ByBox is a smart locker business in the UK that hasn’t made many inroads in the US, and doesn’t really exist anywhere else yet. This is fascinating new logistics technology.
Unfortunately this also seems like a case study of excellent logistics technology with a questionable business model. Founded in 2000, the business was bought in 2018 by Francisco Partners for about US $280M. I’m going to venture out on a limb and hope these poor founders achieved $280M in revenue after 18 years.
For perspective, Shopify announced the acquisition of 6Rivers warehouse robots in September 2019 for $450M, which they expect to achieve $30M revenue in 2020. That’s 15x revenue, for a company that is 4 years old.
I’m not dissing ByBox. 6Rivers raised almost $50M in those 4 years, while ByBox appears to have done little more than a seed round back in 2003. Rather, I’m trying to put in perspective that if ByBox had greater revenues than $280M, it would have sold for less than 1x revenue, which is unlikely for such an attractive business. And if ByBox were, say, less than $50M in revenue, it would have taken 18 years to get there, and I would have recommended they give up a while ago.
Hence we’re likely looking at a 1x sale, which is frankly typical of an old school, low margin logistics business.
Which is to say, ByBox is a fancy looking logistics technology, that I’m assuming had pretty great entrepreneurs, that couldn’t get a major software line into their financial statement.
So if I think about their financial statement, and assume $280M in revenue, then I’m going to guess 90% is pure warehouse-like low-margin logistics services and land leases ($252M), and 10% is recurring software revenue ($28M).
To anyone thinking of emulating this business in a new market, my challenge is for you to build just the software portion of this business, and bypass the physical logistics entirely. Outsource it. Recruit an old school logistics business to make a killing off your efforts.
Then make a list of 10 industries where you think the software can apply, and go interview field managers in each industry and see if they agree. Let them educate you on the unit economics, and pros and cons of your business for their use case. Then pick the top 3 best industries, and buy sushi lunch for the field managers in exchange for them letting you “duck tape” together a test of your idea on their watch. By duck tape, I mean DON’T BUILD ANY SOFTWARE. For example, go to Costco, buy a locker, put inventory in it, and go stand by the locker with a clipboard. If the unit economics are good, the manager will love that you’re doing this for him, and he’ll support you in presenting your case to his manager. If you can’t fight your way through this test, then why would you waste time building the software first?
And if this path doesn’t make sense to you, consider that you might be more of the technology guy, and that you need a partner who is the customer acquisition guy. He’ll eat this up.
And we’re here for you every step of the way. We live for this. Before funding you, we would want to see you do a rough and tumble test like we describe above. We could then help you recruit a rockstar partner, if needed. Please visit my office hours and continue this conversation.