Tech Brew Ride Home - (Portfolio Profile) Middle Mile

Episode Date: November 9, 2024

Middle Mile is the next evolution of the gig economy. Make use of your spare garage/basement space to provide fullfillment for ecommerce brands. More here: GetMiddleMile.com Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. All right. Sitting timer. Welcome to another weekend bonus episode of the TechMeme Right Home podcast. I'm Brian McCullough as always. This is a portfolio profile episode. We haven't done one for a long time. And I'm so excited to bring you one that the ride home fund has invested in that I'm super excited about.

We are going to talk today about Middle Mile. And we're going to talk. talk to Willis Jackson, the founder of Middle Mile. Willis, can you give us to start off the show sort of the elevator pitch of what Middle Mile is and does? Yeah, so Middle Mile is, you can think of us as the Airbnb of fulfillment. We are a distributed fulfiller for e-com companies direct-to-consumer channel. Those companies have a huge challenge trying to grow these days. we help them solve that problem by giving them a 100% two-day ship solution for all their orders. It allows them to capture more customers. And we do it by building a network of fulfillers who turn a basement or a spare room into a mini-fulfillment center for us and operate out of their home.

And we do that without being more expensive for the brand. So we're able to pay a good amount, give the brand a great upside and have a good business for ourselves too. Okay, I want to underline this. this is the sort of the gig economy, the sort of door dash or whatever, but underlining that you could be a person that has a garage, a basement, and what you would do is work with Middle Mile and you could be the person that fulfills the end point of the delivery for various e-commerce brands and what have you for you taking the goods and the orders and then you bring it out in your own vehicle, what have you.

But it's literally your garage, your basement. Like that's the simple take here. Yeah, it ultimately ends up being a pretty straightforward job. They store inventory and, you know, that extra room that's just got too much stuff in it, turned it into a little mini warehouse. And when we get orders from our partner brand, you know, we assign them to people. They pack the order. They take it at the end of the day.

They drop it off with our carrier who does the last mile delivery. And they go about their day running their errands. And, you know, we're able to pay, especially, you know, stay at home parents and folks like that who have a hard time finding an income. that works for them, a really good amount for part-time work that fits inside of their lifestyle. Could I poke on that a little bit again? The flexibility, is it bespoke in the sense that I could, you know, I have availability on Wednesdays into Saturday, or I've got the next two weeks, I'm free? Like, how does this work if I want to contract with you?

to do this sort of thing. Is it like literally being an Uber driver or what have you where I'm in control of my hours and stuff like that? To an extent, yes. I mean, our brands, you know, expect us to fulfill on weekdays, right? And so we ask people to be available consistently on weekdays. Stuff happens. People will get sick or, you know, there's summer vacations and things like that. excuse me, but they're, you know, it's ultimately up to them if they're going to be available.

You know, we incent people to be available. And, you know, it's not, if they don't think they're going to be available consistently on weekdays, it's probably not the thing for them. But as, you know, somebody who's spouse is a stay-at-home parent for a couple of years, they can tell you, there's two hours of dead time every day where you can, you know, you can fill in with other things and being able to generate some income in that situation is really helpful to the family. What if I'm a brand or an e-commerce partner?

Explain to me how this is, this is different. This is a new option for me versus the other options that are out there. I'll mention them. I'm not afraid to mention like, you know, Amazon fulfillment, Shopify, things like that. So explain to me how Middle Mile would do something different if I am that side of the equation. Yeah, for sure. A lot of the brands we talk to,

they, for a bunch of reasons, try to use Amazon as the sort of partner of last resort. They're a lot of times more expensive than a lot of other options. If you're going to sell on Amazon, you're going to end up paying the merchant fee. There's a lot of additional things that go into whether or not that's a good strategic decision for your brand. You know, compared to other fulfillment options,

you really get value from a two-day fulfillment option when 100% of your orders are going to be able to take advantage of it. 100% of the people come to the site. You can tell every single one of them at the top, hey, it's going to get there on Thursday of this week. And by doing that, you get more people purchasing. The other options in the market don't get you to 100%. And when they do, it costs a lot more than you're spending. brands already spend a lot of money on fulfillment. It's one of their biggest costs aside from the actual products itself.

