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Good morning! It's Tuesday, February 13th. Today, we’re taking a look at Starship Technologies, the company bringing delivery robots to major cities across the world!

THE FEATURE

Starship: Bringing Sci-Fi Dreams to Life with $230M in Funding

Whether it’s in historic movie franchises like Star Wars or classic novels like Hitchhiker’s Guide to the Galaxy, science fiction fantasies have always involved automated robots whizzing around in public life. 

Those fantasies have made a big step towards becoming a reality this month, with Starship Technologies raising $90M to expand its fleet of automated delivery robots!

So, What's the Business?

Starship Technologies was created in 2014 by Janus Friis and Ahti Heinla, successful entrepreneurs best known for co-founding Skype. 

The company’s sole product is its “Starship robots,” which ship groceries and restaurant deliveries to consumers. Each robot can operate for 18 hours and travel ~25 miles on a single charge, navigating across city sidewalks using the LiDAR technology seen in self-driving cars. 

From 2014 to 2018, Starship completed a million deliveries with their robots. Today, they’ve made over 6M deliveries with their 2,000+ robots in major cities like London, Washington, DC, and Bern.  

Its latest $90M funding round brings Starship’s total funding to $230M. The company has not disclosed its valuation, but PitchBook estimated a modest $110M valuation in 2019. 

How They Win: Making 15-Minute Deliveries Financially Feasible

When the pandemic hit, we saw a massive spike in delivery service usage and demand for near-instant deliveries. 

However, that spike didn’t last long. In 2022, we saw DoorDash shares drop 62%, and online grocery orders dropped 29%. 

That’s because business models that revolve around 15-minute to same-day deliveries struggle to turn a profit. Delivery drivers, on average, can only complete two drop-offs per hour. Even if those drivers are making minimum wage, it’s a substantial labor cost that most consumers aren’t willing to pay— which is why most businesses have to subsidize their same-day delivery operations. 

But, the instant delivery model does work if it’s automated. Having a Starship robot bring food to your door costs a measly $1 to $2 delivery fee. 

Starship robots only operate within a few miles from their charging hub. While this may seem like it’s severely limiting, it’s intentional. 

For one, restricting these robots to a few square miles helps them learn to navigate cities highly efficiently via machine learning. 

More importantly, these robots solve the last-mile shipping issue, where approximately half of shipping costs come from. By automating that final mile, Starship has acquired partnerships with major grocery players like Tesco and food delivery services like Grubhub. 

Key Observation: Creating New Demands in the Market

Most companies become successful by identifying an existing consumer demand and filling it. When Friis and Heinla created their first company, Skype, they took a different approach. 

Rather than addressing the current market, Skype set out to shift public sentiments and create new consumer demands they were best positioned to fill. Friis and Heinla saw the internet’s potential to facilitate online chatting and video calling and were the first to popularize the concept. 

Friis and Heinla’s goal with Starship technologies was to popularize robots in public, just like Skype popularized internet video calls. Heinla has stated that his primary interest as an entrepreneur is not to generate massive sums of revenue but to visibly change how humans interact with one another and the world. 

However, while attempting to change the world, they’ve created massively successful companies. 

The lesson: the businesses that create new consumer trends are best positioned to profit from them.

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