Flexe is raising more capital ahead of schedule as the pandemic-driven e-commerce boom spurs faster-than-expected growth for its warehousing technology platform.
The Seattle startup announced a $70 million Series C round led by new investor T. Rowe Price, with participation from existing backers Activate Capital, Tiger Global, Madrona Venture Group, Redpoint Ventures, Prologis Ventures, and others. Total funding to date in the 7-year-old company is $134 million.
Flexe originally planned to raise another round sometime next year. But investors were ready to put more fuel into the business given its recent metrics.
“Flexe is poised to become an impactful company in the logistics industry for the long term,” Andrew Davis, director of private investments at T. Rowe Price, said in a statement. T. Rowe Price recently led a $2.5 billion round in electric car maker Rivian and was an early backer of Facebook, Twitter, and other big-name tech companies.
Flexe operates a marketplace that gives retailers such as Walmart and Staples a way to purchase warehousing space on an on-demand basis and turn what was traditionally a fixed expenditure into a variable cost. Customers don’t need to invest millions into long-term warehouse leases; they can use Flexe as needed.
The startup has described itself as a “warehousing-as-a-service” company. Nearly 2,000 warehouses across the U.S. and Canada use Flexe’s software to bid on various offers, up 50% from last year.
Flexe is seeing huge tailwinds from an increase in online sales amid the pandemic as people stay home and shop digitally. U.S. e-commerce sales rose 36.7% year-over-year in the third quarter, according to the Census Bureau. More than 10 years of digital commerce adoption took place this summer, according to McKinsey. And Adobe Analytics reported that Cyber Monday was the largest online sales day in history, with spending up 15.1% year-over-year to $10.8 billion.
Analyst predictions and surveys show that much of this shift to online shopping will be permanent after the pandemic. U.S. e-commerce sales still only account for 14.3% of total retail sales, which is up from 11.2% a year ago.
“We think these new customer behaviors will largely persist,” Walmart CEO Doug McMillon said last month after the retail giant saw online sales spike 79%.
The rapid change in shopper habits and larger economic uncertainty this year forced retailers to adjust their fulfillment and supply chain networks. That means more business for Flexe, which has doubled its revenue year-over-year.
“There is a very strong increase in demand for these flexible, dynamic logistics networks — and that’s precisely what Flexe provides,” said Flexe CEO Karl Siebrecht.
The recent struggles of brick-and-mortar stores are also driving revenue for Flexe. Warehouse operators for physical retailers have a lot of latent capacity and Flexe is able to bring them business given the high demand from e-commerce clients looking for extra space.
Flexe customers just pay for what they need at a given time. It’s similar to how pay-as-you-go cloud computing services such as AWS or Azure replaced the need for a company to purchase and run their own data centers.
“Traditional warehousing is a lot like traditional data centers,” Siebrecht said.
Flexe also gives companies a way to move inventory closer to where customers live, reducing delivery times. That’s important as Amazon continues to make 1- and 2-day delivery the industry standard.
Scott Jacobson, managing director at Madrona Venture Group, called Flexe “the right solution at the right time.”
“Flexe enables enterprises to add capacity and efficiency to their fulfillment networks quickly and flexibly, with no upfront costs,” he added.
In July Flexe inked a key partnership with Google Merchant Center, allowing retailers and brands to connect their Flexe Fulfillment programs into Google Shopping ads. This lets shoppers see estimated delivery times — something that Google has lacked, especially compared to Amazon.
While Flexe helps customers sell products through or to Amazon, it is also somewhat of a competitor to the Seattle retail giant.
Instead of selling with Amazon’s fulfillment business, Flexe offers retailers an alternative that lets them ship products with their own branded boxes and existing shopping software. The third-party warehouses, meanwhile, handle labor and administrative work. It also keeps retailers from having to share any data with Amazon.
“What you’re seeing is an emergence of an ecosystem of technology providers that are starting to offer some of same things that Amazon can do so well and has historically done uniquely,” Siebrecht said earlier this year, noting how tech companies such as Shopify or Instacart are helping level the playing field for non-Amazon retailers.
Flexe competitors include industry giant XPO Logistics, newer startup Stord, and UPS, which launched its own warehouse technology startup called Ware2Go last year.
Siebrecht, a finalist for Big Tech CEO of the Year at the 2020 GeekWire Awards, co-founded the company with Edmond Yue and Francis Duong after they attended a housewarming party and met an entrepreneur who complained about finding warehouse space for his barware company. Siebrecht was previously an executive at aQuantive and AdReady.
The fresh cash will be used to double the size of the company’s engineering team and grow its sales arm. The 168-person company is ranked No. 67 on the GeekWire 200 index of top Pacific Northwest startups.
Flexe moved into a new 24,000 square-foot downtown Seattle office last year and plans to move back in when it is safe to do so. It previously raised a $43 million Series B round in May 2019.