Go on, open the Postmate app and type “coconut water.” Key in your address, add a credit card, and kick back for half an hour - you’ve just joined the on-demand economy.
After 5 years in the trenches, CEO Bastian Lehmann and his cofounders Sean Plaice and Sam Street have finally become an overnight success, on track to reach one million monthly deliveries handled by 14,000 Postmates - couriers like you or me who hit the road to deliver goods from almost any retailer and restaurant, creating a sort of hidden city shipping infrastructure. And what are they delivering? Well, everything.
In Startup Grind’s home in Silicon Valley, I can grab a plate of Steam dim sum, add a Sprinkles cupcake, and wash it down with a microbrew 6 pack. But just an hour north in San Francisco - and in many of the 30 cities served by Postmates - you can also shop for electronics at Best Buy if you have a charger emergency, get your groceries at Trader Joe's, or pick up special local offerings like 4505 BBQ. Postmates is now leading the on-demand revolution among competitors like Google Express, Instacart, GoButler, Fluc, and many others as the industry heats up. But ask Bastian about his industry in the early days, and you’ll hear the story of a battle-hardened veteran who has fought to pave the way.
Watch the full interview here, and read on to catch our favorite lessons and takeaways.
Plan B: Successful Silicon Valley Founder
Sitting down with Derek Anderson at Startup Grind San Francisco, Bastian started his story on a personal note: his greatest dream during his youth was to be a film director. With enough exposure to technology and business news out of Silicon Valley, Bastian let becoming a founder of a scalable tech company become his Plan B if directing didn’t work out. Luckily, it didn’t.
He started his first company soon after dropping out of college. An ecommerce site listing scarce, highly discounted products, Bastian and his team had built an early flash sale site as their first venture in 1999. It was a true Silicon Valley affair: the team launched a product far ahead of customer demand, lead with a misunderstood technology, and bled money despite being founded in their parent’s homes. With his parents officially labeling his superpower as “losing money,” Bastian learned a valuable lesson in modesty - not to mention the price of phone bills and internet bills.
On closing down the venture, Bastian met his future Postmates cofounders Sam and Sean when he lived in Europe. Catching the attention of Thomas Korte’s team at AngelPad, Bastian’s team was stellar enough to place in one of the earliest batches of the incubator program. Their idea, however, didn’t get the same love. Called Curated.by, the startup would crowdsource and edit content around user interests - or something like that. The concept was confusing enough that their early fundraising meetings are stories unto themselves.
Immediately on arriving to the Valley, the Curated.by team realized they have a “stupid idea” on their hands, by Bastian’s own words. Nowhere was this more obvious than in fundraising. In 2010, they pitched Naval Ravikant, a respected Silicon Valley angel, on Curated.by. He gave them the rarest response of all: an honest “this isn’t going to work, guys” — with a twist: they left the meeting with an offer to become venture hackers at Naval’s new startup, AngelList. They would turn down the offer, but not before impressive Naval with a question that revealed compassion: “what would happen to AngelPad’s investment if we joined?” The founders’ honesty, alongside a choppy iPhone demo, was a tipping point in getting Naval to lead their angel round once Curated.by became Postmates, right after Naval invested in Uber.
How Bastian’s Customers Founded Postmates
Just how Curated.by became Postmates, though, is a bumpy ride. Like many entrepreneurs, Bastian has a secret ledger of ideas — schemes and companies he’d like to build during his lifetime — but one kept haunting him, pulled from his time living in Europe. German students like himself, blessed with close proximity to gorgeous and diverse countries with open borders, would frequently vacation in different countries on weekends and holidays. Bastian remembers loading up his car with his friends and driving or taking the train out of Copenhagen to France or more exotic locations, but rarely having the space for a surf board or snowboard. Postmates was his solution: he would recruit friends or strangers going in the same direction as you, but with more space, to carry your excess crap. The world would be your courier system.
Getting there proved to be easier said than done.
Bastian and his team set to building the most terrifying of startups: a three sided market, with buyers, merchants, and a network of couriers (the namesake Postmates). They needed infrastructure, so they started by signing up every existing messenger company in San Francisco, seducing them to be part of the supposed on-demand revolution that was so totally juuust around the corner, according to Bastian.
