When you think of startup tech hubs, the South may not be the first that comes to mind. But Bill Smith, CEO of Birmingham-based Shipt, an on-demand grocery delivery service that saw the largest private capital raise in Alabama history, challenged that notion while speaking to a sold-out crowd at Sloss Tech, a tech festival in Birmingham.
Smith says the South’s competitive advantage comes from the southern attitude. “Taking care of people is not some grandiose idea, but it’s definitely not the West Coast way,” Smith says. “It’s part of our Southern culture to treat people well.”
Does he make a valid point? In Silicon Valley and on Wall Street, it seems to be all about the ROI. Launch, scale, exit, and “deposit dinero en banco” are the buzzwords. But with HR-related lawsuits either pending or settled against former Silicon Valley superstars like Uber, Lyft, and Instacart, among others, workers are claiming that their burdens are not commensurate to the benefits.
In contrast, Smith attributes Shipt’s success to treating people, particularly its on-demand employees or “shoppers”, well. And with Net Promoter Scores (a measure of how customers view your product) from its shoppers in the high 60s, Shipt has data to support the claim.
“[Shipt’s shoppers] are the lynchpin of the whole business,” Smith says. “I can give you the best app in the world and the most beautiful experience, but if someone shows up at your home that legitimately hates the company or feels like the company does not care for them, the customer is not going to view the company as a positive business to work with.” So, Shipt built its shopper network into a community, keeping their interests top of mind, listening to their suggestions for improvement, and acting on them.
Workers are not the only beneficiaries of Shipt’s people-first culture. Customer satisfaction has also been a top priority. In fact, Smith believes so much in staying connected to customers that in the early days, customer welcome emails came directly from his email address. Because of the responses he received—“What I really want is grocery delivery!”—Shipt successfully pivoted from big box delivery to grocery delivery, even though Smith had told numerous friends at the outset that he did not want to do food or grocery delivery.
It seems to have been the right move, considering both Shipt’s growth and industry-leading customer retention rates.
The southern startup investment equation
Shipt’s investors says his commitment to customers set the company apart. “It seems obvious that someone should make customers extremely happy,” said Brendan Wales, whose Silicon Valley venture capital firm e.ventures participated in Shipt’s A and B rounds. “[But] it is unique that [Shipt] focused this immensely on customer service from the beginning. What happens is that companies in big markets that are trying to grow quickly focus primarily on growth, and they acquire customers too fast. As a result, they are unable to provide a service that is of high quality while they are scaling… And the companies that are not providing good service are not going to be around very long.”
While fewer West Coast VC firms look at the Southeast, Wales, who hails from Atlanta originally, is keeping his eye on the region for investment opportunities. Among the metrics he looks for in a potential investment is the caliber of team. He saw in Shipt a team with demonstrated success “comprised of the empathetic individuals that you have in Birmingham that understand customers’ needs and partners’ needs. And that’s a magical equation.”
That magical equation in the Magic City has yielded over $60 million in capital raised.
So, how can entrepreneurs capitalize on the South’s momentum?
First, slow your roll. Businesses “must make money, not just raise it”, Smith says.
Wales agrees. “Not everyone needs to raise VC. [In the South] you can create a massive business without raising anything” due to lower costs of living and doing business. “Get validation [of your concept] first. Focus on providing an amazing service, and from there it’s going to grow.”
Smith finished with this lesson. “Get out there and get started. Build traction. Focus on building a sustainable, real business. Forge partnerships, but customers must come first. If you don’t have customers, no one cares. You can do a lot with a tiny amount of capital.”
So, in the end, y’all be nice!
Featured image via
David Averyt is the Managing Director of the Birmingham office of Atlanta-based Acuity, a modern day accounting and finance department helping entrepreneurs reach their financial goals with confidence.