The $3B Company Trying to Beat Amazon Prime

0:00Welcome to Sorcery.

0:10Sean Henry:The potential of photonics. The technology to interconnect these GPUs. Global payroll and HR platform. 8 billion operational data points. Scale-ups over startups. You'd rather have a million of something than one of anything. Building the intelligence layer for defense. There isn't enough power. There's not enough memory chips. We're at the end of physics of what we can still do.

0:41Sean, welcome to Sorcery and Strike. We're out here in Monaco. Technically, Capfarrat, but we'll just go with that. How are you doing? Doing great. It all blends together to me as well, but it's incredible to be here. What a beautiful venue, and thanks for having me on the show. So you're the founder of Stored. For people who don't know what Stored is, could you give us a little background? Yeah, so Stored really exists to level the playing field with Amazon Prime for the other two-thirds of commerce on the internet. When we look out there, we think that Amazon's product really is delivery, and that's what all other merchants struggle to achieve, and it's what keeps all of us as consumers going to their website to check out instead of independent merchants.

1:22So we really see ourselves as the physical intelligence layer combining all the fulfillment and delivery, all of the commerce software, and all of the applied robotics and AI to achieve Amazon-level delivery costs, speeds, and consumer experiences. And so for people that aren't aware, you recently had a milestone of funding and growth. Where are we at with the business? Absolutely. So earlier this year, we announced a$250 million Series F. That was really to not only continue scaling the business rapidly, where this year we'll be crossing a billion in annual revenue. And over the last four years alone, we've 10x the business in terms of scale and revenue and both volume.

2:02And so it's a lot of fueling that future growth where there's so much of an advantage of scale. Scale drives economics. It also drives density. And that's really what builds the moat in delivery, enabling Amazon's level speeds and costs. So continuing to press on the gas hard with scale. We also announced stored labs along with it, which is very much an application of all of the latest robotics, AI, drones, but also a data foundry actually training the robotics in reverse. And so we're really excited about how really all the new technology is enabling a vertically integrated industrial business like us to just keep separating our moat from the existing industry we live in.

2:41Let's get into that because robotics is super hot right now. It's flying. It's like become the age of robotics. Why is now the time to go hard on that? Yeah, if you really look back over history, a lot of the problem with robotics is kind of the dumb robots, where if anything goes wrong, if any variable is changed, they can't succeed in that environment anymore. And so if you have a operationally complex environment where every minute or hour could be hundreds of thousands of dollars or more of productivity, that traditional robotic operation can be quite risky. And so now you're getting to this point of agentic robotics where you're having robotics that are building real world models that can see videos for very brief times and learn how to self-heal and get back on track.

3:26So let's say you get a slightly different size or form factor in a unit in a fulfillment center. Does all of a sudden that go down until IT can show up in code or do something different? Or does the robot learn on the fly with one worker walking up and holding it for three seconds and showing them how to put it in the box? And so that's really where robotics is going and why now is such a moment for it. Yet at the same time, if you look back through history and if you study kind of the Teslas and SpaceX's of the world, the whole process and equation is how do you go from refining your processes physically and operationally to then software and kind of repeat that loop over and over again?

4:04And only then can you really get the advancement you want in hardware because now you're applying it and really hard coding whatever that process was. So if it was under optimized, you're going to fall behind now in a hard coded way. That's really the issue with robotics in today's world is a lot of the physical world out there that needs these robots doesn't have the basis of that best-in-class process or vertically integrated software to go apply the robot. And so that's kind of the chasm that robotics is going to have to cross in the period ahead now that they are getting more agentic and self-healing as well.

4:36So what are the typical data points are you collecting through robotics that inform the software and back and forth? Yeah, for us, we process about 8 billion operational data points a year. And that could be anything from how to place a piece of inventory in the network to how to plan for certain consumer demand to how a unit is picked in the facility with labeling on the hands so that they can learn all of these different picking and packing patterns. There's also post-deployment training, which is videos of the robots after they've actually gone live to show those errors and to help them keep learning more and more.

5:10And so there's really a ton of data that goes into a business like Stored. And when we're processing about 100 million packages a year to about a third of U.S. households now, almost$20 billion of GMV, that's really one of the most data-rich environments that all of these labs and robotics companies are trying to either simulate and learn. And that's why we have this not only head start in the e-commerce and logistics industry that we sit in, but also have such an advancement in the robotics in the early phase with these partnerships with leading companies and labs deploying across the store network because of that data-rich environment.

5:46where let's say you deploy a camera to do the post-deployment training on a robot. Well, because of our software, we also know in that video, what's the exact dimensions and weight of the box? Where's the weight if it's placed so it's going to have balance difference because of the pack-out process? And when you can enrich these videos with not only labeling of the hands, but that level of vertically integrated data, the learning is just so much faster. I have to ask this. This is a selfish question because they're so popular now in creating a lot of media buzz, but do humanoid robotics belong in the factory or in a manufacturing warehouse literally anywhere?

6:21Over time, I think that you'll see 2x plus efficiency output in manufacturing and robotic environments due to really all these different form factors of robots. And I think humanoids are the most eye capturing when you look at a video of it as a consumer or just a human and you see this thing. That's really what gets the attention. But there's a lot of different applications of them because the history was that you could kind of either have like a mounted arm that would pick things or something on the ground like a kiva that would move things not two and one well you don't actually have to have legs for a robot to move on the ground doesn't literally have to look like a human to have the same level of it actually should not look like a human if you want to maximize dexterity and so i think humanoids are interesting but very much stuck in the pilot phase and you're seeing a lot of advancement in different levels of robotics as well.