As they added merchants and eventually even courted buyers, their courier partners flopped. Whether due to miscommunication, perceptions of competition, or guardedness, the suddenly bitter courier companies forced Postmates to do the grueling work of building their own crowd of couriers.
Three Sided Market Woes
While the hustlers recruited messengers, the hackers were putting together an app that Bastian still calls one of the most beautiful things the team has built. Designed for merchants of shops selling goods demanding delivery — like furniture, electronics, or appliances — the UX was simple: a beautiful note taking app that was context aware for the object being delivered as well as the start and end locations.
Of course, Postmates' users had other ideas. As excited as merchants were to see the app created, the expected demand never appeared when the app did. In fact, no one used the app — except rebellious lifehackers who decided Postmates would deliver them food rather than furniture. These early users entered their current location, the address of their favorite restaurant or grocery store, and a shopping list. The Postmates team as stubborn as confused, canceling food orders. Still, some orders were getting filled — and these clever customers kept coming back every week.
The opportunity was good — Postmates was actually becoming the infrastructure play Bastian and his team were hoping for. The cheeky masses of users wanted food, and the Postmates team had to oblige. They ran a #GETITNOW campaign within the app, allowing users to order anything from anywhere and get it delivered, usually same-day. Too bad, then, that the team had no payments infrastructure for couriers to make purchases.
The solution: prepaid debit cards. The Postmates team literally bought out the San Francisco area of all $100 cash cards, buying $10,000 at a time in every store that stocked them in the city. Explaining this to the bank, Bastian said, was a separate story. Gift cards in hand, couriers could buy groceries, apparel, electronics, and more for users, who were charged in-app. It was be Postmates’ most profitable day since its founding - until the service was officially launched, to today serving almost one million orders each month, in the past peaking near 4 million in a single month.
The Series A Crunch and The Birth of an Industry
With the support of Naval and a number of Silicon Valley angel investors, Postmates had become a poster child for on-demand. Angel investors need only know that the founders are smart and committed, and that the industry is on an upward trajectory. So Bastian didn’t expect raising a series A would be the brutal uphill slog he encountered. He visited every leading fund in the Bay Area, only to receive a Silicon Valley no - “That’s really interesting, please keep us updated.” He didn’t come with tens of thousands of deliveries, millions in sales, or huge strategic partners, he said, making it hard to craft the only argument institutional investors wanted to hear: Postmates could be seen winning this entire industry vertical. “Sometimes you can be a little too early,” added Bastian, “there were no competitors and few data points. You have to believe in these guys when it’s institutional money.”
What finally tipped the scale was lighting some fire under the feet of investors with a competing term sheet. Though the terms weren’t great, investors saw the offer to invest as a good sign, and eventually Founder’s Fund led the A round. Brian Singerman would be their hero, convincing Peter Thiel and the rest of the partners to take Postmates to the next level.
It would be just months later, with the Founder’s Fund investment legitimizing the industry, that competitors DoorDash and Instacart would close their 7-figure seed or A rounds, respectively. The space has heat up dramatically since Postmates was first scooting around on hope, will, and cash gift cards.
The Future of On-Demand
Postmates has been on a tear, mostly driven by word of mouth and press. Referrals have driven the business, but as competition heats up, the company has gone to paid acquisition to stay ahead of rivals.
As far as Postmates' aspirations go, the vision hasn’t changed much: the team would like to become the real-world API for logistics. On ordering any product, be it a meal or a TV, Postmates wants to act as a transactional service layer to get goods delivered quickly and cheaply. In looking at the industry, however, with Amazon, Google, and Uber making similar plays, Bastian can see the possible centralization of the on-demand industry, whether in a single dominant player or an aggregated platform of numerous delivery services working together. The final goal of the on-demand industry: instant delivery that’s so common, it functions no different than a utility like water or power.
As Postmates aims for 50 cities and beyond, hitting profitability with 2 million deliveries per month by 2016, and builds out a workforce that’s making more part-time than a San Francisco barista would make full-time, Bastian left the crowd of entrepreneurs with some parting wisdoms.
First, think about profitability form day one.
Second, build a business, not just something that seems cool
Third, build a business model that can withstand economic abundance as well as downturns.
Postmates is transforming the way local goods move around a city by enabling anyone to get any product delivered in under one hour. Postmates' revolutionary urban logistics & on-demand delivery platform connects customers with local couriers, who purchase and deliver goods from any restaurant or store in a city.