Building a marketplace for warehouse space isn’t the most sexy job in today’s tech industry, but for one Seattle startup, it is certainly proving to be lucrative.
Flexe today announced a $14.25 million funding round led by Redpoint Ventures. This brings total funding to date for the 3-year-old startup to more than $20 million.
Flexe’s marketplace makes use of excess warehouse space. Its platform includes a network of more than 370 warehouses across 45 markets — up from 100 warehouses across 30 markets one year ago — in North America that offer more than 400,000 rentable pallet spaces.
Former aQuantive and AdReady executive Karl Siebrecht told GeekWire that his 20-person company is “growing pretty aggressively” and will use the fresh cash to meet demand. He said revenue grew by 600 percent in the past year.
“We have ambition to continue to grow at those rates into this year,” he said.
The goal for Flexe is to help those with unused space earn additional revenue, while enabling businesses to utilize a pay-as-you-go, on-demand model when they need additional warehouse space. This provides an alternative solution to the fixed costs that often come with a lease, particularly for retailers that only need extra storage space for a limited amount of time — perhaps a beverage vendor that sees sales spike in the summer, or a retailer that sells its inventory during the holiday season.
Beyond seasonality, Siebrecht said another use case on the demand side of Flexe comes from “supply chain disruption,” or when businesses face unpredictable problems that affect manufacturing and production with suppliers and distributors.
Then there is the Amazon effect. Thanks to Amazon’s robust delivery network, people who make online purchases now expect to receive shipments faster than ever at cheap rates. Having multiple distributions centers allows e-commerce businesses to finish the “last mile” of a shipment more efficiently.
“If you have tens of billions of capital and put up 160 locations, you can do that really well,” Siebrecht said, referencing Amazon. “But if you are like most companies in the world, that isn’t feasible. The ability to rely on a marketplace model can really help you compete better and keep up with those changing consumer needs.”
On the other side, a warehouse operator will typically pay the same monthly lease on a building whether they are operating at 100 percent capacity or 10 percent capacity. With Flexe, they can earn additional income by driving higher utilization of their space.
Siebrecht compares Flexe to Airbnb for the supply side, and Amazon Web Services on the demand side.
“On the supply side, we are like Airbnb,” he said. “People with extra capacity can list it in a marketplace and sell that capacity to others.”
Meanwhile, the pay-as-you-go model for Flexe is similar to how Amazon makes money on its cloud computing service.
“It’s purely a variable cost model — you don’t have to lease space and hope that you got your forecasts right,” Siebrecht explained. “In that sense, we offer warehousing-as-a-service.”
Flexe, which requires a 50 pallet, 30-day minimum (or spend $500), makes money by taking a 20 percent cut of each transaction.
Siebrecht, whose company was a finalist for the Startup of the Year category at the GeekWire Awards, said that the technology developed by Flexe is key to its early success. The platform helps buyers and seller’s work efficiently and together, all the way from shipping to receiving the inventory and everything in between.
“The technology takes a ton of friction out of the equation and basically enables all different participants in a marketplace to operate together,” Siebrecht added.
Siebrecht wants Flexe to double the amount of warehouses on its platform, from 300 to 600, within the next year. He also wants to reach 90 markets, up from the current 45, in the same time frame.
The CEO noted that now that as supply chain efficiency becomes a higher priority for companies, there is more need for a technology like Flexe in a market where U.S. businesses spend $1.4 trillion a year on logistics, according to Siebrecht.
“The market size is massive,” he added.
There are other startups building solutions for supply chain improvement, including fellow Seattle on-demand trucking startup Convoy, which helps match trucking companies with shippers.
“It’s not accidental that you are starting to see a bunch of these startups coming into this category with a better way of doing things,” Siebrecht said.