Seattle shipping startup EquaShip, which aims to save small and medium-sized businesses big bucks over UPS and FedEx, has hit a big stumbling block. The company is suspending operations to overhaul the way it routes packages in a bid to speed up delivery times.

The change is major—CEO Ron Wiener says it could take a year. Up until now, EquaShip has partnered with another company that funneled packages through trucking companies, who actually delivered packages. But that had been taking too long to get packages delivered, so EquaShip intends to take over the middleman duties itself when it relaunches.

The new version of EquaShip’s service should allow the company to actually offer more options for shippers, including same-day, expedited, and international service, while still offering lower rates than UPS and FedEx, Wiener says. Cutting out the middleman and taking over those duties itself “not only lowers our costs but allows us to pick our own local couriers and long-haul trucking companies, with more direct IT integration.”

EquaShip initially launched its service in October, just in time for the busiest shipping season of the year. Its target customers are mostly e-commerce merchants who spend $100,000 or less a year on shipping—the size of businesses that don’t typically get special rates or deals from the big shipping companies, who are concentrating on offering their best rates to larger customers.

EquaShip has raised $1.5 million from undisclosed angels and strategic investor Newell Rubbermaid, which sells shipping and mailing technology through one of its sub-brands. The new approach will probably take some additional fundraising, Wiener says.

Wiener says the company’s customers, partners, and investors, have been “universally supportive” of the rejiggering—although they’re understandably disappointed at the amount of time it might take to get things fired up again.

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EquaShip, the Seattle startup that’s aiming to wrangle dramatically cheaper shipping costs for small and medium-sized businesses, has added another $600,000 in financing from undisclosed investors. That pushes the startup’s total funding to $1.5 million, following the announcement of a $900,000 investment in June.

EquaShip rolled out its service in October, targeting the small sellers—many of them doing business on eBay and Amazon—who don’t get big-account treatment fro FedEx and UPS. Founder and CEO Ron Wiener says there are millions of those businesses around the country, and EquaShip says it can offer them rates that are “typically 28 percent to 79 percent below UPS and FedEx residential ground rates.”

EquaShip does that by partnering with smaller carriers, who funnel packages through the U.S. Postal Service for final delivery—what’s known as a consolidator service. EquaShip also offers package tracking and insurance. The company plans to use the new investment to add software features and drop-off locations.

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When two million online merchants fire up their shipping software today, they’ll see a fourth option for package carriers: EquaShip, a Seattle startup aiming to take on FedEx and UPS by offering steep discounts for small and medium-sized businesses.

We first profiled EquaShip back in March, when it was known under a different name. Since then, EquaShip’s raised angel funding, added some board members, and recently relocated to a new office in Lower Queen Anne to make room for growth (including the most advanced set of treadmill-desks I’ve ever seen).

The startup says it’s also been “stealthily integrating” with popular software platforms used by small businesses that sell goods online, so that when they click through to ship orders to customers, they’ll have the ability to open an EquaShip account and possibly capture big savings on their shipping bills.

How can a little startup offer better prices than major carriers? EquaShip CEO Ron Wiener explains it this way: First of all, UPS and FedEx do battle over mega-customers by offering big discounts to their major accounts. The little guys don’t get those prices—and often might find a confusing thicket of pricing levels and charges that lead to high costs, Wiener says.

“We’re going after their totally unprotected flank,” Wiener says. “This is where they make all their profit.”

EquaShip, however, doesn’t own trucks or planes. Instead, it partners with a company called Blue Package Delivery, which consolidates orders and routes packages to the U.S. Postal Service to make final delivery.

In shipping-industry lingo, Blue Package handles the “first mile” and “middle mile” tasks of picking up packages from merchants or drop-off locations, consolidating them at a hub, and sending them on to a Post Office location near the final destination. The Post Office takes care of the “last mile” to the package recipient.

This model is known as a postal consolidator service. FedEx and UPS have their own, but Wiener says they’re typically only offered to big customers, like Amazon.com, which demand it because it saves the final-mile charges that a regular private carrier would add.

