, ShipBob scans delivery fees at DHL, UPS and the United States Postal Service to determine the best price.
“The startup’s biggest competitors are individuals who try and do it all themselves,” [CEO Dhruv Saxena] said, storing and packing items in their homes, and then running to the post office when they’re ready to ship. “ShipBob has to convince merchants that outsourced fulfillment is the best way to scale.”
In addition to managing logistics, ShipBob also offers customers like TB12 — football star Tom Brady’s lifestyle brand — storage space inside one of its 10 fulfillment centers. The company’s homegrown tech manages the warehouse operations inside these spaces, with workers relying on ShipBob’s own algorithms to determine where products should be stored and the order in which they should be picked.
“This helps us to improve the efficiency of the fulfillment centers, which makes our fulfillment operations cheaper for our merchants,” Saxena said, adding that building its own tech stack also makes it easier to quickly deploy its software in new facilities.”
And there are reasons it is in Illinois.
Location: As logistics providers learned generations ago, location matters a lot when you’re moving physical goods from point A to point B, from warehouse to customer. Being in the middle of the country is a distinct advantage to shippers, roughly halving the time it takes for a package to get to either coast.
(This is also the reason that Kansas City emerged as a communications hub in the early 20th century with Sprint, Garmin and others locating there. It was already a place where all the railroads came together for shipping; setting up telegraph and later telephone and fiber lines along those same routes just made sense.)
Talent: Granted, ShipBob isn’t running an entire logistics and shipping chain from its Chicago hub, but the city’s history of doing just that means there is a critical mass of shipping talent and innovators in the region. It’s just a good place to start a shipping company.
Capital: When working on my first book I heard from a lot of founders across the country that their local investors in Orlando, Las Vegas, Portland, etc just didn’t “get” what they were doing. The money was there, but it was more focused on investing what it already understood, like hotels or franchise restaurants.
But Chicago’s logistics legacy means that local investors, and those across the Midwest, “get” what ShipBob is doing. It’s taking a legacy industry in the region and making it smarter and better. Yes, the companies Series D (and most of its larger rounds) have come from Bay Area investors, but its seed capital was local, something that may not have been possible elsewhere.