The livery company’s growth spawns a slew of startups offering goods and urban services via mobile app.
Uber’s disruption of the taxi and livery-car industry has given it a market valuation so sky-high that a slew of startups are launching on the premise of replicating the company’s attack against the old order of doing business, whether it be food delivery, makeup, selling a mattress or even locksmithing.
The resulting movement of taking commonplace services and delivering them with the help of a mobile app is being referred to by some as the “Uber-for-X economy.” And that economy is booming. According to a report from venture-capital database CB Insights, startups that fit the Uber-for-X model have raised a total of $1.73 billion in venture funding in 2014. “It’s a convergence of trends,” said CB Insights analyst Matthew Wong. “Mobile apps are everywhere, e-commerce is huge, and a fast-growing, service-based economy is serving denser urban areas. People will invest in that.”
Uber, which is valued at upward of $17 billion and recently estimated it will reap $10 billion in revenue in 2015, has raised $1.2 billion on its own this year. Add that to the $475 million raised by fellow West Coast-based technology star Airbnb, and you have almost the amount of total investment that has trickled down to startups building on the Uber-for-X model.
Many of those newer outfits see New York as a necessary market to incubate in or explore, a fact that is reflected by Silicon Alley’s share so far in 2014: $82.2 million, an impressive amount for just nine deals.
“Inherently, we all like convenience,” said Toby Harvey, head of marketing at Pager, a Manhattan-based mobile app that schedules doctors for house calls in Manhattan and Brooklyn. “But delivery and the idea of ‘coming to you now’ are certainly ingrained in the DNA of New York City.”
Getting goods and services delivered to your door is nothing new in New York. But as the country’s largest consumer market, New York is fertile ground for entrepreneurs and investors who want to build an Uber-for-X business.
Flatiron-based Handy, a mobile app for booking cleaners, plumbers and handymen, raised $30 million in June. Online grocer FreshDirect pulled down a $10 million investment earlier this year. GlamSquad, a mobile app for scheduling beauty professionals for home or office visits, received $7 million in October. Pager, which was developed by a team that included Uber veteran Oscar Salazar, raised a seed round of $4.5 million in May.
For those Alley-based startups, New York’s notoriously expensive reputation is not a concern because using the Uber-for-X model is deceptively inexpensive, at first.
“Many people think about technology disruption as entirely new hardware, an entirely new application or an entirely new business model,” said Brian Manning, president of Centric Digital, a digital-strategy consulting firm. “By contrast, Uber leverages existing hardware, existing applications and existing business models to transform the experience of a traditional business.”
Thanks to the low capital needs for a startup to start up, Uber-for-X businesses in the five boroughs can focus on the upside of an enormous consumer market.
“The New York mentality is what makes the city so attractive as a tech hub,” said Mr. Harvey. “It does allow a certain amount of problem-solving in a different way. In our case, health care is a universal thing, and health care on demand is a ‘solve’ for tons of stress and friction.”
New York’s delivery-friendly mentality and layout allows entrepreneurs to experiment with new ways of doing business. Bringing a service (often performed by a contractor) to a person’s home not only offers convenience, but also saves a company both labor and real estate costs.
Flatiron-based KeyMe’s app lets users scan a physical key and upload that image to the cloud. Users can then order copies of the key to be delivered, or use their scan to instantly create a new key at kiosks in places including Bed Bath & Beyond.
“In New York, the density and infrastructure are ideal to service a lot of people using a hub-and-spoke model,” said Greg Marsh, KeyMe’s founder and CEO.
That business model is as much a part of the Uber-for-X paradigm as mobile apps. By creating a system that moves goods or services around a central hub—like Uber cars moving around bases–startups can deliver to users without having to invest heavily in physical assets.
Sam Rosen used this method to found MakeSpace, a Chinatown-based startup that uses a mixture of mobile apps, cloud technology and old-fashioned logistics to create an Uber for self-storage. From a small Manhattan office, Mr. Rosen and his team manage a fleet of trucks that picks up customers’ stuff, catalogs it, and takes it to a New Jersey storage facility. The entire customer interface is managed digitally and is optimized for speed and cost. In May, MakeSpace raised $8 million from a group of investors including Knicks star Carmelo Anthony.
NYC worth the effort
Using a smartphone to store one’s winter boots is still quite novel, however, and many Alley entrepreneurs say New Yorkers are slower than others to adopt mobile apps for everyday transactions. “That early adoption threshold is a little higher in New York,” said Mr. Harvey. “But we think it’s worth the extra effort.”
Some West Coast startups seem to agree. In October, Shyp—a San Francisco-based company that is using the Uber model to challenge traditional delivery services such as FedEx, UPS and even the U.S. Postal Service—signed a 10-year lease for space in Brooklyn’s Industry City. In keeping with the theme of convenience and mobile engagement, Shyp charges $5 to have a package picked up from a home or business, then allows users to track their packages on an app interface similar to Uber’s.
The company will look to try out its model in New York after raising $10 million in Series A funding in July.
“New York’s a major market,” said CB Insights’ Mr. Wong. “These apps are launching everywhere, but they’re definitely keying in on New York as a market where they need to be.”
While it remains to be seen if there will be capital left over for the next wave of Uber-for-X startups—like celebrity chef David Chang’s recently announced Maple, which will deliver gourmet dinners from a handful of kitchens around the city—investors’ interest does not appear to be weakening.
“I don’t think this is even the peak,” said Mr. Wong. “There will be more, and more significant amounts.”