So we end up being less expensive than the alternatives to try and generate that lift for them. And ultimately, it's less complicated because we're able to manage the inventory assignment and all the sort of additional under the hood stuff that they don't really want to have to deal with most of the time. So it ends up being a pretty high value proposition for them. Well, one of the reasons why obviously we invested is because we'll get into, I'll ask you about this, like, UNA economics, you've got this all figured out. But give me your background and how you came to do Middle Mile. On a sort of broad level, what is your entrepreneurial journey?

How did you get to here? How did you discover that this is a solution? solution that the world's ready for. Yeah. I mean, I've certainly taken a little bit of a winding path. I, from an early age, knew that I wanted to start companies. About, I don't know, 12 years ago I got into doing it. Realized I wasn't very skilled at a lot of the things that were important to making a business

successful and decided to spend some time in the Bay Area trying to improve my ability to execute. While I was here, I worked at a couple of e-com companies. I was responsible for trying to increase the amount of people who purchase from us. We ran some two-day ship experiments, and I saw the results, and I was like, wow, this is, this is like bigger than anything I've done in any, like, bigger than entire quarter's worth of work. And who were you working with again? I worked at two e-com brands. One was Madison Reed, and then I worked at a Grove collaborative, which is, I was the first product manager there, and they since gone public.

But I also, like in college, I worked for UPS, implementing some of their home-built software systems. And I spent some time as a dispatcher afterwards. And I've just sort of always, I've been around to logistics. One of my parents was deep into logistics. So it's just a space that I've always been kind of curious about. That funny enough, the idea came when I was catching up with a friend. And he was telling me how his sister-in-law is a state home parent was struggling

to find a way to make some money. And she was doing something and she was storing a bunch of stuff in her garage and it was just like sitting there. And it just sort of like the two ideas collided at the right time. And I thought, uh-huh, well, you know, maybe I could pay her to store my stuff in her basement. And, you know, she'd actually make money

instead of just watching some stuff sit around. So, you know, but I actually like, I shelved the idea. Like it was very easy at the time to grow as an e-com brand. Like the industry was growing 40% year over year for the most part. if I even tried to pitch it at that point, I think people just laughed me out of every meeting. But because it's really challenging now, like the environment is right for people to do more creative things and for brands to, you know, to try and venture outside of the normal well-worn paths, find ways to be effective and competitive.

One of the reasons I didn't laugh you out of our meeting was you actually, you had one of the more detailed, uh, pitches in terms of like, uh, I mentioned you in economics, but like the, the spreadsheet in terms of like, you had it down to if we do X, we'll get why, uh, the, the profitability is Z for this. Like, um, how, how much time did you put into? And I'm asking this sort of as people that are, oh, I've got a good idea. Hey, let's, let's, let's, let's, let's, let's, let's, let's, let's, let's allow people to do sort of gig economy by shipping and storing in their basements or things. How much time did you put into figuring out the actual nuts and bolts of this where you can figure out what is profitable for, from day one to day 10,000 in terms of like the volume and the scale and everything? I don't like more than I could probably count.

I mean, I spent most of my career in product and I, in that vein, I really specialized in discovery and validation and firsthand, you know, trying to take the sort of messy world of information you can get out of a conversation and turn it into something reliable that you can use to make a high quality decision with a predictable outcome. the I knew from the get-go this is a unit economics business if the economics you can't credibly say the economics work like you shouldn't you should not go down the path it's going to be like very very painful and if it doesn't work out like that's you just put discovery at the end instead of at the beginning where you can do it you know with a lot lower overhead so we had a ton of conversations to try and figure out what we were going to be able to charge and what our costs we're going to look like the I think, you know, moreover, I've, I worked at five different startups in the Bay Area. I've experienced firsthand when a company runs headlong into some discovery thing they should have done at the beginning that they skipped and didn't do for five years. And then it becomes the ceiling you can't break through.