7:14Turns out humans are very inefficient form factors. That might be the quote of the day. So Stored has grown by also acquisition and roll-ups are kind of a hot thing as well. So are you a roll-up? How do you think about acquisitions? What does the growth of the business kind of pan out to in the next couple of years? Yeah, when we started this business, we toured warehouses, fulfillment centers, and we were thinking about should we build the software layer on top to orchestrate a prime-like network for other brands. And we kind of got stuck on this problem of, well, if you walk in the average warehouse, many of them are still doing paper-based picking where a worker prints out, go build an order of these units and walks around the facility, either from memory or from just looking around at cards and aisles in the facility.

8:02So how can you really expect prime level delivery, drones, and all the advancement in robotics if the industry they're going into is so far behind? So from the earliest day, we really chose to vertically integrate and say, well, we're gonna be both the software and the physical behind this to power that prime-like delivery for everyone else so that when we build this best-in-class software, we can actually apply it to the physical service it's behind. And that's really what's changed. Back when we started, physical wasn't really in vogue. it wasn't the thing to do. And now you're seeing these new applied kind of roll-up companies, holdings companies, and more saying, wait a second, I can build the best accounting software or whatever it may be, but if the accounting industry is slow to adopt, what if I go accrue all that advantage into my own company and my own accounting service where I own the data, the customer, and the software and AI powering this?

8:55And so really, if you think about Stored, Our secret sauce is this vertically integrated software, but how it's applied to real world operations. And the flywheel of this business is that the more volume you serve, the lower cost, the faster speed and the greater trust. And if the average business out in the U.S. is delivering for 15 plus dollars a package in five to six business days, while Amazon's delivering for five dollars a package in one to two days, if not even half a day, that's the fundamental gap that exists. And so the race to scale and spin that flywheel to level the playing field is really on and we're in the lead.

9:31And so when we look at acquisitions, we've actually been probably the most efficient on cost and also the highest outcome on uplift to these businesses because you're buying both density in the network and volume, but you're also applying your unit economics and your software throughout this business. And so in most of the deals we've done, we've seen five to seven or even more times uplift of the efficiency and therefore profitability of these businesses in extremely short time horizons. Damn. So you're a Teal Fellow at 19? That's right. You're not 19 anymore? Not 19 anymore. It's about 10 years ago.

10:08Okay. You're now evolved and mature. So you started in logistics there. What made you get so interested in logistics so early on? Yeah. Really, it's easier going backwards when you kind of look at being an entrepreneur. But a lot of times, probably a few of you around here, I'll pull out my phone and show my real live eBay account where it shows members since 2003. I was very young selling products online, really to just pay for anything in my life and get involved. And what happened was I saw the reviews go from be about the product you sold and I did or didn't like that product to just about the shipping and kind of post-click experience.

10:45Just how fast was it? What was the customer service? What was the returns? And kind of trace that to the rise of Amazon and Prime and consumers now believing, well, I can get anything online. The difference is who actually provides that post-click experience. And so that was really the kind of trend I was looking at. I was a student at Georgia Tech. In my kind of funny Teal Fellows story is I actually dropped out more than a year before I got the Teal Fellowship. And so it was almost in arrears, but still was quite validating to my parents and my family. And I think Jake joked about it earlier that there's a lot of different college startups you think of.

11:20And I remember our first kind of angel investor when we were students. They were like, most college students I know start a dating app to meet someone faster or an on-demand beer company. to get drunk faster. Like, why are you doing logistics? And we're like, we're really just solving a problem we've seen ourselves. And that if we look out at the world, it almost seems like too obvious. Like if you ask any consumer, what's the best delivery service? Where do you want to shop online? The answer is Amazon. Well, why is no one doing that for the other two thirds of the internet across e-commerce?

11:53What was the biggest lesson you learned from the Teal Fellowship? I think they really impress upon you what is your right to win and essentially build the biggest company possible, i.e. build a monopoly over time. And I think that their whole goal is that that's really what you should strive for, not that it should exist in the sense you want to win your category. And so I think they really dug into that precision of why will this win in the long term. And for us, a lot of it comes back to that flywheel where it's really hard to catch up to the speed and cost advantage. Again, if the industry's at$15 in five or six days and Amazon's at$5 in a day and now stored as sub$7,$8 and delivering in two days and we can deliver in one day depending on placement, it's very hard for that industry to catch up.

12:42And as we've spun that flywheel, we can trace our win rate in sales from sub 10 % to over 50 % because these brands can't find that level of capability elsewhere. And so when you're able to articulate why as you get bigger, you actually get better as a company and becomes harder to compete with you and you can move faster at scale. And that's why we're growing faster at scale. I think that's really what the Teal Fellowship impresses on you and subsequently Founders Fund who led our rounds and joined the cap table. As we close out, I'll make this one quick. What is your hottest take right now? I think there's all this obsession with kind of AI and robotics, whether you're an investor or you're a consumer and you're afraid of how that's going to displace you.

13:26And I really think that there's a fundamental gap in that. I don't think the value is going to keep accruing to the AI and to the robotics. I think it actually accrues to the application layer and to the real world. And so I believe humans' lives are going to get better. I believe physical businesses like Stored are going to win and get faster and cheaper. And long term, it's actually these super fast growth AI companies and robotics that end up commoditized by how low the cost becomes to replicate them internally across companies and for individuals even. Amazing. Well, Sean, thank you so much.

14:03Thanks for having me. Cool. Hey, it's Molly. If you enjoy our interviews, check out our newsletter, sorcery.vc, where we deliver a once a week top deals and tech headlines email and also go deeper on our podcast interviews. Subscribe to Sorcery today. And don't forget to subscribe to the podcast on YouTube, Spotify, Apple or wherever you listen. Link in description to sign up.