A startup that cracked the code on ultrafast delivery just raised $20 million. Here's how its CEO pl

Publish date: 2024-07-07
2021-04-07T15:03:39Z

As companies like UPS and FedEx dealt with the pandemic-induced boom in e-commerce, delivery delays became the norm — and a disaster for time-sensitive food shipments.

Any company that could help navigate the myriad supply-chain disruptions stood to win big — and the San Francisco delivery startup AxleHire was one of the winners. 

"FedEx and UPS were declining volumes," AxleHire CEO Adam Bryant told Insider. "We were the beneficiary."

The company's package volume increased 50% from November to December when national carriers were at their most overwhelmed, according to Bryant. And AxleHire's 2020 revenue was nearly four times that of the previous year, he said. 

The startup is looking to capitalize on that momentum with a $20 million Series B funding round led by Ajax Strategies, with Eclipse Ventures, Quiet Logistics, Bee Partners, and Acorn Pacific Ventures also participating.

AxleHire facilitates same-day and next-day delivery in major cities for any company that values speed — mainly those with perishable products. The startup launched in 2015 and quickly took off with meal-kit companies because of their unique shipping needs. It now covers Dallas, Houston, Los Angeles, San Diego, the San Francisco Bay Area, New York, Phoenix, Seattle. and Portland, Oregon. 

"The inventory is essentially a ticking time bomb from a freshness perspective," Bryant said. "The customers are waiting for their order to eat, so the stakes are higher. And the packages tend to be larger because it's a week's worth of meals."

For any perishable shipper without the right preparation, 2020 was "brutal," said Charles Kim, the vice president and head of distribution and logistics for the prepared-meal company Freshly. 

Beyond perishability, meal-kit companies have to be sure not to sell more than they can produce or deliver, since you can't back-order dinner. When carriers falter or suppliers don't deliver, companies could be forced to respond by ratcheting down marketing efforts and intentionally selling less, Kim said. Constraints, when it comes to delivery, are particularly bad for business.

Freshly avoided this fate in 2020 by working with a long list of carriers to make sure there were plenty of redundant services to fall back on, Kim said. It also expanded its business with AxleHire, which it has been working with for more than two years, and now moves a "sizeable" amount of its package volume with the company, Kim added. 

"As a food company, we want to work with small, hungry companies that are willing to provide a little bit more flexibility than some of your larger, more established last-mile carriers," Kim said.

2020 proved the value of this strategy. 

AxleHire's warehouses act as hubs where packages are sorted overnight by gig workers for next-day delivery by gig drivers. And the company offers real-time tracking for every delivery. 

The magic is in the way the company batches packages and directs drivers, according to Bryant. AxleHire's software builds delivery routes for gig drivers the same way UPS or FedEx would for its trucks. That goes far beyond the messenger model most gig-economy startups, including Uber and Lyft, are building, where just one package goes in just one car. 

Some gig drivers deliver up to 100 packages in a day depending on their vehicle, Bryant said. 

Plus, Bryant said, AxleHire is more nimble than UPS and FedEx because it doesn't own any of its infrastructure and can stand up a new warehouse as soon as demand appears.

"If you think about the traditional carriers, where you have heavier infrastructure — they have trucks, they have employees — it's a lot harder to spin up capacity on a dime," Bryant said. 

With the new funding, AxleHire will build up its software and physical infrastructure to enable delivery in eight hours or less from the moment a package arrives at an AxleHire facility, Bryant said. He called it "blurring the line" between same-day and next-day delivery to offer a service few other carriers can directly compete with. The transition will require more staff and more sophisticated software, he added.

AxleHire hubs fill up during the day. Workers sort packages overnight. And deliveries begin the next morning. Switching to a model where packages leave the warehouse based on what time they enter is a big change.

"That's really a complete operational reconfigure," Bryant said. The future likely holds full-time package-sorting employees and automated sortation equipment, but with the business growing as fast as it is, Bryant doesn't see those coming too soon, he said. 

"We've been growing so quickly that we've been outgrowing our buildings. So we don't want to do any sort of heavy automation where you have to physically bolt things to the floor, which will make us rigid," he said.  The company operates nine warehouses now, and it plans to open two to three more before the end of the year. 

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