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Good Saturday, friends; I hope you’re all right. As you read this, I have returned to my usual digs in the northeast, leaving sunny New Orleans behind. Yes, next week’s letter will be more emotional due to the weather. Anyway, there are two things to talk about today, so let’s get started! I Alex
When APIs are developed on the platform
Earlier this week, the exchange spoke with the founder and CEO of Shippo. Laura Berens Wu Following his company’s announcement of a partnership with Shopify.
Shippo participates in shipping by offering merchants a SaaS offering that gives them access to bundles and therefore lower shipping rates. The company raised $45 million last year at a valuation of less than $500 million. (In 2019, when the company raised $30 million, Berens Wu said his company has SaaS-like gross margins, for reference.)
The company has grown rapidly, doubling its shipments in 2020, with sales being poorly tracked at the time, and doubling its size in 2019.
In early 2021, when we last contacted Shippo, they had a great plan up their sleeve to keep this growth going (emphasis mine):
Now with more capital, what’s next for Shippo? According to the CEO, the startup wants to invest more in platforms (like where Shippo bakes into the marketplace).International expansion (Shippo only handles “a little” international shipping, according to Berens Wu), doubling its core customer base.
Berens Wu said this week that the shipping offer is now a “canteen rate” on both the platform and the marketplace, so individual merchants expect that if you offer them a digital storefront, they will offer payment support with shipping options. Shippo wants to be the shipping tool the platform provides.
The CEO said that after receiving incoming interest from the Marketplace about 18 months ago, his team began building an API for their service that would allow others to integrate the Shippo service into their Marketplace.
The deal has a revenue share, Berens Wu said, but with Shopify and other potential partners offering a huge amount of benefits, the math could work well for Shippo. This is because the service gets better with volume. The more packages Shippo helps to send, the more profitable it is to make deals with transport companies around the world. And now it has a way to drastically increase the overall volume, perhaps making it more capable of monetizing the world of e-commerce delivery.
We’ll have to contact the company in a few months to see how things are going, but this all sounds a bit optimistic.
Berens Wu contacted us after hearing about our report on the evolution of API-based startups. Well, now that a company has an API that is the key to its overall growth trajectory, our thesis is: SaaS is clean, but APIs may be the business model of the future.
Insurtech: Still alive!
Insurtech has had its ups and downs over the years, not even releasing expired horses into the wild. From massive fundraising for non-insurance startups to large sums of money for the InsurTech market, we have seen a series of IPOs that had no value once they debuted. It’s corrupted.
and still. Earlier this year, the exchange wrote that InsurTech’s VC activity last year was strong despite a deluge of negative news about some of the biggest names in the industry. At one time, things were so hot that in early 2020 we were trying to figure out “why VC is pouring money into the insurance markets.”
Well, venture capitalists are still working on it. This week, PolicyGenius announced the closing of a $125 million round. The company’s software essentially allows consumers to find and purchase various insurance products online. Considering how big the insurance market is, getting people into the right product is big business. How valuable was the credit karma, if you will.
PolicyGenius competitor Zebra raised $150 million last April just for the record, so the PolicyGenius round came as no surprise. But it highlights the fact that while public market news may stimulate the startup sector, it does not disrupt it.