And I was just sort of determined to not to do that to myself. It was not fun, to be honest, to go down that path. But it's, it's, it has actually been kind of. of interesting. Like, what we break, we've broken a lot of rules and conversations with investors, like pitching off a spreadsheet is one of them. But because, I think because of the work we put into it, it shows through that it is, you know, we're not, we're not making things up here. We like have an actual idea of what's going on and how to do it and where we're going with it. Well, okay, that's almost my next question because that is kind of, um, that's kind of to go in the opposite

a direction. Oh, I have this all plotted out. But what's the phrase? Everybody thinks they know how to win a battle until you actually get on the battlefield and you get punched in the face. Or is that Mike Tyson? Yeah. I'm mixing. Everybody's got a plan until they get punched in the mouth. So now, there are people that can go to business school and like, oh my God, I've got an MBA and I've I've plotted all this out, but then, hey, by the way, in the real world, your spreadsheet does not meet reality the second that you actually try to deploy it. So what have you found in terms of, you have had experience in this field, and you have thought long and hard about how you're going to deploy this startup. but what happens when you deploy in the real world and it doesn't actually meet what the spreadsheet says it should meet? Yeah, and I mean, I think we've had enough experience to know that we're wrong.

I've made a career out of making minor mistakes. Can you say that again? Wrong. Like, the spreadsheet tells you you're right, but like, okay, deploy it. you're wrong. Yeah, I know we're, I know we're going to be wrong about something, right? Like, there's, you know, I forget, 16 line items on, on like the unit economics. I know we're going to be wrong about something. We take, there are two things that I do, especially for our kind of business that I think gives us the confidence that that it's going to work, right? Is one,

be right about the stuff that's the biggest. I like, I've made a career out of making the only minor mistakes. Make sure that you cover the big stuff and that you're not wrong. wrong about the big stuff. But we know something in there is going to be wrong. We took a worst case view and tried to be extremely pessimistic in everything that we put on there. We have a more optimistic version of it that like, you know, is very rosy. But if the number is positive enough at the beginning when we're being very pessimistic and we know that we've nailed the big things, the things that like really move the needle, then when we end up being wrong about something, it won't undo the whole thing.

If, you know, if we looked at it and we said like, oh, our, you know, our margin per order is going to be like 10 cents, you know, the fact that we're going to be wrong about something is like a huge problem. But because what we found was something, you know, quite different, then it, I know that when we find something that's wrong, that it's not going to undo the business. And who knows? We might, like, we might find that we're way too pessimistic about a bunch of things

and that it works out to our benefit in balance. And, you know, I think with the approach we've taken, that's possible. It's almost not to put words in your mouth, but it sounds like what you're saying is, sure, you can create a spreadsheet with your ideals, but if you're creating a spreadsheet and you're creating a plan, a business plan based on experience, that's different because, you're already starting with a directional idea of what you think should work. And so as opposed to having it be like, this is my idealized view of what should happen. I'm going in the direction

of what I think should work, but I'm open to the idea that this and that will not work. And then I have to tweak. And that's sort of part of the philosophy of how you deploy. Yeah, exactly. I mean, like, I expect to learn my way through what we got wrong. But it's also, like, important to note, too. Like, this is like, the one you saw is like the, I don't know, like the 10th version of it. I mean, months ago. Yeah, yeah. We had several versions of it before, like, that we put together in the process of trying to discover does this work? Like, we had one where it was, what is the cost comparison to like if somebody's already upgrading a two day? And then when I talk to people, I realized nobody was doing that. So it was irrelevant. Like, we were comparing our costs against something. thing that was like they weren't spending. So we had to like we had to change the way we thought about it, changed the approach. And so, you know, I think it doesn't work perfectly for everything. For our business where the unit economics are they like it's it is it is the thing. If they don't work, there is no business. And let me underline that too because we're talking about logistics where

it is a thing where there's a lot of inputs and outputs that we're we're saying spreadsheets and and I'm not saying that you, we're using that sort of writ large as an analogy for how you do a startup. But it is in logistics and shipping and fulfillment, it is very, there are so many inputs and outputs that it is sort of that keeping track of all of these vectors, right? And so even though we're using that as a metaphor, what we're saying is it's a, Again, you have a plan of battle, and when you get punched in the face, it's about how you, the degree to which you are willing to keep going with what your philosophy was and your idea of the product was, and then to what degree you're willing to allow the reality of being in the market to change how you do things. Yeah, 100%.

Right. And like, I mean, if we wanted to do it as an MBA project, we would just keep researching that spreadsheet all day long. But, you know, we got to the point where we like said, hey, this is close enough. Like the rest of it, we're going to have to learn in the market. It's also worth noting too. Like our model has models, right? Like, you know, there's a, in logistics. Like every kind of logistics operation at some point has to like bring goods in and like unpack them and put them someplace or, you know, sort stuff. We have models for that that are a lot easier to understand from experience. You like know a sort is a sort. to a certain degree, there's like a range of outcomes. And so those things you put a little bit less time into, but you figure out the big stuff and then you got to go, you got to go see if it works. Fortunately, you know, knock on wood so far it is. Yeah. I've said this before on the show.