EquaShip flips that model by focusing only on small and medium-sized shippers, and eschewing enterprise customers, with a flat pricing structure.

“Roll back the clock 23 years prior to deregulation of the parcel business, when UPS charged Sears the same price that they charged you,” Wiener says. “What’s happened in the past 23 years, of course, is they’ve gotten in a race to the bottom with FedEx.”

More specifically, EquaShip is targeting shippers who send less than $100,000 a year on shipping. “But that’s millions of little guys—on eBay and Amazon, predominantly,” Wiener says. “These are the guys who do not have an account rep from FedEx or UPS.”

Even though it’s now officially available to shippers, EquaShip is treating sign-up as a beta phase, to make sure it has enough customer reps and pick-up reach to handle an influx of new customers. EquaShip is also planning to offer international shipping, which works slightly differently, early next year.

Even though it’s just rolling out the service during the busy fourth quarter, Wiener says he’s hoping to show a profit by year’s end (EquaShip makes a margin on each package shipped). We’ll be checking back to see how the upstart progresses.

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EquaShip, a startup that aims to save small- and medium-sized businesses money on shipping costs by going head-to-head with UPS and FedEx, is announcing a $900,000 investment round today. The company, headed by serial entrepreneur Ron Wiener, said the money was raised from various angel investors from Seattle and the Bay Area—but didn’t name names.
Named as a strategic investor was Newell Rubbermaid, the company that owns a wide range of consumer and business brands including Dymo, which provides shipping and mailing technology through its Endicia brand. EquaShip said Newell Ventures director Scott Galovan would join the startup’s board. EquaShip, which is hiring for a half-dozen positions, plans to use the money to add to its operations, namely a customer care center.

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It was high society meets tech entrepreneurship last night. The setting: Bob Metcalfe’s townhouse in the Back Bay. The occasion: an annual reception and dinner before the finale of the MIT $100K Business Plan Contest, which takes place tonight at Kresge Auditorium. The players: all the finalists and event organizers, plus a few venture capitalists from Polaris Venture Partners, and other guests.

This year’s gathering marked the end of an era. That’s because, as you probably know, Metcalfe the VC and inventor—that’s Professor Metcalfe now—has moved to Texas as a faculty member at UT Austin and will probably sell his Beacon Street home. Which raises the question of where this stellar event will take place in future years. But let’s not worry about that just yet.

Metcalfe, dressed fashionably in a jacket, tie, and sneakers, greeted each guest at the door, and posed for pictures with $100K finalists and organizers (including Kourosh Kaghazian) throughout the evening. As an aside, one finalist said to me, “How do you ‘invent’ the Ethernet? Do you just decide one day you’re going to do it?” (I had to admit it was a good question.)

Each of the six teams gave a quick pitch from the staircase above the first-floor landing. As usual, it was an impressive array of businesses spanning high-tech, social tech, life sciences, cleantech, and energy.

William Sanchez from CoolChip Technologies (which won the $200K MIT Clean Energy Prize earlier this week) talked about developing more efficient heat sinks to save energy in data centers. David Jia from Upkast described his company’s virtual file system for managing your data from Facebook, Flickr, Google Docs, work drives, laptop, and personal devices, all on a unified Web interface. Lindsay Stradley and David Auerbach told the story of Sanergy, which is building low-cost toilets and sanitation systems, starting in Kenya, to collect waste and convert it to fertilizer and electricity.

Auerbach had the sound bite of the night: “Join us as we turn shit into gold.”

Next up, Anand Dass talked about Green Logistics (winner of the MIT Elevator Pitch Contest last fall), which plans to make special air-shipping containers that are lighter than conventional containers and collapsible, so as to save a bundle on jet fuel. Matt Hirsch and Vikram Anreddy introduced Sensactive, which is designing a 3-D gesture interface for mobile devices. (Best application: pulling the slingshot out of the screen in Angry Birds.) And Heather Kline from Zinaura Pharmaceuticals talked about her company’s drug candidate for epilepsy and pain treatment, which she says targets new seizure pathways without causing toxicity, addiction, sedation, or cognitive impairment.

