Dropoff raises $7 million to take on old-school courier services

June 22, 2015, 4:00 PM UTC
(c) Alistair Berg

Startups are coming up with fresh approaches to nearly every industry, and courier services are no exception.

Austin-based company Dropoff is building a same-day delivery service for businesses, and has been operating in Austin and Houston for the past year. On Monday, the company announced it has raised $7 million in new funding to help it expand to more cities and continue to build out its product.

While very similar to traditional couriers that businesses have been using for years, Dropoff says its selling point is the much better experience it provides thanks to things like down-to-the-minute arrival time estimates, realtime-tracking, and upfront and transparent pricing, among other things. It uses couriers on either bike, car, van, or SUV, based on the delivery.

“Traditional couriers haven’t really evolved much,” Dropoff co-founder and CEO Sean Spector told Fortune. Dropoff wants to handle businesses’ last-mile logistics, he added, to take on FedEx, if you will.

Dropoff’s customers largely fall into two category of delivery needs: traditional and e-commerce. Some customers use the service for very traditional business courier needs, like delivering documents and machinery parts. Dropoff’s e-commerce clients use the service to deliver their wares, like cupcakes or flowers, to their customers.

For Hey Cupcake, a Texas-based cupcake company, Dropoff has taken over nearly all of its delivery duties, CEO Frank Drew told Fortune. At the first, the company, which has seven stores in Austin but does all its baking in one central location, was using Dropoff for any additional deliveries to its stores, as well as to any customers that its own drivers couldn’t handle. Now it’s turned over all of its deliveries to Dropoff, except for catering jobs. Drew and his team no longer have to worry about predicting how many drivers they need to staff on any given day with unpredictable demand, he says.

“Now I feel like we’re in the cupcake business, not in the delivery business,” he said of his newfound freedom from managing his deliveries.

The delivery service market is certainly getting crowded, with everyone from Postmates to ride-hailing companies like Uber and Sidecar getting into the business. Companies like Amazon have been heating up the logistics space with the e-commerce giant’s popular two-day delivery option and its same-day Amazon Fresh service for grocery items. But Dropoff says it’s different and not worried about other companies because it’s exclusively focused on the needs of businesses, not on servicing consumers as Postmates does, for example. While that sometimes means Dropoff’s couriers make deliveries directly to a client’s customers, it’s only type of delivery the company makes, and it’s not in the business of acquiring consumers as its customers.

For Paul Bricault, who headed Greycroft Partner’s investment in Dropoff in this new round, that enterprise focus is what distinguished Dropoff from others.

With that said, Dropoff is sure to face challenges as it continues to grow. It will have to navigate the unique geography and industries of each new city it expands into, ensure it maintains the quality of its drivers as it increases hires, and handle potential regulation issues that may arise, among many other hurdles.

Spector founded Dropoff with Christian Carollo, Ted Hong, and Jason Klann in late 2013. Greycroft Partners led this latest round, with Correlation Ventures, Texas Atlantic Capital, Wild Basic Investments, and others also participating. The company previously raised $1.85 million in funding.

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