Cortado Ventures
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Cortado Ventures

CORTADO VENTURES

Delivery at the Speed of Thought?

How Cortado’s latest investment in Pipedream represents a new normal in logistics and ownership

Thank you Patrick Sweeney for your significant contribution to this article, distilling the important market drivers around our investment thesis.

At Cortado Ventures we invest in companies who dream big and have what it takes to make it happen, disrupting sectors with innovative technology where we are aligned as operators. Our recent investment in Pipedream embodies that conviction. Founders Garrett McCurrach and Drew Bellcock see a future where teleportation is within reach and the ownership of things model is turned on its head. Their solution gets us one step closer.

Oklahoma City based Pipedream is the future of hyperlogistics, the next generation of on-demand delivery. They were recently featured in Techstars, one of the top tech accelerators in the world. Pipedream plans to create a system of underground tunnels that will enable high speed delivery robots to deliver and store goods. Imagine a future where anything we want can be delivered within 5 minutes. Now add the ability to return items at the same speed, and you’ve just redefined ownership. Other investors include executives of Drizly, Atmos, Dropbox, and Doordash. Cortado is well aligned as our leadership includes a ditch digger (former Ditch Witch CEO David Woods) and a pipeliner (former EagleClaw CCO Blake Bixler). Pipedream is piloting their tech in Los Angeles.

Speed Matters

E-commerce is highly dependent on shipping and its ability to deliver goods to customers in a timely fashion. Average e-commerce shipping times have been trending down over the last decade, with shoppers receiving a package 2–3 days in 2019, down from an average of 6 days in 2012[1]. As order fulfillment times continue to decrease same-day delivery options have become more common. Consumer demand is growing for same-day delivery, in fact a recent survey showed that 80% of participants want same-day deliver and 61% would like delivery within 1 to 3 hours of a purchase. The same survey showed that 56% of people from the age of 18–34 expect same-day delivery and 25% of shoppers would abandon an online cart if that option wasn’t available[2]. Same-day delivery is fundamentally changing the way people shop by integrating the convenience of online retail with the immediacy of brick and motor stores. In addition to this, delivery pool services like Postmates, Uber Eats, and Doordash have made it so consumers can easily order food and groceries via their smart phone and have it delivered to their door steps in about 30 to 70 minutes[3].

Consumers continue to demand ever-faster delivery and online retailers such as Amazon have spent an exorbitant amount of capital on infrastructure to receive ever marginal improvements in delivery times. While conventional logistic networks and delivery pool services have been reducing delivery times they can never physically reach parity or close to parity (less than 15 minutes) of the immediacy of brick and motor stores. One of the major issues facing both of these delivery methods is traffic congestion, which they both suffer from and contribute to. It’s estimated that traffic congestion costs Americans $87 billion annually and individuals lose an average of 97 hours of their time per year due to it[4]. Additionally, both delivery methods strain existing infrastructure, create pollution, and contribute to the number of traffic accidents.

Pipedream’s Leading Role in Hyperlogistics

One possible solution that’s been suggested to address the issues that current delivery methods face is the use of drones (more formally known as Unmanned Aerial Systems or UAS) for parcel delivery. Yet, there are three main hurdles that make drones inefficient for large-scale parcel delivery. Frist, drones use a substantially greater amount of energy to move a package because they require energy to lift it from the ground and can encounter wind resistance which increases energy consumption. This amounts to approximately a 25 times increase in the minimum amount of energy needed to move an object when compared to a ground based system. The second issue facing drones for large scale parcel delivery is that there is an elevated operational risk. Lifting packages into the sky and flying them over crowded cities carries with it inherently more risk than ground based systems. Payloads or parts could fall and cause damage below, the drone could have a power failure and crash into something, or the drone could collide with object or person. Finally, the underlying technology needed to have fully autonomous delivery drones is inherently complex and will require more research and development before it can be fully implemented safely. For drones to autonomously delivery packages they’ll need collision avoidance systems (CAS), improved sensor technologies, additional research of stability and control of multi-rotor aircraft, increased battery energy density, and reduced cost of components due to improved manufacturing[5]. While conventional logistics systems, delivery pools, and delivery drones have many drawbacks there is one alternative that circumvents the problems they all possess; underground transport. This is exactly what Oklahoma City based startup Pipedream Labs (Pipedream) is doing with their underground hyperlogistics network.

Introduction to Pipedream Labs

Pipedream Labs is a technology company that aims to develop the world’s first commercial hyperlogistics network. This network will utilize underground tunnels paired with autonomous high speed transport robots to achieve delivery of a variety of products in as little as 30 seconds to 5 minutes. Customers will be able to both buy and return items at the same speed, which will redefine ownership. The robots or ‘’cargo pods” will be battery powered, self-navigating, and capable of speeds in excess of 220 mph. Each pod will be able to push a chain of 5 to 6 mules (packages). The pods will recharge either at terminals or at dedicated recharging stations. Terminals will be placed at locations that maximize the number of customers in ¼ mile radius. The network of tunnels will be created using low cost 12 inch pipe and improved drilling technologies that are currently used to transfer electrical infrastructure underground. In addition to this, Pipedream plans to create a micro automated storage and retrieval system (micro-ASRA) to autonomously store items near specific locations and allow transfer between various types of delivery. This ability to store items physically close to the end consumer will aid in rapid delivery and will capitalize on the current trend of hyper-localization of physical objects.

Illustrative Pipedream network

Pipedream’s network will substantially improve delivery times of household good such as food, medicine, consumables, clothes, tools, technology, and more. This will fundamentally change the way consumer’s shop, by allowing them to receive fresh food and laundry every morning. Restaurants could send over fully prepared meals or the exact amount of ingredients could be delivered for a family to cook at home, thus helping to eliminate food waste and trips to the grocery store. Ownership will be redefined and the “shared economy” will expand into new markets. Anything from power drills to food processors could easily be rented and then returned via the Pipedream network. This technology will enable just-in-time delivery for nearly all physical objects and create a paradigm shift in physical connectivity.

Market + Trends

Pipedream’s network will provide delivery services to consumers that rely on both delivery pool services and conventional logistics networks. More than two-thirds of Americans order food delivery online and in 2020 the market generated $28.4 billion in revenue[6]. Lockdowns from the COVID-19 pandemic accelerated growth and drove more first time customers to order food online. This market is expected to continue to grow at a compound annual growth rate (CAGR) of 13% between 2021 and 2026[7]. In addition to the delivery pool market, Pipedream will also disrupt the conventional logistics network market which was estimated to be approximately $233.37 billion in 2020. This market is expected to grow rapidly at a CAGR of 20.5% over the period 2020 to 2027[8]. Finally, Pipedream with its micro-ASRA for individual items is expected to change consumer behavior. People will now be able to order items they would buy at a convenience store and have them easily delivered to their home in a matter of seconds or minutes. This opens up another large market opportunity for Pipedream. Total inside sales for the convenience store market were $255.6 billion in 2020[9].

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Nathaniel Harding

Nathaniel Harding

Managing Partner for Cortado Ventures and Young Global Leader in the World Economic Forum. Investor and advisor for tech startups, building a better future.