Can You Really Make a Billion Dollars Delivering Beer, Condoms, Rolling Papers and Nerds Ropes?
An Instagram celebrity is spearing sour gummies off a platter with a fork, then plopping them into his mouth with the slow-moving consistency of a windmill. Fatboy SSE, as his stage name suggests, is a heavyset (and heavily tattooed) guy from North Jersey, sitting on a makeshift throne covered in boxes of Sour Patch Kids. With 2.1 million followers, Fatboy is the 39th most popular Web star from the Garden State, according to one website that tracks such things. He gets paid to
A cameraman with an iPhone is attempting a tracking shot of Fatboy’s antics inside a vast, low-slung warehouse just north of Chinatown that’s lined with deli-style refrigerators and racks of hookah supplies, sodas and tons of diabetes-inducing snacks. There’s a bunker next door stocking beer. The cavernous space has the frothy coloring of a Willy Wonka setting, but it’s poorly lit, as if Wonka had fallen in love with bodegas.
Despite the camera, there’s no plot to the sequence being filmed. No dialogue, either. Just a near-naked Fatboy, muttering to himself, “I love the green Sour Patches.” He’s wearing nothing but a pair of pink underwear, necklaces, white ankle socks, and a bright blue cap that says “goPuff.” That’s the entire gag. When it’s finished, the video will be 21 seconds long. It will receive more than 1.8 million views.
This avant-garde marketing ploy has been staged by goPuff, an on-demand delivery company started by two former Drexel students that holds, at the moment, the coveted title of Philadelphia’s Hottest Start-Up. Over the past six months, the service has expanded at a rapid clip, opening a new location every three weeks. (At press time, goPuff was in 20 locations, from major cities like D.C., Manhattan and Chicago to far-flung college towns like Madison, Wisconsin.) It’s taken on $8 million in venture capital, primarily from a Silicon Valley backer. It claims to add a new employee at its corporate headquarters right upstairs from the Callowhill warehouse every 10 days. On an average day in Philly, more than 70 of its drivers complete more than 500 hours on the road.
If you’re wondering why the company isn’t a household name yet — even compared to, say, delivery service Instacart — it’s because goPuff simply doesn’t care about being a household name. It isn’t out to conquer Amazon. Its service is something more intimate: delivering essential goods — well, if you consider munchies and smoking supplies and condoms and booze “essential” — any hour of the day, within 30 minutes of when you tap the app. Unlike Instacart, goPuff doesn’t fetch your grocery list by buying directly from stores like Whole Foods. Instead, it stocks roughly 3,000 items at a centralized warehouse in each delivery radius. To bet on its concept is to dream of the next evolution of the 24-hour CVS. Or, as the Inquirer once put it, “Wawa on wheels.”
On one level, this might seem a tough sell. Are convenience stores so inconvenient that you need one to come to your house? And yet, consider this world we’re currently living in: Mobile commerce is erupting, research says people are eating more meals at off-peak hours, and every aspect of 21st-century life seems to be barreling toward hyper-personalization and to-your-door service. Fast food is out, while snacking, highly variable, is in. In such a world, goPuff seems positively visionary.
Plus, with goPuff, there’s no cashier to size up you and your Ben & Jerry’s binge. “Being judged grabbing five pints of ice cream — I don’t want any of that,” says co-founder Rafael Ilishayev. “Judgment is a big thing. Otherwise we wouldn’t be selling so many Plan B’s.”
Inside the warehouse, Fatboy is now wielding a fire extinguisher, staging a fake holdup of a bespectacled goPuff employee half his size. Off-camera, Fatboy is boyishly cheery. On-screen, he’s a funhouse hybrid of Chris Farley and Terry Crews, a comedian who blends rotund body humor with riffs on angry-black-man caricatures. Naturally, Fatboy is also a snack fanatic. On Instagram, there’s a video of him taking a bath in fruit punch, and another of him eating an entire container of Icebreakers underneath a hotel comforter, for some reason, shirtless.
Fatboy’s thread of snack pornography couldn’t be more on-brand for goPuff, whose customers, employees and entire ethos are overwhelmingly millennial. Beyond sexually suggestive humor, other staples of the company’s marketing arsenal include fidget spinners, inversions of Internet ephemera (#sendfoods), and nods to 21st-century party culture, like someone drinking NyQuil from a wineglass. Sometimes backlash ensues. Twice, goPuff has removed content: an Instagram post that said “Make snacking great again,” and a “Cinco de Drinko” email blast that offended some Mexican-American customers. These missteps haven’t chastened the company a bit. It desperately wants to start selling sex toys.
