Darkstore – A Successful $1.4 Million Seed Round Enables Expansion

Darkstore pic
Darkstore
Image: techcrunch.com

Based in New York, Darkstore CEO Lee Hnetinka focuses on the same-day delivery needs of e-commerce brand retailers. An April, 2017, article in TechCrunch brought focus to Lee Hnetinka’s success in completing a $1.4 million PivotNorth-led seed round designed to enable the firm to expand from three markets to a total of seven, with new markets including Seattle, Chicago, and Los Angeles.

The seed funding round was noteworthy in being led by PivotNorth CEO Tim Connors, who also guided delivery startup Deliv’s successful seed round. Mr. Connors is now integrally involved in the operations of Darkstore as a board member. In tandem with the funding round, Darkstore expanded its brand partners beyond mattress startup Tuft & Needle and the clothing maker Wildfang, and added Master & Dynamic, a high-end headphone manufacturer, to its lineup.

The seed round capped a period of significant growth, with the startup generating 120 percent month-on-month order growth in its first year of operations. The firm shipped goods valued at nearly $1 million in November and December of 2016. The company has an innovative business model of not charging for inventory storage and instead charging three percent (with an upper limit of $20) on every item shipped out.

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Key Logistical Elements of a Same-Day Delivery Service

Darkstore pic
Darkstore
Image: techcrunch.com

New York entrepreneur Lee Hnetinka is the co-founder and CEO of Darkstore, a startup company that provides ultra-fast shipping services for e-commerce brands. In his leadership role at Darkstore, Lee Hnetinka offers clients same-day and one-hour shipping via local inventory in major cities such as New York and San Francisco.

The nature of service offered by same-day delivery companies necessitates the constant availability and accessibility of products. Since retailers tend to cluster their inventories in regions with elevated consumer densities, same-day delivery services currently remain restricted to highly urbanized areas (although this may change soon). But wherever they operate, retailers should prioritize updating their inventories in order to accurately determine which products are available for same-day shipping.

From an operations perspective, ultra-fast shipping is only possible with an extremely efficient warehouse retrieval and packing process. This often requires significant investment in warehouse infrastructure, which prices most small retailers out of the market. Startups such as Darkstore, however, are changing the game by allowing e-commerce retailers to benefit from external infrastructure on a per-shipment basis, without the need for a major investment.

Darkstore – a Unique Same-Day Delivery Fulfillment System

Darkstore pic
Darkstore
Image: techcrunch.com

Guided by WunWun founder Lee Hnetinka, Darkstore is an emerging force in the same-day delivery fulfillment sphere. As described by Lee Hnetinka, the Darkstore model is directly influenced by disruptors such as Uber and Airbnb in serving as an efficient, responsive fulfillment provider that does not actually run a fulfillment center.

In a TechCrunch article, Mr. Hnetinka detailed a platform with a unique system in place that does not charge for inventory storage but rather places a 3 percent fee on all items shipped. The minimum charge is $2, with a $20 maximum. For example, when Tuft & Needle customers purchase a $750 mattress through the San Francisco showroom, Darkstore charges $20 for that item as it goes out the door.

In order to enable same-day fulfillment in San Francisco, Darkstore initially partnered with Storage SF in finding a way of quadrupling its per-square-foot revenues while providing customer-first fulfillment solutions. They created a win-win 70/30 revenue-sharing model, with the startup giving 70 percent of the 3 percent it charges to the storage facility as each item ships.

Darkstore’s Expansion into New Markets