Whew, that’s a very wide-ranging set of ideas. But over drinks and dinner, I got to know … Next Page »

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The Seattle package-shipping startup previously known as ShipSweet has changed its name to EquaShip, and is emerging from stealth mode today as it heads for a summer launch. The company is headed by serial entrepreneur Ron Wiener, also of Venture Mechanics. The idea behind EquaShip is to give small- and medium-sized businesses much better deals on their shipping costs by aggregating those packages together. Wiener says EquaShip will be able to deliver prices that are 10 percent to 30 percent better than UPS or FedEx, primarily because those mega-carriers give their best discounts to companies that ship big volumes. EquaShip also says it’s working on a national network of retail dropoff locations, which sounds like it would dramatically help in establishing a footprint.

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Visits with some of Seattle’s big-name Silicon Valley invaders, details from some emerging startups, and new features for Microsoft’s underdog search engine are among the highlights in this wrap-up of the past week in Xconomy’s Seattle tech coverage.

—We stopped in for chats with leaders from both Facebook and Salesforce.com in the past week, checking in with those companies as they continue to scour the region in search of engineering talent.

In a sit-down with Facebook Seattle office lead Ari Steinberg we learned that Facebook has topped its original target of about 30 people and sees no need to slow hiring. Steinberg also said that the Seattle office’s engineers were quickly making a name for themselves back at headquarters in Palo Alto, CA, and in particular were taking a leading role in an update of the social networking powerhouse’s chat feature.

—Salesforce.com officially opened its Seattle office with a downtown charity volunteering event that included Mayor Mike McGinn—an actual Salesforce customer both in his official duties and on the campaign trail (sorry, Microsoft).

Woodson Martin, a senior vice president of the San Francisco-based cloud computing company, indicated that a recent lawsuit challenging a former Microsoftie’s hiring wouldn’t slow down Salesforce’s expansion. He also got in a signature dig against Redmond, saying that engineers “want to be out on the cutting edge and innovating, and not maintaining the status quo.”

—In startup-land, we checked out ShipSweet, a company from serial entrepreneur Ron Wiener of Venture Mechanics. ShipSweet is among the firms out there trying to crack some of the byzantine … Next Page »

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[Corrected 3/7/11 10:15 a.m.] Remember shelling out big shipping and handling charges for that rotisserie oven you just had to buy from some infomercial? Small retailers sure do—and they remember it fondly.

In fact, when entrepreneurs Ron Wiener and Josh Leichtung were in the catalog business years ago, shipping and handling could actually account for your entire year’s earnings.

“You looked at your 2-to-4 percent at the end of the year, it was all the profit that you made on shipping,” Wiener said. “Amazon’s changed the game.”

Now, to compete with Amazon.com and others offering free and low-cost shipping, small- and medium-sized retailers have had to trim their old reliable revenue stream. That’s been a big win for consumers—another example of computing power and business minds disrupting an old, opaque, inefficient system that was begging to be turned upside down.

But Wiener—a serial entrepreneur and investor—says smaller retailers have been mostly left out of the positive side of that revolution. The little guys are still using the big carriers like FedEx and UPS for a lot of their shipping, but are unable to command better discounts on their own costs.

“They fight over Amazon. They fight over the big retailers,” Wiener said of the shipping giants. “And they make money on the little guy.”

That’s where Wiener and Leichtung hope to thrive with their new company, Seattle-based ShipSweet, which they’re priming to start operating sometime in the second quarter.

ShipSweet aims to aggregate the front end of package collection, customer service and payments (the “first mile” of parcel travel, in shipping parlance) for small and medium retailers. ShipSweet will take those parcels to the shipping companies—particularly the lesser-known networks of regional and local carriers—and use the economies of scale that come from pooling lots of small orders to deliver both profits for ShipSweet and better rates down the line for small businesses.

