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On-demand services are one of the biggest trends in the startup space at the moment. Silicon Valley, it would seem, is not content to rest until every bit of “friction” is removed from the lives of consumers. The trend has grown to the point that we would seem to be fast approaching the day that it becomes unnecessary for people to leave the house, should they choose not to. While the shift towards an on-demand world provides ease and convenience for customers, startups are still feeling their way into some of the newer areas being explored in this growing trend.
Shyp was one such company looking to bring on-demand service to another pain point in people’s lives — in this case, shipping. Shyp sought to remove the hassle of shipping items; their app allowed users to take a photo of the item they wanted to be shipped, and for a $5 fee, Shyp would pick that item up to package and deliver to a shipping company. Users wouldn’t have to worry about finding a box and packing material, or driving to a shipping store or post office to send their package.
The concept was strong enough for the San Francisco-based startup to eventually raise $62 million in funding to continue its expansion. The company expanded its services into New York, Los Angeles and Chicago (with an eye towards Miami), and introduced new initiatives like its partnership with eBay and a new feature, address-less shipping. And unlike other startups that failed to fully deliver the promised services, Shyp did what they said they would, collecting and shipping material to the required destination.
For all that was going right, there were underlying problems with Shyp’s operating model. A flat fee for pickup and packaging proved a challenge given the wide variance in size of packages that people were sending. In response, the company introduced fees for packaging and shipping that could vary based upon the size of the item being packaged. And while probably prudent for the company, it likely diminished the value of the service in the eyes of customers. Shyp also initially targeted individuals as the user base for its services, most of whom only ship packages occasionally, and therefore are not the repeat, sustaining business that companies look for.
In response to those mistakes, Shyp sought to reorganize and refocus in an effort to stay afloat and prove its viability. The company laid off employees and cut their operations back to its original home base of San Francisco. They also began to focus more on acquiring small business customers rather than individuals. These moves proved to be enough to stem the tides temporarily, as the new model eventually had the company operating at a profit. But Shyp’s early mistakes proved too costly to overcome, and with too little runway to allow the new model to play out. The company shut down operations in early 2018.
In a LinkedIn post, Shyp CEO Kevin Gibbon admitted that his determination for “growth at all costs” and his unwillingness to listen to advisors were mistakes that his company was unable to recover from. And while those were undoubtedly the misjudgments that did the greatest damage to Shyp’s fortunes, it and other companies of its ilk, face a particular set of challenges that make their long-term survival difficult. In the case of Shyp, the costs associated with packaging materials, physical warehouses, and drivers paired with the need to keep prices low to attract customers make for finer margins and demand more of the startup capital than other ventures. And the documented struggles of other on-demand services to establish viability can out investors off of putting more money into what might be a losing bet.
Ultimately, Shyp’s fortunes illustrate the difficulty of establishing a business with a solid foundation and the need for proper and prudent planning, even when entering a space that can delude ambitious entrepreneurs into thinking success is assured. Trying too much too fast, without thought as to sustainability or cost, is a high-risk proposition that few can afford to make. And getting too wrapped up in an idea and the technological solutions that can be brought to bear can prevent a clear view of what the market is, and what can be reasonably expected and achieved. Finally, ignoring advisors can often come back to bite a founder. #onwards.
January 24, 2019 at 09:10AM
Forbes – Entrepreneurs