Onfleet Moves 3M Deliveries a Month and Takes 0% of Them
Onfleet processes three million deliveries a month for Gap, Total Wine and Sweetgreen, and charges about twenty cents each. Its CEO explains why he refuses a percentage.
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Onfleet sits between retailers and the people who deliver for them, processes three million deliveries a month, and takes exactly zero percent of what those deliveries are worth. Its CEO knows what that costs him.
We don’t take a margin. We charge you based on the feature set that you need within the software. We do charge you based on the delivery volume, but we don’t care if you’re delivering something for ten dollars or a hundred dollars.
Khaled Naim, CEO and co-founder, Onfleet
Latka’s reply named the trade directly: “Maybe your VCs would argue you should.” Naim’s justification was not about generosity. “We’re not driving the sales, so we can’t really command a margin. And we don’t even know the value of the items that are going through.”
The pricing decision is the business. Onfleet charges per completed task, not per dollar moved, which caps its upside on every large order and makes it structurally cheaper than the marketplaces for exactly the customers those marketplaces monetise hardest.
What a task costs
The unit is a task: a driver starts a delivery, completes it, that is one. Customers get a volume allowance in their base rate and pay per task above it.
Average price per task is about 20 cents. “Our highest volume customers are all the way down to ten cents a task, and lowest volume is a little higher than 20 cents.” At roughly $900 a month and 20 cents a task, Latka worked out around 4,500 tasks — about 150 deliveries a day — and Naim agreed, with a caveat about spread: “We have customers doing hundreds of thousands of deliveries a month and customers doing hundreds a month.”
Put that against the alternative. A Sweetgreen catering order routed through a delivery marketplace surrenders a percentage of a large ticket. The same order through a Sweetgreen-employed driver dispatched by Onfleet costs twenty cents plus the driver. Naim was explicit that restaurants run both: “A lot of retailers, a lot of restaurants are adopting a hybrid model — but because of the margin profile of having their own drivers, especially if it’s a large order like a catering order, then it makes sense to have their own fleets.”
The customers are not who you would guess
Latka assumed the base looked like Drizly, the alcohol-delivery service Onfleet had just announced. Naim corrected him.
Brick-and-mortar retail — the largest independent retailer of fine wine and spirits in the country, running its own last mile.
Same-day delivery in some international markets, powered by Gap’s own driver fleet on Onfleet.
Restaurants running an in-house fleet alongside the marketplaces, for the orders where the margin maths favours owning the delivery.
The drivers are never Onfleet’s. They sit on the customer’s payroll or belong to a third-party courier company, and Onfleet acts as what Naim calls “a collaboration tool or orchestration layer” — the retailer hands work to the courier and still gets “all of the data, the visibility, as if it were their own fleet.”
The part where it was a different company
Onfleet launched in 2015, but Naim traces it to 2011 and a completely different problem.
“We were actually originally down at Stanford working on location-based services technology,” he said, “targeting emerging markets, helping people that lack functional street addressing systems in their countries to communicate locations with delivery services.” The product was a web app that let anyone create a URL representing a physical location. It was called Addy.
What they found while selling it was the actual company. “As we were building it, we identified that these companies that we were talking to just didn’t have any technology on the back end. They were managing their fleets with pen and paper, chat apps, phone calls, text messages. And meanwhile we were in Silicon Valley and saw all of these companies emerging around us that were basically just using smartphones to better manage fleets of drivers.”
Break even, then stay there
By August 2020 Onfleet had raised $5 million in equity, plus close to $1 million in debt from Lighter Capital — first as a revenue-based financing vehicle, later a fixed-term loan around late 2018. That is the entire capital story behind a business processing three million deliveries a month.
It has also been profitable for years. “We hit break even a couple of years ago,” Naim said, and confirmed they were still there. Growth, if anything, was the constraint: “Our revenue growth has outpaced our ability to hire.”
$400k → $800kmonthly recurring revenue, twelve months earlier versus August 2020
That doubling is the figure the GetLatka profile records as a $9.72 million run rate in August 2020, against $4.8 million a year before. Naim expected to more than double again: “This year we’re definitely on track to double, probably more than double revenue this year.”
People had noticed. “We have been approached by a number of folks for M&A but have decided to continue pushing forward,” he said. “We think we’re just getting started.”
The raise he would not quite announce
Asked about capital needs, Naim gave the interview its most obviously suppressed moment.
We wanted to get the business to a point where it could stand on its own two legs and we don’t need outside funding. But we are at the point now where it looks like there’s a huge exciting market opportunity to go after — we’ll be announcing something in the near future to that effect.
Khaled Naim, CEO and co-founder, Onfleet
Latka: “Oh, that face tells me something’s cooking.” Pressed on size, Naim named $10 to $15 million and immediately qualified it: “We don’t need a ton of capital. We’re a super lean operation and we don’t plan to go back into like heavy burn mode. A little bit goes a really long way with us.” A funding round is recorded against Onfleet in early October 2020, six weeks after this conversation.
The numbers underneath
The team was 40 people, 15 to 17 of them engineers, with three SDRs and five AEs on the sales side and a plan to reach 65 or 70 by the end of the following year. Naim was hiring for revenue operations for the first time — “a new position we’ve never hired for before” — and still working out the right ratio: “There’s still a lot to learn, we haven’t quite figured it out yet.”
On retention, he corrected a number Latka had carried from a previous interview. Gross annual revenue retention runs around 85 percent — so roughly 15 percent gross revenue churn — with expansion of about 30 percent putting net revenue retention at 115 to 116 percent. He was careful not to bank the pandemic bump: “A lot of that is obviously May, June, just crazy expansion across our existing customers. We did see higher than usual churn. This year has been across the board anomalous.”
Latka asked, as he does, why a founder shares any of this. Naim’s answer was almost administrative.
We don’t really have anything to hide. Our investors aren’t asking us to be super quiet about our numbers. You can kind of put the pieces together — we’ve been on the Inc 5000 and things like that, so we’ve had to disclose our numbers.
Khaled Naim, CEO and co-founder, Onfleet
And the closing question, what he wished he had known at twenty, got the shortest answer in the archive: “Invest in Amazon.”
Sources — Khaled Naim interviewed by Nathan Latka, recorded 25 August 2020. Revenue, headcount and funding figures from the Onfleet profile on GetLatka, with dates as recorded.