“We’ll be competitive in most cases for shippers who are under 150 packages a day,” Leichtung said. “But under 50 packages a day, no one will be able to touch us in terms of price.”

Although I know basically nothing about the mechanics of the shipping industry, I was skeptical after hearing the pitch that a small startup could quickly get in front of enough retailers … Next Page »

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Open Mile, an online shipping startup based in Boston and Chicago, announced today it has raised $6 million in Series B financing led by Globespan Capital Partners. Existing investor Charles River Ventures also participated in the round. Open Mile, led by Evan Schumacher (the former CEO of Going.com), uses Web and mobile technologies to match up trucking companies with shipping organizations in a way that could be more efficient than existing freight brokers.

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If you’re in an industry where you depend on suppliers from across the globe, searching the Web for a part or a collaborator isn’t exactly as easy as trying to figure out where you should eat dinner. Josh Green discovered this around 2005 when he was a Harvard Business School student interning at E Ink, the maker of the screen behind Amazon’s Kindle, and needed to find a supplier for an electronic component.

It wasn’t easy. So he started talking to MIT computer science student Jim Psota, who he had already been working with on putting together a startup. In 2006 they incorporated Panjiva, a Web company that aims to simplify the supplier search process for businesses of all sizes. Their product is out to tell manufacturers and retailers everything from who they can order parts from, to whether or not a potential supplier is stable enough to work with, to what their top competitors are shipping.

“We’ve built a Google-like product, but we’re organizing information specific to the global trading space,” says Psota, the co-founder and chief technology officer, who I spoke with at the company’s Cambridge, MA, headquarters (CEO Green leads the operations in New York).

Panjiva (a play on the name of the supercontinent Pangea) is based on a system of data mining algorithms, machine learning, and natural language processing that culls numbers from more than 10 sources, like U.S. Customs. After Green and Psota found their initial inspiration for the business, they spent a few years developing the product, and raising angel and venture financing. Its backers include Battery Ventures and angels like eBay veteran and Stanford professor Michael Dearing, fashion designer Diane von Furstenberg, and David Frankel of the Founder Collective, Psota says. Panjiva’s Web-based, industry-comprehensive search tool launched in April 2009. Home Depot was its first customer.

The core of the Panjiva product is its search engine, where users can find suppliers by searching for parts, or get more information on a particular supplier they have come across by searching their name. Panjiva’s database has more than 1.5 million companies (including suppliers and customers) from more than 190 countries. Its interface is made to allow users to sift through that deep set of data to find a short list of potential partners. Panjiva customers use drilldown menus based on variables such as country, certifications, shipping date, or the health of the supplier’s business.

“The raw data that we get in is very messy, it provides disparate data points that are not that interesting in and of themselves to helping the user,” explains Psota. “The secret sauce is taking the disparate and messy data sources and boiling them down and cleaning them up.”

Once users get a manageable list of suppliers they could potentially purchase from, they can select a particular company to view a complex profile, which includes information such as … Next Page »

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Just when I thought venture deals, especially for software and tech companies, had headed south for the winter (or longer), the Northwest erupted with a slew of financings in the past week.

—But first, some serious biotech. Kirkland, WA-based OVP Venture Partners led a $30 million Series B round for Fate Therapeutics, a San Diego-based stem cell company with ties to the University of Washington, as Luke reported. Existing investors Arch Venture Partners, Polaris Venture Partners, and Venrock Associates also participated in the funding, as well as three strategic corporate investors—Astellas Venture Management and Genzyme Ventures were named.

—Seattle-based DocuSign, a maker of software to automate and control the process of electronic signatures, received a strategic investment from Second Century Ventures, the VC fund of the National Association of Realtors. The funding amount was undisclosed, but the money will be used to accelerate and extend DocuSign’s efforts with real estate customers.

—Beaverton, OR-based Avnera pulled in an $8 million equity round from undisclosed investors, according to a regulatory filing. The company’s previous investors include Bessemer Venture Partners, Redpoint Ventures, Jafco Ventures, Intel Capital, and DAG Ventures. Avnera was founded in 2004, and designs novel chips for wireless audio applications.

