INOVIA, SHOPIFY BACK DELIVERY STARTUP SWYFT IN $22 MILLION SERIES A ROUND

INOVIA, SHOPIFY BACK DELIVERY STARTUP SWYFT IN $22 MILLION SERIES A ROUND

Swyft, a Toronto-based digital logistics startup, has raised $22 million CAD ($17.5 million USD) in Series A funding in a round co-led by Inovia Capital and with participation from Shopify.

With just one year in-market after launching its offering, Swyft has seen positive momentum in its hometown and is now looking to replicate its same-day delivery model across Canada and into the United States.

“Where Swyft plays and wins is in that middle between next day and on-demand, and that’s where the largest market opportunity for e-commerce is also.”
– Aadil Kazmi

The $22 million CAD round was co-led by Inovia and US-based Forerunner Ventures, with participation from Shopify and existing investors Golden Ventures and Trucks VC.

The all-equity, primary capital Series A round follows less than a year after Swyft closed a $3 million CAD seed round. Investors in last year’s round included Golden Ventures, Panache Ventures, and angel investors such as Marcelo Cortes of Faire, Mudit Rawat of Nexus Commerce, and Derrick Fung of Drop. The Series A funding brings Swyft’s total capital raised to date to $21 million.

With a delivery marketplace currently operating in Toronto, Swyft is set for a major geographic expansion over the next 12 months. The startup is currently working to launch operations in Los Angeles in the near term and plans to expand across Canada and more into the United States over the next year as well.

“We’ve already proven it in Toronto, where we can scale up the volume [of deliveries] our cost structure falls,” said Aadil Kazmi, Swyft’s founder and CEO. “The only challenge is that … [as a marketplace business], you need to keep on replicating what you’re doing in one city, in subsequent cities. So, we have a playbook around it and now the goal is just replication of that playbook in markets across North America.”

Swyft’s software application integrates with merchant shopping carts on e-commerce platforms like Shopify, WooCommerce, and Magento to offer same-day delivery. Swyft grants courier companies free access to its software, and in return, they join Swyft’s marketplace, creating a network of warehouses and delivery drivers.

The company’s overall goal is to make the price of same-day delivery comparable to two-day (or next-day) delivery.

Noting high retention among its customers, Kazmi told BetaKit, “We’re demonstrating extremely high stickiness between all of our basic customers, and that just goes back to the fact that we’re able to create value for their shoppers, same-day delivery at rates comparable to two-day shipping, with a fantastic delivery experience. That’s the goal.”

Some of the brands currently using Swyft’s marketplace include Lush, Knix, Hunter Boots, and Mejuri.

RELATED: On-demand delivery platform Tyltgo raises $2.3 million to accelerate Ontario expansion

Having only launched in March of 2020 – striking timing for the company given the uptick in last-mile delivery needs due to COVID-19 – Swyft has delivered 180,000 packages to date. It also reports having expanded its gross margin (the difference between revenue and cost of goods sold, divided by revenue) since April 2020 from 78 percent to 82 percent, with the startup attributing the numbers to its zero-asset business model.

According to the company, one of its most notable successes to date has been helping a major North American jewelry retailer drive an additional $10,000 sales per day in December by offering quick delivery service at a time when the holidays often cause delays.

Swyft is still early in its journey, though. And Kazmi openly admits that Swyft is looking to increase brand awareness to grow its merchant customer base; a portion of the funding will go towards helping Swyft increase its sales and marketing team.

“As a consumer, if you want a delivery you’re automatically thinking about DoorDash, Uber,” the CEO said. “We want that same type of mindset in the eyes of brands and merchants, where if I’m looking for faster delivery because my shoppers are asking for it, then I’m automatically thinking about Swyft.”

Inovia general partner Karam Nijjar said his firm has been looking at the last-mile logistics space since 2012 (one of its investments includes Montréal-based construction delivery startup RenoRun). He noted that Inovia evaluated all sorts of other models, but found Swyft to be the first solution that could efficiently scale same-day delivery across North America.

Swyft reports having expanded its gross margin since April 2020 from 78 percent to 82 percent.
 

“COVID-19 has accelerated many trends around the need for both online and traditional offline retailers to embrace these expectations or face the reality that someone else (ahem, Amazon) will,” Nijjar said in a statement to BetaKit. “It’s hard to compete with trillion dollar companies when it comes to capex [capital expenditure] spending to build distribution centres and hire fleets of drivers.”

“However, you can compete with them by combining existing assets with underlying software that increases their utilization,” he added. “We’ve seen that trend play out across multiple industries, and Swyft was the first model we saw that we believed could scale in the last mile logistics space. Once we verified that we had the right team to execute on that model, we were all in.”

Eurie Kim, general partner at Forerunner Ventures, echoed that sentiment. “In our search for the most scalable last-mile logistics model to power the 50 percent of e-commerce retail outside of Amazon, Swyft stands atop the pack with its zero-asset, software-powered marketplace that yields increased productivity for last-mile delivery/courier partners and competitive pricing for merchants and customers,” he said.

Kazmi sees Swyft’s competitors as both large, legacy regional delivery services like Puralator, and delivery apps like Instacart and Uber.

“Where Swyft plays and wins is in that middle between next day and on-demand, and that’s where the largest market opportunity for e-commerce is also,” he said. “By playing in same-day we’re able to target the most number of verticals, cosmetics, jewelry, fashion apparel, home goods, consumables, where the propensity for the shopper to pay more for shipping is such that they are willing to pay a tad bit more than next day to get something faster, but they do not necessarily need on-demand, or they’re not willing to pay much much more for on-demand.”

While Swyft also works with merchants on e-commerce sites like WooCommerce and Magento and plans to increase its number of integrations following this raise, Shopify’s investment in the Toronto-based startup is a notable one. Speaking with BetaKit last year, Kazmi argued that Shopify wants to become a “build a business in a box” platform, and he sees Swyft as a potential piece in this strategy. The CEO predicted that once Shopify builds out its fulfillment network, it will shift its focus to last-mile delivery—Swyft’s domain.

“We are thrilled to participate in Swyft’s most recent round and look forward to working with them as they build their last-mile logistics platform,” said Bram Sugarman, Shopify’s director of corporate development and strategic partnerships. Sugarman joined Shopify in 2015 from OMERS Ventures. In his role, Sugarman is responsible for Shopify’s mergers and acquisitions as well as strategic initiatives. While Shopify’s direct investments in companies have been sparse, it acquired Massachusetts-based 6 River Systems in 2019 for $450 million USD to help build out its burgeoning fulfillment network.

“Swyft enables independent brands to offer affordable same-day delivery, which is critical in helping them grow their businesses and meet increasing customer expectations,” said Sugarman. “At Shopify, we believe in democratizing commerce, and Swyft shares this vision.”

Noting that Shopify’s investment does not change Swyft’s integration with the e-commerce company at this time, Kazmi noted that with the overall funding his startup plans to deepen its current integrations across the board.

“Brands and retailers have been at war with Amazon, who has owned the battlefield with an almost exclusive ability to offer customers speedy, affordable delivery options,” said Kim. “Swyft levels the playing field by arming e-commerce players (both large and small) with same-day delivery capabilities that customers have come to expect, even demand.”

“Swyft will be connective layer that allows retailers of all shapes and sizes to access their customers with same day delivery options at a fraction of the cost of the status quo,” said Nijjar. “Leveling that playing field means that everyone can compete on the basis of the quality of their product or service rather than the size of their balance sheet.”

Image source Matthew Henry via Burst.


Original article on Betakit, by Meagan Simpson, April 7th, 2021