The only real job that I had for six months in my life was FedEx, a little different. But there's the famous story of Fred Smith doing the, the FedEx sort of business plan, and the idea that you could sort of plot out something that was impossible that people didn't think was possible. And then it is a famous Harvard Business School sort of thing where it's like, yes, I plotted this out, it was real and I made it real. So again, let's hope that we're on the same famous historical track as that. Where are we at with a middle mile right now?

Super early investing in you all. And I don't want you to give away too much. But where are you in terms of the market you're serving and the customers and even the the geographic areas that you're serving right now. Yeah, so, I mean, we are early. The, you know, we've got our first customer, the biggest challenge in a business like ours, you know, if you're the brand and you pick the wrong partner,

boy, it's going to make your life miserable. And if they're really bad, they could really undo your business. So, you know, it's a very reference-driven sector. We have, getting that first customer's cruise, We got the first customer and we started operating with them not too long ago. You know, but there's a lot of interest in what we're doing. Like I said, brands are, they really are hurting. And they're willing to look at things that, you know, can help them chart a path forward for themselves.

You know, so we're working with customer one. We're about to hit the holiday season where things get predictably very busy in our line of work. And, you know, the expectation is that in January, we're going to have a lot of of people who are excited to talk to that first customer and start trying us out as well. If I was a brand and maybe you're not necessarily ready yet with the holiday season coming up, but let's think down the road. If I was a brand that was interested in working with you, what can you provide me again in terms of like what you could do for them geographically, for their fulfillment, that sort of thing?

Yeah. So, I mean, brands talk to. us about working with them one of two ways. Excuse me. They either are interested in us being, you know, the whole fulfillment solution for them where we fulfill all their all their direct consumer orders or they, you know, in some cases, in sort of rare cases, they have an existing traditional fulfiller that they really like or one that they operate themselves in a specific location. And we can take the regions that are sort of outside of the two-day coverage or around that

location. we aren't geographically locked. You know, our opinion is if you're the brand and I say like, oh, we're expanding in Denver right now. You're like, I don't care about Denver. That does be no good. It's like, how soon can I tell every visitor that I get, that they get free two day?

That's what they want, right? And so for us, when we talk to a brand, we talk about how long it takes to get them to 100% coverage so they can start to see that payoff. But we can work, you know, it's lower 48, but we can work around whatever their sort of requirements are for, you know, how they want to work with us and give them that lift. I hadn't mentioned this, and I should have earlier, get middlemile.com is how you can get

in touch. G-E-T, M-D-D-D-L-E-M-I-L-E dot com, get-M-L-E-E dot com. Also, since we're very early investors, if there are other investors that are listening, that have an idea for scaling this sort of thing out. Where are you at with the raise right now? And that sort of thing? Yeah, I mean, we are pretty far along. We've got a lot of folks that have been having conversations with us,

especially in the last couple of weeks. It's been a huge uptick and interest. But we are, you know, we're moving through the process. And if there are people who are like, oh, my God, I've been waiting for somebody to solve this problem, you know, they should reach out. Yeah. Finally, what about if I have a garage, if I have a spare Wednesday or whatever? Again, is it geographical based? Does it matter to you yet? And by the way, it's still so early that, you know, obviously, you know, you might not be all lower 48, but like if anybody is interested in getting in touch for that sort of thing, what should they know?

Yeah, absolutely. When we tell people what we do, like very often, like a response is like, oh, my like, you know, my father-in-law would love that or, you know, my, my cousin is a stay-at-home parent. She complains about money all the time. It's like these kind of things like come up. Like there's a contact us for them at the bottom of, you know, our homepage, like drop us. Their contact info will reach out. We have a wait list for people who want to work with us. And, you know, as we get the volume to make sure that it's going to be.

good experience for them. We bring people on and there's like there's not anywhere, you know, in the states where we don't want to add people. And, you know, if they're, if they're in a position where the economics makes sense, then it's usually a pretty easy conversation. Great. Willis. Again, this is get middlemile.com. Thank you for coming on the pod and telling us what you're up to. My pleasure. Thanks for having us. All right. There we go.