An edgy upstart out of Philly that provokes outcry from the politically correct — that sounds a lot like Urban Outfitters in its heyday. But the success of goPuff might be more important for Philly than the fortunes of URBN, the company now trading on Nasdaq. Our tech economy has been lagging. Pittsburgh seems poised to remake itself as the economic capital of Pennsylvania this century, in part because of a thriving sector of robotics-makers, self-driving cars and Carnegie Mellon. Philly? Not so much. In terms of cutting-edge economy, there’s Curalate and NextFab and the Pennovation Center, but there have also been disappointments, such as Philly-bred Monetate, which raised $47 million, then moved its headquarters from Conshohocken to New York.
Part of the problem is that it’s hard to window-shop the Philly tech scene. As long as most of the city’s best tech companies are business-to-business services, we’ll have a hard time shedding our reputation as a third-tier start-up capital. Consumer products are what excite the imagination. Curalate, arguably the most successful start-up going in Philly, specializes in “visual commerce and marketing solutions.” That’s not exactly self-driving cars.
And neither is goPuff. Clearly. Still, it might answer the call that Philly has been putting out for its Uber, its Shutterstock, its Facebook. Could a company that delivers smoking paraphernalia and Nerds Ropes to your door in under 30 minutes really be the savior we’ve been waiting for? GoPuff — a company run by witty and gritty sons of immigrant parents — might be the most appropriate torchbearer for the future of Philly tech.
On a Friday afternoon in April, I walk into the unremarkable, sign-less entranceway that leads to goPuff headquarters. When you open the door, you’re greeted by a ragged black couch and a void of natural light, a vibe more garage-band practice than start-up with millions in venture capital.
The couch doubles as a waiting room. From there, the rhythmic energy of goPuff comes into view. Managers dressed in blue goPuff t-shirts shout orders to on-deck drivers like: “Bin nine, no alcohol, you’re going to Temple.” The driver maneuvers toward a wall of bins labeled one through 150, retrieves a sturdy plastic bag, and heads out the door with 29 minutes and 30 seconds to reach his destination.
Beyond the fact that goPuff peddles late-night snacks, the ethos of the company reeks of college bros cramming for tests. Employees casually mention how a colleague has been working for 26 hours straight, or has been in the office all weekend. Pizza crusts and takeout containers are everywhere. Most of the men I see on the corporate side of headquarters
— goPuff’s customers are roughly 60 percent male, and from the looks of it, so is its workforce — are sporting day-old stubble and dressed-down attire and have less-than-glowing visages that suggest vitamin deficiency.
In goPuff-ese, the warehouse is known simply as “the house”; the second-floor corporate office, directly above, is known as “the basement.” When I make it up there, where the founders share an office, Rafael Ilishayev points out the chic-industrial aesthetic of the place — Silicon Valley meets 19th-century Philly — and offers some context for the fast-moving system downstairs. “Think of it as a funnel,” he begins. “Order A comes in, the system assigns order A to bin one. Orders coming in within the same proximity of A, it’ll assign that order to bin one as well.”
Location by location, block by block, goPuff adjusts its delivery system based on variables like speed of travel and inclement weather. (Rain and snow boost sales significantly.) An algorithm keeps track of practically everything. “Now we’re taking it a step further and analyzing on a driver-by-driver basis, learning which drivers take orders faster to which parts of the city,” Ilishayev says. “You do that over the course of 20 markets, and you just have a script running all day analyzing this stuff,” which in turn informs their supply chain and daily cohort of drivers.
Ilishayev, who appears freshly showered and is wearing a plain green sweater, and his co-founder, Yakir Gola, are both 24 years old. The wall in their office has a glowing HUSTLE sign in the style of Dan Flavin. Ilishayev asks one of his employees to fix a hookah for the two of us. In short order, an Egyptian-made hookah with mint shisha appears. The decadence is deceiving.
“When we started, it was just myself and Yakir. It was manual labor seven days a week, 17 hours a day,” Ilishayev tells me, in his usual exuberant tone, right after reciting a lengthy Mark Cuban quote. “Sleeping in the warehouse, living in the warehouse, showering in the warehouse. It’s why we started calling the warehouses houses — because literally, it was our house in the beginning.”
Big data wasn’t an element of daily operations until about two months ago. The DIY origin story for Ilishayev and Gola as entrepreneurs goes something like this: They became best friends at Drexel University, where Ilishayev was a business major and Gola (whom I met on a separate occasion) a finance major. They were both the sons of entrepreneurial parents. Gola grew up in Cherry Hill with an Israeli-American father who runs a shop on Jewelers’ Row. Ilishayev came over from Russia when he was two. By 10th grade, he was general manager of the family banquet hall in Brooklyn. Business was in their blood.
