A Peek Into Boxbee’s Pivot From a Storage Service to Software

[Updated 5/18/16, 6:50 am. See below.] Change is not always easy, but for some startups it is a shot at evolving into something tangible.

Confronted with uncertain prospects for growth, the team at Boxbee, based in New York, pivoted away from its original business—which was managing the pickup and storage of personal property for its customers. Though the company previously had operations in both New York and San Francisco, expansion into more markets meant seeking more funding and even then the opportunities to scale up seemed slim, says COO Dev Tandon. “Our then-competitors were trying to raise more and more capital, and grow city by city,” he says.

Boxbee originally developed software for its own use to oversee its logistically complex operations, Tandon says. Under the current strategy, announced Monday, the company licenses that software to other businesses in the self-storage sector.

Tandon says more companies in this sector are adopting an on-demand structure comparable to other industries, and that is where Boxbee’s software comes into play. “You can get a car, you can get food,” Tandon says. “There’s no reason why storage wouldn’t become the same way.”

The software Boxbee developed is used for such tasks as acquiring customers, making appointments, viewing what was placed in storage, handling billing, and on the backend managing the transportation and warehousing of items.

Last June, the Boxbee management team decided it was best to switch its focus to its software. The new strategy is to seek existing mom-and-pop self-storage businesses, as well as startups in the sector, as potential clients. This move naturally led to deep changes within the company. “We sold our legacy storage operations last December,” Tandon says, “in New York to Iron Mountain, and in San Francisco to Corovan.”

Iron Mountain merged the storage operations it acquired from Boxbee with Box Butler. Corovan made a comparable move with its consumer-facing brand Brute Box Moving. “Both of those companies are going to start using our software in the near future,” Tandon says. “We’re building custom applications for them.” [Tandon later clarified that such an arrangement with those companies is still up for discussion.] Boxbee soft-launched its software licensing in February.

Though former rivals, such as New York-based MakeSpace and Clutter in Los Angeles, are sticking with the self-storage market and have raised several rounds of funding, Tandon believes his company made the right choice by getting out. “We’re not convinced that they’re going to be able to scale as quickly and as cost effectively as we are,” he says.

As the pivot took effect, Boxbee cut its staff from a high of 35 down to eight people. Tandon says selling off operations meant the company no longer needed drivers, warehouse managers, or customer service staff. Boxbee did hire three more engineers who were well-versed in building software-as-a-service platforms.

The company’s software could see use outside of the storage scene, Tandon says, especially when different component pieces, such as appointment booking, are considered. “There are a lot of industries that require consumer appointments,” he says, “and the management of time slots and making sure you have staffing for them.” Food delivery and massage therapists, for instance, could make use of that aspect of the software, he says.

Other functions of the software, such as route management, driver management, and pickup and delivery, Tandon says, could be used by companies with transportation management needs.

One thing Boxbee is not looking to do, at least in the near-term, is raise more funding. “We think there are enough users of our software that we can fund with revenue at this point,” Tandon says. “We’re looking to be a cash flow–positive business fairly soon.” The smaller staff and elimination of infrastructure costs is making it easier to pursue that goal, he says.

With any pivot, investors in a startup may have strong feelings about what direction the company might pursue next—as well as questions about why the previous idea did not pan out. The way Tandon tells it, Boxbee’s investors, which include Google Ventures, Floodgate, Metamorphic Ventures, and Lucas Venture Group, made it easy to transition to a new strategy once they had a bit of perspective. If they stuck with the old business model, another funding round was all but inevitable. “We gave them the alternative of similarly scaling but without all the risk of leases and staff and expensive customer acquisition,” Tandon says.

Trending on Xconomy