When doing the right thing by people is also the better business model: Why I backed Homer Logistics

Late last year, Adam Price opened by eyes to a group invisible to most New Yorkers--bicycling food delivery guys.  He told me about how they get their jobs, what they make, how they make it, and about all of the various problems that come with being a 1099 worker--or being completely off the books.  

He told me months and months ago, before anything came out about Uber's workforce, how it was never going to work in a world of increased "on demand" services.  He outlined some of the issues in a recent blog post:

  • Using 1099 workers--people who, by definition, you can't tell where and when to be at a certain spot, is inherently inefficient. 
  • The explosion in on demand apps and services meant that any retailer or restaurant didn't just have one firehose of demand to drink from--they had eight.  These small businesses needed a single delivery solution in order to focus on what they do best--whether it's making food or curating products to sell in a store.  

That's what Homer is.  It's not a B2C company.  You order from Seamless or wherever the way you normally do, and the restaurant turns the delicious meal over to Homer, the delivery experts.  This way, Homer doesn't have to raise hundreds of millions of venture capital dollars to change consumer ordering behavior. 

He created Homer in order to solve those logistics problems, but he was especially proud of another problem that he solved:

These delivery workers were highly underpaid--because they were working off of tips and were highly underutilized.  When you have a single shop that has varied demand throughout the day, the amount of money you can make delivering is really low.  Sometimes, you'll get zero orders in an hour and you'll just be stuck with the $5 wage you're being paid--if that.  

What happens when you start batching all of these orders across restaurants is that now you're getting two, three, four, or even five orders, not just in peak orders--but every hour--and sometimes more.  Now you're pushing hourly wages for these hardworking people into the teens, and you're doing it while classifying them as W2 employees with worker's comp protection.  I can say as a NYC cyclist myself that's particularly important. 

Adam told me the story of one of the members of his delivery team who enjoyed riding for Homer so much that he started dropping leaflets at the restaurants he used to drive for--and marketing wasn't even his job.  It was a much better setup to be classified as a W2 employee, with all its protections, as well as obviously making more money, more consistently.  

Homer didn't need to get sued to classify its employees as employees.  It found a better business model that solves doing right by customers and doing right by its staff.  That's why I'm proud to have led their $2mm round of financing.  I'm joined by Two Sigma Ventures, VaynerRSE, and, importantly, some of the largest delivery restaurant owners in the city--the founders of Chop't, Dig Inn, Melt Shop, Dos Toros, etc.  

Urban logistics and delivery is a huge market and in high demand by customers.  There's enough money here to both make a huge business and compensate people appropriately.