To hear the founders tell it, they weren’t the best students. In college, their friends hosted parties — sometimes epic ones that rivaled those at the frat houses in University City. Gola, the only member of their friend group with a car, found himself traveling to a variety of locations just to pick up party essentials. “So, goPuff was solving our own problem,” he, the introvert of the founding duo, says. Wouldn’t it be much simpler, they thought, if you could get all this stuff from the same place? They got to work building an app, acquired their initial inventory, then aggressively marketed their service, hitting local college campuses where they pushed branded bottle openers and even went so far as to personally download their app onto people’s phones.
In January 2014, they made goPuff’s first delivery, in a leaky 1995 Plymouth Voyager. Ilishayev got into a fender-bender. The second order proved more successful — and revelatory. “That customer was right next door to a 7-Eleven, almost sharing a wall,” recalls Ilishayev. So Ilishayev asked him: Why goPuff? “He said, ‘Why do I need to walk next door when I can order on an app?’ I ran back into the car and told Yakir: We need to get to work.”
A lot of people laughed off the concept as a half-baked stoner adventure. From the start, goPuff specialized in smoking paraphernalia and snacks, so, basically, hookahs and Ho Hos. Doubters were legion, including among the administration of the founders’ alma mater. “Drexel was the only school that didn’t provide us resources,” Ilishayev says, whereas other local schools, such as Penn and Temple, welcomed their advertising on campus. “Drexel only came later, after we had our Series A.” Last year, a faculty speaker at Drexel’s LeBow business school gave a shout-out to goPuff in his commencement speech.
For the first four months, Gola and Ilishayev did everything themselves. They boosted their profile with guerrilla marketing (bottle openers, magnets, lighters) and skipped classes to make deliveries. They didn’t run a Facebook ad until a year and a half in. On some days, they’d finish deliveries at 3 a.m. before speaking with their Ukrainian app developers on a regular 4:30 a.m. call. They dipped in and out of lectures. Ilishayev lied to Drexel about fulfilling his six-month co-op requirements at his parents’ company; he was surreptitiously developing goPuff, essentially
co-op-ing for himself.
Around this time, Gola stopped going to Friday-night Sabbath dinner with his family. Eventually, he’d drop out of college. “Some people say that if you want to be successful in business, you have to make your business your top priority. How we think about it is that you have to make it your only priority,” he says. Within 16 months, goPuff had expanded to Boston and D.C. and, say the founders, was generally profitable at two of three locations.
That’s not the norm for on-demand start-ups, many of which spend years achieving profitability, if they ever do. GoPuff doesn’t share financial details publicly but asserts that the majority of its locations are profitable.
The founders are more eager to talk about the company’s bootstrapped beginnings than its newfound VC allowance, clinging to their underdog image. When the company finally took on its first venture capital, raising more than $8 million in 2016, it took the money and ran with a tested-and-true formula.
“They got to somewhat fly under the radar before other people really got to take notice,” says Curalate wunderkind Apu Gupta. “Now that they have a foothold and have expanded to a bunch of other cities, the challenge that they’re going to face is that there are a lot of delivery services that are very well funded. Why can’t they deliver these services, too?”
In April, just a few days before my meeting with Ilishayev, PetSmart, the largest brick-and-mortar pet store in North America, acquired Chewy.com, a pet supply retailer, for $3.35 billion. It was the largest acquisition in e-commerce history (topping Walmart’s August 2016 purchase of Jet.com for $3 billion). Though I’m the proud father of a one-year-old cat, I admit, I’d never heard of Chewy. But the record-breaking purchase proved to be an affirmation of the viability of goPuff.
“People can go buy every single product that Chewy sells on Amazon for the same price or cheaper,” says Ilishayev. The reason Chewy made almost a billion dollars in revenue in 2016, he reasons, can be found in its microscopic attention to detail. Chewy carries thousands of products. For almost every single one, there’s a video from an employee explaining how that product is beneficial to your pet. This makes Ilishayev gush: “I heard this from very reliable sources — that [Chewy has] an algorithm that predicts when your pet dies. Then, their CEO writes a letter [of sympathy] for your loss and your family. It’s that kind of detail that will separate the losers from the winners in this on-demand space.”
If hyper-personalized condolence cards from corporate authors sound creepy (or lifted right out of the plot of Her), don’t worry; goPuff hasn’t gone that far. But a greeting card given to every first-time user includes an assortment of tchotchkes, like an adorable puffer fish (the company mascot) and a couple of freebie lollipops. It’s just one way to differentiate the company and build a relationship with customers. An Instagram feed with wink-wink jokes (Who’s getting Lays tonight? read a recent post) further cements these bonds.
