Dissecting Startups- Clutter21 Jun 2019
Do things that don't scale
So goes the (new) age-old advice from VC Yoda, Paul Graham. After him, the deluge of startups transforming unsexy industries that, historically, don't scale: Law; Container ships (and containers!—just kidding these definitely scale); Health Insurance (disclaimer: I used to work here); Home Buying; Oh—and also Home Buying; and, last but not least, Home Buying.
One unsexy industry that I want to focus on is personal storage, specifically one emerging front runner called Clutter.
Here are some basic facts about Clutter:
- Clutter offers cheap storage units for stuff that doesn't fit into your home
- Clutter also offers free pickup and delivery when you want to put more stuff in or take it out
- Clutter has raised nearly $300M, after their latest $200M Series D, led by SoftBank
- Clutter has absorbed a couple of competitors in the space: Omni and Handy
- Clutter operates in 10 locations (technically, 3 of them are relatively close: LA, Orange County, and Inland Empire; but they still break them out as separate regions on the website)
By most standards, Clutter is killing it, and the trades seem to agree.
Diving into the Clutter
There's a book called Chaos Monkeys by Antonio García Martínez. It's an entertaining enough book, but something that stuck with me was this passage:
When confronted with any startup idea, ask yourself one simple question: How many miracles have to happen for this to succeed? If the answer is zero, you're not looking at a startup, you're just dealing with a regular business like a laundry or a trucking business. To be a startup, miracles need to happen. But a precise number of miracles. Most successful startups depend on one miracle only. The classic sign of a shitty startup idea is that it requires at least two (or more!) miracles to succeed.
I'm not saying that Clutter is a shitty startup idea. But, I do believe it will take more than one miracle to succeed. Some ideas just based off of a cursory dive into the business:
- They need users to pay for long enough to pay off their CAC (Customer Acquisition Cost). This is a user retention miracle
- They need users to take it easy on checking in and checking out items, because that incurs costs to the company (Cost of Revenue). This is a variable cost/user behavior miracle
- They need to build an order/warehousing management system that can easily find everything a given customer has checked in. This is a technological miracle (one that Amazon is working on, as it happens)
- They need deliveries and pickups to be as efficient as possible. This is a process miracle
- They need their warehouses to not burn down, flood, or be hit by an earthquake. This is a literal miracle
I'd like to spend the next couple of weeks digging into this.