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Borders bookstore founder wants to save the home delivery market with robots

January 13, 2022, 4:39 PM UTC

Louis Borders, the founder of the Borders bookstore chain, has wanted to deliver groceries to your door for two decades.

The first iteration of that was Webvan, the grocery delivery business that raised $800 million, then filed for bankruptcy in 2001—two years after its initial public offering—unable to garner enough cash to maintain its high losses. Borders has re-emerged, this time with plans to use robots to get on with it. The challenge will be convincing investors that it will work this time around.

His new venture—Home Delivery Service, or HDS Global—says it has finished building the robotic technology for the fulfillment centers it wants to open. The startup has also added another $5 million of funding into the mix from angel investors, including former Walmart CEO Eduardo Castro-Wright and Rudy Salas, a former senior vice president at Coca Cola.

But that’s still a far cry from original fundraising plans. The company was in talks to get $25 million of Series A funding in May 2020, but that fell through, per Pitchbook. Borders says that smaller rounds of funding have been sufficient and less dilutive, and that the company plans to go out later this year for a larger round. (The company has raised $8 million in funding since then from angel investors, including this round)

With a total of $26 million in debt and equity from Ingram Micro, a handful of angels and initial investors including Toyota Motor since 2013, Borders has moved forward with his ideas, building a technology center in Indianapolis to demo its artificial intelligence-powered robots, which are able to pick and pack items, stack trays, and move goods around the warehouse. These automated workers should be able to keep its warehouse labor costs low, Borders says.

“In a typical fulfillment center—in the warehouse—there would be [around] 200 people to run that, and we will be more like 60,” Borders says. Each fulfillment center will cost $40 million to install and be able to handle capacity for about $200 million in annual sales, he says. Just like Webvan, Borders is envisioning a fleet of on-staff delivery workers and HDS Global vans to drop off groceries within five hours, or in an hour for a premium fee. Unlike Webvan, the fulfillment centers will be smaller, largely robotic, and there will be more of them in a metro area. They’re also taking their time to roll it out.

Borders has his work cut out for him. For one, they’re behind schedule. In May 2020, Borders told Forbes they should be able to start taking orders in 2021. HDS Global is still about six months out from beta testing, Borders says, and it will likely take another 12 months after that to open the first fully-operational fulfillment center in South San Francisco.

Not to mention, Borders is trying to get back into a market that is saturated with dozens of players, ranging from goods delivery companies with their own fulfillment centers, like GoPuff, to “ghost kitchens” for food delivery, thanks to Travis Kalanick. 

All of the companies honing in on rapid home-delivery are fighting an uphill battle when it comes to the economics, says Len Sherman, a professor at Columbia Business School, who describes the funding going into this sector as “lunacy.” (Sherman used to work for George Shaheen at Andersen Consulting—before Shaheen went on to become Webvan CEO in 1999)

“We’ve been through this so many times and here we are, again,” Sherman says, adding: “It’s a very, very tough business to make money and distinguish yourself.” Ticket sizes tend to be low, and it’s extraordinarily inefficient to run orders when they come in, according to Sherman. Jokr, a startup focused on instant delivery for local groceries, reportedly told investors that it was losing $159 per order in the U.S., according to data seen by The Information

Can technology save the bottom line? Borders thinks so, and he has for a long time. He says that there were plenty of customers for Webvan, but it expanded too quickly and quality suffered after it went public (Borders notes he left the company prior to the IPO). There’s a huge opportunity, he says, in being able to sell private-label brands directly to customers and not just distribute your own items.

“That’s the thing that we started out with a long time ago,” he says, adding that the technology wasn’t there, and it still isn’t. “We had to build it ourselves.”

TPG Partners goes public… The Fort Worth, Texas-based alternative asset manager and private equity firm, is hitting the Nasdaq today, under the ticker “TPG.” It’s one of the last large private equity firms to go public. The firm priced shares at $29.50, garnering a $9 billion valuation, and it and its shareholders raised $1 billion from share sales. 

See you tomorrow,

Jessica Mathews
Twitter: @jessicakmathews

A previous version of this essay misstated the price of TPG shares.


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