Yet what goPuff doesn’t call attention to could be its most impressive feat. Its bread-and-butter is a promise to deliver your order in under 30 minutes for a minuscule $1.95 delivery fee. But lately, this isn’t mentioned in its branding. “There’s more to services and products than just the price. If they don’t use our service, at least they got a laugh,” says Jacob Levin, goPuff’s head of marketing. “We always ask ourselves: Would another on-demand delivery service do this? If the answer is yes, we won’t pass that initiative.”
Unlike a lot of online services, goPuff has spent significantly on billboards. The company has no chill when it comes to sending push notifications — sometimes pitching deals, but often simply reminding you that goPuff exists and is witty.
It also stands apart as a snack-centric app in an otherwise crowded on-demand food sector (think Blue Apron and HelloFresh). “Ultimately, I think the business model of cooking and delivering food is flawed, because the quality of food can’t be controlled on a national basis,” Ilishayev tells me a few days after well-funded Silicon Valley start-ups Sprig ($60 million in venture capital) and Maple ($30 million) abruptly shutter. As for goPuff, Ilishayev says, “M&Ms are M&Ms.”
There’s also an element of luck in goPuff’s viral success. In the early 2000s, food e-commerce companies like Webvan wilted, in part because technology and consumer habits hadn’t caught up to entrepreneurial imagination. Since then, the regularity of eating has been impressively disrupted. The demise of family dinner represents only a small part of the overall picture. Anarchy has busted the three-square-meals-a-day paradigm.
According to “The Future of Snacking 2016,” an industry research briefing conducted by the Hartman Group, snacks now account for 50 percent of instances when we eat. Further, 37 percent of the time, a snack replaces one of the three daily meals for American consumers. “Snacks can address consumer needs in ways that traditional meals often cannot. The boundary between meals and snacks is blurring, but most people understand a meal to be shaped by cultural traditions around timing, setting and food groups,” write the authors of the report.
Snacking has exploded. And for the always-indecisive millennial, snacks are the perfect noncommittal meal, offering variety without the semblance of gluttony. “They’re not just really smart at marketing; it’s that they’re really smart at understanding where the customer is going,” Gupta says of goPuff’s founders.
When Gupta’s company, Curalate, started winning national plaudits a few years ago, like Ernst & Young’s Emerging Entrepreneur award in 2013, he figured that was only the beginning for the larger Philly tech scene: “I just assumed that every year, [Philly] would see another breakout success come through. I’ve been a little surprised that there haven’t been more consumer breakouts.”
What excites Gupta about goPuff goes beyond the founders (“Those guys are workhorses,” he says) or its growing market presence. It includes the potential applications of the company’s data and services down the road: “GoPuff’s consumer strategy is becoming the model for every major CPG [consumer packaged goods] company that wants to be relevant to young people. That is massive.” Imagine that, bolstered with a newfound big-data approach, the company made a business of selling consumer snack patterns to companies.
“In the near future and in the long term, we don’t have any plans on selling consumer data,” says Gola. “We’re using it for internal purposes, for efficiency. But it’s a growing asset. We have all the information that CPGs are dying for. With these big CPG brands, the products touch so many hands before being sold online.” In other words, companies have had no way of tracking a universe of data on their own brands.
No way, perhaps, until goPuff.
Parking tickets tend to pile up around goPuff headquarters. The flagship location in Philly — there are three additional local warehouses, servicing Manayunk/Roxborough, the Northeast and parts of Delaware— sits on a two-lane one-way street in Callowhill. Drivers are independent contractors and paid per delivery, so they often double-park and wait for their next order rather than absorb the opportunity cost of searching for a spot.
The view from the front seat of one of their vehicles is a lot different than that from the black couch. I’m shadowing Endri Gina, one of the company’s original 10 employees; he now runs the “growth team” at headquarters. Before goPuff enters a market, it does extensive research, and it has a massive, scrolling list of the cities it would like to eventually enter, including European capitals. Gina will go as far as to delve into the per-capita spending on snacks per census tract.
Gina grabs a 12-pack of Miller Lite and drives toward Point Breeze in a white Mustang. With a master’s in civil engineering, he’s turned down gigs in Qatar in order to double down on goPuff. He speaks about the company more as a lifestyle than a delivery service: “GoPuff is special. The more people who use it, the more it turns into a culture, turns into a religion.”
In April 2016, Texas-based delivery app Favor romped into Philly with a war chest of $13 million in seed funding — 60 percent more than goPuff’s initial round of venture capital. Within two months, Favor dropped out of Philly altogether. One year later, it’s retreated back to Texas.
