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Ron Hango-Zada and William On, co-founders of Shippit

Shippit’s co-CEO reveals why his start-up turned down $2.8 million from interested investors

Sydney-based logistics start-up Shippit has declined the opportunity to close a $5m Series A funding round, instead settling for a more modest $2.2 million from a line-up of new investors.     

Co-founders Rob Hango-Zada and William On originally sought to raise $3 million for the shipping management platform they launched to market in February 2015. The purpose of the raise was to obtain capital to invest in strategic hires for their product engineering team as well as the start-up’s expansion into the wider Asia Pacific region within the next 12 months. The company currently services more than 750 merchants across Australia, including Sephora, Topshop, Thankyou and Pet Circle, with 250,000 parcels delivered via its platform each month

While the round was oversubscribed by $2 million, Hango-Zada and On, who share the company’s CEO role, made the decision to turn down $2.8 million in funding from interested investors, owing to growth experienced by Shippit during the round, which was round led by prominent APAC venture fund Aura Group. Additional capital was contributed by AddVenture Fund, RTL Group Investments and private investors.

Hango-Zada spoke to Dynamic Business about the Shippit’s Series A funding round, including the ‘very hard’ albeit ‘fiscally responsible’ decision to revise their initial funding target.

DB: What motivated Shippit to undertake its Series A round now?

Hango-Zada: Although we have enough cash to see us through to the end of the year, we wanted to capitalise on the momentum we were experiencing and continue to grow. It was purely a discretionary raise. Will and I have talked about it being a little bit like racing in the Grand prix. Think about a Formula One race car going around the track –  you need to know exactly when to pull into the pit stop and refuel. You don’t want to have much too much fuel in the tank and burn the time and you don’t want to have too little and run out in your efforts to make it there. That’s kind of the operating principle we work under.

DB: What makes your Series A investors ideal business partners?

Hango-Zada: Shippit doesn’t just look for funding, we also want to surround ourselves with investors who can contribute mental capital. Given our ambition to expand into the Asia market, Aura Group is an ideal partner – they’ve got great networks in the region and have successfully worked with start-ups to take them to IPO. Similarly, we handpicked a couple of private investors based on their expertise in certain domains. One is personal investors working for a large venture capital firm in the U.S and the other is well-versed with, and has great relationships in, the local retail market.

DB: To ensure a good fit, what criteria did investors need to meet?

Hango-Zada: Firstly, they needed to have a track record of growing the start-ups they had invested in. Secondly, they needed to be able to assist us with international expansion. Thirdly, there had to be ‘follow-on’ potential. By this, I mean we want our investors to get involved in Shippit, commit to the vision and consider it as much their business as ours so there’s no question of their future participation, provided we hit our milestones and key deliverables.

DB: Why did Shippit turn down $2.8m in capital? Was it a tough call?

Hango-Zada: It was very hard because you look at that money and think about all the things you can do with it. However, many start-up founders just look for the big numbers without really considering the massive responsibility they have to their shareholders to spend capital efficiently. Will and I are dual CEOs and considering our bandwidth we would have struggled to hire as many people as we needed to hire in the short-term to justify the larger capital investment.

We’ve always been fiscally responsible, which has involved looking at investments that will deliver a return for the business. We took the same disciplined approach to our Series A round.  The valuation exceeded our expectations, as did the offers, and this put us in a great position. Before we made our final decision, we re-evaluated what we needed and, considering our growth ambitions, settled on a figure much closer to $2 million.

Underlying our decision not to accept the full amount on offer was the fact that during the raising process, our our subscriber base grew by over 40% and our revenue doubled, which alleviated our need for capital.

DB: How would you account for Shippit’s growth trajectory?

Hango-Zada: The key has been really listening to the customers and refining the product based on customer feedback. We don’t see ourselves as a shipping platform, we see ourselves as an enabler for delivering in the space of ecommerce, based on the consumer demand of today. We have an obligation to our customers to keep delivery rates low and to streamlining the delivery process – that’s been our diligence focus since we launched. Having marquee enterprise clients who support Shippit and are genuinely interested in developing new, innovative solutions has also been critical. It’s enabled us to build expertise in those verticals, meaning we can better service the customers in those verticals.

DB: Noting your expansion plans, what opportunity does Asia present?

Hango-Zada: If you look at Asia, logistics infrastructure is trailing consumer demand. China has done a terrific job in terms of innovating in this space but across South East Asia, there is still significant room for improvement. What gives us an advantage is our intimate understanding of how retailers operate and how consumers expect to receive their goods. We have a unique opportunity based on our business model and the fact our software platform enables logistics and logistics enables our platform – this means we can fix logistics issues in the region while leveraging our software platform to further drive growth. It’s important, however, not to be naïve about the competition that already exists. We are not just setting up shop and expecting businesses to join us, we are going in with a determined approach, based on demand from our customers to enter markets in the region.

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James Harkness

James Harkness

James Harnkess previous editor at Dynamic Business

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