—Seattle stealth startup Doxo raised $5.25 million in equity financing, according to a regulatory filing and media reports. The investors were not disclosed, but David Feinleib of Mohr Davidow Ventures was listed on the SEC form as a director.

—Bellevue, WA-based Enroute Systems, a developer of software that helps companies manage their parcel-shipping logistics, closed a Series A funding round worth $810,000 from Keiretsu Forum, Zino Society, Puget Sound Venture Club, and angel investors. Next up, Enroute is looking … Next Page »

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Seattle-based Zino Society has announced the winners of its 2009 Zino Zillionaire Investment Funds. Bellevue, WA-based Enroute Systems, a maker of analytics and transportation management software for parcel-shipping businesses, received $60,000. Arlington, WA-based MicroGreen Polymers, a company focused on making plastic products more environmentally sustainable, also took home $60,000. The companies presented to investors back on September 17.

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Anytime a biologist needs a shipment of something that must be kept cold, like a blood sample or biotech drug, it comes in a polystyrene (Styrofoam) box. Usually from the East Coast. Usually two or three days after the order was placed.

This all strikes Mickey Blake as pretty wasteful and inefficient. So she’s starting a business with partner Pete Kegel that she thinks will appeal to biologists’ desires to save time, money—and the world. I met Blake, a longtime sales rep for Bioline, last week at the University of Washington’s South Lake Union campus, where her new company, S3, was pitching its wares at a science fair.

This business is still in its earliest days, having made its first bio-supply shipment to customers in August. The company has secured warehouse space in Everett, where it will keep 3,300 square feet of inventory, with 21,000 square feet of backup space, for some of those lab supplies that scientists at the UW can tap for same-day delivery. She’s ordering the supplies in bulk, so she can save some cash on shipping, and pass it on to the labs—which are scrounging for pennies amid budget cuts. But the part that really caught my attention is the Greenbox, a recycled, reusable box for shipping those refrigerated products that she hopes will make polystyrene boxes in landfills a thing of the past.

“Polystyrene does not hold temperature very well, it’s not sustainable, and it’s expensive,” Blake says.

Like a lot of new environmentally-conscious products, the rub here is that customers need to pay more upfront to save money over the long run. A typical polystyrene box costs $12 with cooling gelpacks, gets used once, and is tossed in the trash, says Steve Skallerud, vice president of sales and marketing at Entropy Solutions, a Minneapolis-based thermal shipping company that makes the Greenbox used by distributors like S3. The Greenbox, made of recycled materials, costs $109, but it can be used 100 times or more, meaning it should cost $1.09 per shipment, he says. It’s supposed to withstand heat and cold better because of proprietary nanotech insulation in the lining of the box. Entropy introduced the boxes about a year ago, and already has signed up Wal-Mart’s specialty pharmacies, CVS Caremark, and Abbott Laboratories as customers, Skallerud says.

S3 plans to use these boxes exclusively, and is taking on the responsibility for picking them up at the lab when it delivers new shipments. S3′s model is really to serve as a West Coast distribution hub for big lab vendors like Qiagen, Mediatech, Sigma Genosys, and Corning, Blake says. It makes its money by taking a 3-6 percent cut of the sales it delivers.

If the Greenbox is really going to be re-used 100 times—which sounds to me like a big if, given the behavioral inertia behind trashing these boxes—then S3 might have a pitch that will resonate. Janis Wignall, a longtime science education specialist with Amgen and Immunex (and a friend of Blake’s) told me she’s hopeful that this will catch on with the labs. She remembers being at Immunex in the 1980s, and seeing those polystyrene boxes stack up in junk piles at the end of the hallways, come Friday each week. She’s hoping that the Greenbox will make the economics of a new shipping model compelling enough to force people to switch to a more environmentally-friendly model.

“I hated the polystyrene boxes,” Wignall says. “It was a problem 20 years ago, and it’s still a problem today.”

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