Having watched the Startup Junkies premiere season, some episodes multiple times, I guess I'm still an Earth Class Mail skeptic, at least at the market capitalization it must currently be at. (I am only guessing at the market cap, due to a very high initial raise of $16 million -- $10 million from Keiretsu Forum members and $6 million from Ignition.)
Vision Decision
First, I need to get this on the table. CEO Ron Weiner, and several executive members, keep referring to ECM as somehow being competitive with the postal service, yet also wanting to partner with the world's biggest postal services out there. (Weiner is reportedly moving to Switzerland to focus on Euro-postal opportunities.)
I don't buy into the basic argument -- that postal services are going to be extinct if they don't look out and digitize now.
ECM *requires* a postal service. It is a mail processing facility, albeit a digital one, elevated by the language of a very good promoter, with some interesting twists. Sure, it helps digitize the "last mile", so to speak, but it doesn't really do anything to get the originator's message to the recipient digitally, end-to-end. That's where email, FTP, twitter, facebook, SMS, and other technologies/services fill a void and are truly competitive with the postal service. Are we to believe that ECM has tremendous value-add over email in a truly end-to-end-digital world? No. It's merely a way of digitizing the final product.
Perhaps a Big Idea... but Seriously Overscaled at Startup
Which leads me to my second point. It *could* be a big service, if it really capitalized correctly versus the opportunity. The military, large corporations, and ex-pats, and perhaps RV'ers/snowbirds are all segments that could use mobile-snail-mail. But rather than invest multi-million-dollar sums to build out a processing facility in Oregon, and who knows how much to build dubious street-level facilities in major cities, why not scale operations with customers? If the data shared in Startup Junkies is correct, it's somewhere around 3,000-4,000 paying customers as of last year, adding maybe 300-400 every month. That's terrific, but really, that level of volume only supports maybe 10 employees, adding 3-4 every year. Overcapitalizing is equivalent to accepting $1,000 to mount a dagger to your steering wheel in your car -- it's all fine and dandy if the road is smooth, but if you're at all going to miss plan, it's a very bad thing.
My prediction is that a high burn rate is going to kill an interesting idea.
I understand the need to satisfy large corporate accounts and postal services and answer the "scaling" question. But with virtually zero directly-competitive pressure, there is no need to way, way overbuild infrastructure ahead of demand. Have we learned nothing from Webvan?
Recommendations
I think ECM could be an interesting idea, but they need to:
1) Rightsize their infrastructure investment immediately versus the opportunity. The "Raiders of the Lost Ark Filing Center" in Beaverton seems way, way overscaled. Get the company as close to breakeven as possible, now.
2) Rid themselves of street-locations. (Isn't the very kernel of their idea to be location-free? Why get bogged down with extremely expensive physical addresses? If they need local-area addresses, they could do it much more cost effectively by setting up mini-mail forwarding micro-sites of their own, or even enlisting other mail-forwarding services.)
3) Pick one or two major customer segments (e.g., the military, enterprises with highly mobile salesforces, snowbirds/RVers, etc.) and nail down their requirements. Build up a beachhead and grow from there.
4) Explore partnerships with physical-delivery firms UPS and FedEx aggressively. See if there's a way to augment their product line with something that converts the physical mailstream into a digital mailstream.
5) Consider offering a "mail to digits" service for consumers and/or businesses that allows people to simply mail something physical and analog to an address, and have it ready in digital form. E.g., let me mail an envelope with magazine clippings, or albums, or what-have-you to a facility and have them converted into digital form quickly and easily. That might be a way to get trial-users and upsell them to longer-term paying customers.
I have very much enjoyed the show, but I remain a skeptic of ECM, at least at this level of investment/market-cap/infrastructure.
It could have been a very interesting, breakeven 20 person company growing larger every year, but I worry that a "get big fast" attitude will doom the company, much as it did Webvan, taking a very good kernel of an idea (e.g., HomeGrocer.com) with it.
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