On one hand, Favor’s demise here is a feather in goPuff’s cap. But its fate illustrates the fragility of tech start-ups, particularly those first to a space. Case in point: Uber. After reaching a valuation north of $70 billion in private markets, Uber has been bedeviled by negative publicity in 2017, its culture allegedly rife with sexual harassment, its drivers claiming lowballed paychecks. Major publications have questioned whether Uber — the progenitor of the on-demand explosion — is toast.
As goPuff’s spotlight grows, it could find itself in a similar quandary. According to multiple former drivers I spoke with on condition of anonymity, it’s not especially friendly toward its independent contractors. “I did it for a part-time summer job, not expecting a ton of money,” says Jeffrey (not his real name), a Temple University student. “But this was more like a traditional job in that they wanted you to work at least three eight-hour shifts per week.”
GoPuff has advertised that drivers can make more than $1,000 per week. While prime-time shifts could yield up to $250, Jeffrey estimates that he averaged more like $125 a night, which, after he subtracted gas and tickets (which goPuff doesn’t pay), wasn’t worth the time commitment. Now he drives for Caviar, where the hours are exceedingly flexible and drivers are allowed to accept or reject delivery opportunities. With goPuff, they have no choice but to be double-parked in, say, North Philly at 2 a.m., wearing a bright blue shirt and carrying a tablet and snacks. “I was a little uncomfortable from time to time. You’re an easy target,” Jeffrey says.
Unlike other on-demand companies, Ilishayev counters, goPuff offers opportunity for advancement. Many of the delivery-ops managers (who are salaried) are former drivers, and many of the corporate employees were once managers. The founders say loyalty and hustle are rewarded in the company.
“We have three guys and two girls [from Albania] who were in the first 18 employees,” says Ilishayev. A number of goPuff’s hard-charging workers are, like the founders, highly educated offspring of immigrant parents. “Two and a half years ago, they were working 80 hours a week, and today, two and a half years later, they’re still working 80 hours a week. Not because I’m forcing these guys to be here. They feel like the job is never done. Our ultimate goal is to be a billion-dollar start-up out of Philadelphia. Everyone in our basement is working day and night, some of the most talented — and, better yet, the most hardworking — individuals.”
When Amazon bought Whole Foods for a whopping $13.7 billion in June, rumors raged as to why founder Jeff Bezos wanted to acquire America’s favorite upscale grocer. Was it to assemble hundreds of future launching pads for Amazon’s delivery drones? To provide the company with brick-and-mortar distribution centers for its brown-box orders? One outlandish theory: Bezos wants his entire workforce to go gluten-free. (The last one is fake news; don’t worry.) Regardless of the actual impetus, the purchase was further proof that the landslide eroding the traditional food-retail sector shows no signs of ebbing.
GoPuff aims to shake up the less sexy world of convenience stores. But despite its growth, the company remains a baby. Compared to the relative riches of Instacart ($675 million raised), it’s hardly invincible. After all, it’s still a Philly start-up, and for all the fortuitous timing, there’s also been a catch. Investment cash is drying up in the on-demand delivery sector. Had goPuff kicked off a few years earlier, it might have seen a vast infusion of capital, like recently failed Sprig. On the flip side, goPuff’s ability to expand so quickly during a time of contraction in on-demand delivery could actually bode well for its prospects. Millennials aren’t going anywhere, and they sure as hell aren’t giving up their smartphones.
The key will be maintaining goPuff’s special brand while scaling its supply chain, expanding its geographic scope, and bringing on new products that generate, ahem, buzz. That’s why Ilishayev and Gola are so gung-ho on sex toys. They tested the market last Valentine’s Day, providing their Philly locations with four different gadgets in the Essentials category (alongside tampons and toilet paper). They sold out within 24 hours.
“We have to take risks a little bit. We have to venture where other people are scared to venture,” Ilishayev says. “Amazon is focused on everything; they’re A to Z. Which is great, but that leaves so much space everywhere in between for people to come and own a market.”
First, sex toys. Next, medications and baby formula and electronics — anything with a shelf life. If you’re doubting him, remember: Amazon started with books.
“When you’re traveling anywhere, you can expect Uber to help you,” Ilishayev says. “One day, I want to be there. At that point, goPuff is a utility. People think I’m crazy comparing goPuff to electricity. But it’s an essential part of living. Today it’s convenience retail 2.0; tomorrow it’s retail 2.0.”
On second thought, Amazon, consider this your warning.
Published as “Can You Really Make a Billion Dollars Delivering Beer, Condoms, Rolling Papers and Nerds Ropes?” in the August 2017 issue of Philadelphia magazine.