Iconic Tour

The tiny start-up challenging the big FedEx machine

David Hochman, special to CNBC.com

Start-ups love to boast about "hockey-stick growth," but with Shyp that term is more than just a visual metaphor for projecting financial success. The on-demand shipping service that lets users summon a courier via smartphone started — honest to goodness — with actual hockey sticks.

Ten years ago as a college student in Vancouver studying computer science, Shyp co-founder and CEO Kevin Gibbon was pulling in six figures as an eBay power seller. His most popular resale items were the replaceable blades that whack hockey pucks, and Gibbon sold them by the cartload at rock-bottom prices.

"The biggest pain point was the shipping piece," Gibbon said from Shyp's Bay Area headquarters. "Having to pack items and get them out. That was the most time-consuming aspect."

Shyp employees pick up your packages and pack them up for $5, plus the cost of shipping.
Source: Shyp

Gibbon, 31, eventually put his engineering background to use to find a solution (he had previously developed the price-comparison iPhone app called ShopAround, which shut down despite having garnered a top 100 iOS App Store ranking.) Sensing capital would be easier to raise in California, Gibbon moved to San Francisco in 2012 and took a friend's offer to work at Attachments.me as a software engineer. He worked there for a year before he started focusing on launching Shyp.

In 2013, he "threw together a landing page" asking potential customers what they needed to ship and played the role of courier himself in just one Zip code area of San Francisco.

"I'd collect the shipments, pack them up back in my garage and send them off. I still had to deal with the shipping piece, but now somebody was giving me money to do it."

That formula continues to pay off, though Gibbon is no longer your pickup guy. In Shyp's four markets (San Francisco, New York, Los Angeles and Chicago), the company has 245 employees, including couriers, packagers and warehouse technicians who are counted as W-2 employees rather than 1099 contractors. Gibbon believes full-timers, though pricier, represent businesses better than freelancers.

Shipping starts with the Shyp app, available for free on iOS and Android. Users take a photo of their items, request a pickup, and a courier arrives at a prearranged time or within 20 minutes in markets with an on-demand option. The deliverables are then scanned into Shyp's system and brought to a local warehouse for packaging before being handed off to a carrier, such as UPS, FedEx or the U.S. Postal Service. All for $5, plus the cost of shipping.

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Some call Shyp the first disruptor in the shipping space since Federal Express introduced overnight delivery in 1973. The company does not release sales numbers but says it has been growing by 20 percent each month and processes 600 percent more shipments than it did a year ago.

A seed round of funding in September 2013 led by Homebrew and Angel List Syndicates (including investors such as Tim Ferriss, author of The 4-Hour Work Week), brought in $2.2 million —enough to staff up and gather steam for the March 2014 IPO. In July that year, Sherpa led a $10 million Series A round, and last April, Kleiner Perkins directed a push that yielded another $50 million and landed John Doerr on Shyp's board of directors.

"At a time where more and more shopping is done online, there is a tremendous need for frictionless returns and enabling individuals to easily sell or trade their possessions without having to leave their home," said early investor Scott Belsky, best known for co-creating the online portfolio platform Behance. "The current carriers have no infrastructure or product designed to magically move an item from your home to somewhere else in the world. Shyp makes that 'first mile' effortless."

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Analysts are watching cautiously. Shyp last year tweaked its service by exiting the market in Miami, where Gibbon says the lack of a Spanish-language app made it hard to serve customers. At the same time, the company redoubled its efforts with the original audience Shyp was intended to serve: eBay sellers. The company launched an integration with the online auction site last December that saw the number of daily shipments increase by nearly 100 percent. It is that momentum that investors say will lead Shyp into the black.

As Nathan Brockman, an equity analyst who watches transportation and business Services at William Blair & Co., observes, "Even if there is some discounted pricing for being a consolidator, they'll take the volume, and if someone is doing the consolidation for them, it works fine, as it ends up being more profitable, usually. Many other shipping brokers already do this for corporate customers."

Meanwhile, Shyp is eyeing Washington, D.C., and Boston as its next conquests, while continuing its pickups in four markets seven days a week. For customers, that means reducing the headache of shipping flatscreens, birthday gifts — and yes, all those hockey sticks.

— By David Hochman, special to CNBC.com