Just four years after its initial launch, on-demand shipping startup Shyp shuttered operations earlier this week, becoming the latest in a string of cautionary tales for new entrants into the shipping and logistics space.
Shyp, a San Francisco-based shipping startup that at one point sported a valuation of $250 million, shut down operations for good earlier this week, according to Chief Executive Officer Kevin Gibbon.
One of several entrants into the shipping market looking to capitalize on the elusive “Uber for freight” model, the idea behind Shyp was relatively simple: create a platform where shipping goods around the world was as easy as catching a lift on the now ubiquitous ride-sharing app.
Initially intending to cater to small-scale merchants like those selling good on online platforms such as eBay and Etsy that didn’t know how to consolidate shipments and get the best courier rates, the company quickly expanded, building out features like advanced scheduling and bulk upload before turning its focus to businesses that ship in large or commercial quantities.
“In 2014, we launched Shyp to make shipping items anywhere around the world as easy as two taps on a smartphone,” Gibbon wrote in a LinkedIn post announcing the company’s closure. “Almost immediately, it was clear the idea resonated. We couldn’t keep up with the growth. Customers were pouring in and shipments were pouring out. Our service took everything people disliked about shipping – from finding a box to waiting in line at the post office – and eliminated it.
“Based on the frequent, overjoyed feedback we received from customers, it felt like we’d accomplished the impossible: making shipping cool. Turns out people are passionate about how much they dislike shipping. Who knew?”
But the execution of this concept at scale, not to mention intense competition from other startups looking to ride the “on-demand” economy to shipping glory, proved much more difficult than initially imagined.
One of the primary difficulties the company ran into was that it had initially priced its services the same regardless of the item being shipped and in a sense commoditized its own offerings. Eventually, Shyp tried to tack on fees for online returns and larger bulk shipments, but it wasn’t enough to stop the bleeding, especially when demand started to slow.
“Consumer growth slowed,” wrote Gibbon. “People close to me and the business began to warn that chasing consumers was the wrong strategy. After all, how often do consumers ship things? I didn’t listen.
“At the time, I approached everything I did as an engineer,” he said. “Rather than change direction, I tasked the team with expanding geographically and dreaming up innovative features and growth tactics to further penetrate the consumer market. To this day, I’m in awe of the vigor the team possessed in tackling a 200-year-old industry. But, growth at all costs is a dangerous trap that many startups fall into, mine included.”
After an aggressive expansion, Shyp downsized last summer, suspending its operations in New York, Chicago and Los Angeles in order to refocus on its primary market in San Francisco as well as the business’ core profitability.
“Knowing what we know now, there’s no question we’d do some things differently,” Gibbon said a the time. “We would have built profitability in from the beginning. And shifted to serve business customers sooner. In a business that requires significant investment to grow physical operations across multiple cities, we would have focused on achieving success in one market before expanding into others.”
In July 2017, Shyp “narrowed our focus entirely to business customers and shut off any part of our business that wasn’t generating revenue,” but this “seemingly obvious” decision wasn’t an easy one, according to Gibbon. “It was disappointing to many, adversely impacting our employees, customers, and partners.”
Once the decision was made, “within a matter of weeks, the health of Shyp’s business did a complete 180,” he said. “The more changes we made to the platform and features we launched for our small business customers, the better the numbers looked.
“By December of 2017, we were generating real revenue in San Francisco, effectively breaking even from a bottom line standpoint,” he added. “The team worked relentlessly, proving that the new direction was uncovering a massive market opportunity. We fought tooth and nail and did everything we could.”
Unfortunately for Gibbon and the Shyp team, however, it was too little too late.
“The progress was exciting, thrilling even, to everyone involved with the business—if only we’d made it sooner,” he wrote. “Unfortunately, our earlier mistakes had left us with too little runway and insufficient resources to continue pursuing the new direction.”
Now, Shyp joins a long list of cautionary tales in the tech startup space, but there are lessons to be learned beyond the basic fact that ensuring profitability is paramount to a company’s success in a market where there are not only other startups, but established service providers as well.
To be clear, this is still an important lesson for startups in any sector: a novel approach to solving age-old problems will get you in the door and may even get you a nice chuck of venture capital funding, but without a clear path to consistent profits, the business is all but sure to fail.
The second lesson here is that shipping and logistics is a tough market to get a handle on, especially for new entrants.
By comparison, disrupting the taxi business was relatively simple. All it took was a platform that could connect regular people with cars and free time to people that needed to go somewhere but lacked the necessary conveyance.
But with shipping goods, especially internationally, there are a whole host of other concerns, from dealing with multiple providers like ocean carriers, terminal operators, airlines, railroads and trucking companies, to customs brokerage and regulatory compliance.
In the end, all that was too much for Shyp to manage at scale.
“This brings us to where we are now: out of time,” wrote Gibbon. “My early mistakes in Shyp’s business ended up being prohibitive to our survival. For that, I am sorry.”
Abandon Shyp! Ambitious growth plans sink ‘on-demand’ shipping startup
