Jetpack — On Campus Delivery

For students by students and owned by people in California who used to be students.

Introduction

Jetpack is a startup company that aims to provide instant access to everyday necessities for college students (coffee, shampoo, deodorant, candy, pens, etc). This company is like the Uber for Toothpaste and it will utilize existing students to carry their product and sell to their fellow students through an app. The role of a seller or “Jetpacker” is as a walking convenience store and the role functions as a gig where a student could make some side cash just by being a student and facilitating the sales of necessities to college students — instant coffee, condoms, an iPhone charger, or shampoo.

This is a survey conducted at Stanford so probably doesn’t reflect the whole country
I am not an investor in Jetpack, but I am attempting to write more deal memos about start-ups. Aaron Batalion suggested people who are interested in careers as Venture Capitalists to write like a venture capitalist — or produce Deal Memos. I’m just following his advice. I’m also trying to utilize the model put that Roelof Botha used to persuade his partners at Sequoia Capital to invest in YouTube. Calvin Chu previously asked me to check out female led companies on Republic which is why I’m analyzing Jetpack. I’m also not a certified financial adviser.

The company Jetpack has a main product in their app which connects students to a Jetpacker and facilitates the transaction. Jetpack makes money on the sale of an item. A jetpacker can make 20 dollars an hour and up to 5 dollars per item delivered.

For instance, if a Jetpacker were to deliver a Starbucks Double Shot to me at 3AM then that Jetpacker could be making an extra five dollars from making a very short trip, but also being paid for being on call to show up with my coffee. Or if I lost my iPhone charger and I commute forty minutes to school a Jetpacker could deliver a new charger to me in the library.

Deal

Jetpack is looking to raise a minimum of 50K, but would prefer to raise 1 million and has a valuation cap of 3 million dollars. They are currently seeking investors on Republic. The minimum investment right now is 50 dollars and the maximum investment is 107,000 dollars. There are rewards for investing in Jetpack and range from a sticker ($50) to a seat on the advisory board and a chartered flight to spend an exclusive day with the team ($50k+).

The current investors listed on Angel List seem to be from an Angel round and include Zach Snader, Barret Davret, Christian Vizcaino Jordan, Cole Youngmark, Tarryn Teresa, Richard Baluro, and Chris Hsiao.

Competition

The competition is existing brick and mortar stores on campus, Amazon, and GoPuff, but Jetpack’s value is that they are there for the “last mile.” My item is delivered to me in the library on the 4th floor because a Jetpacker can get in there while an Amazon delivers to the dorm room.

There are similar services already in the market like GoPuff and other immediate delivery services, but Jetpack has a unique proposition in that I would feel better about the sale if I knew I was helping to fund a fellow student. Jetpack is aimed at providing value to students through students. I have yet to see other services similar to Jetpack where the target consumer is also their employee.

Another competitor could be the company Bodega is seeking to solve these issues with installing high end vending machines.

This is how Jetpack distinguishes themselves from the competition:

It is possible that that Amazon could acquire a Postmates or Doordash type company and be an immediate competitor to Jetpack. While this is not ideal with respect to competition it would validate Jetpack’s main premise of going that last mile and having a peer-to-peer culture.

Key Risks

Doing a peer to peer market is difficult and the risk is that the company is unsustainable with respect to their supply chain and how much a student is willing to pay for a specific product.

If Jetpack can run successfully at Stanford and slowly expand out to other campuses while keeping their supply chain and partners happy then I think they have a chance.

The other key risk I see occurring is that Jetpack could be a way for students to move drugs with the cover of selling candy. The framework of getting a buyer to a seller is already in place and there is a legitimate transaction for the meeting. How much harder is it to hand that Jetpacker 20 bucks and get some drugs? Jetpack needs to be careful their platform doesn’t get hijacked to facilitate the distribution of drugs to college kids.

Also, what if these Jetpackers get mugged. I went to the University of Maryland and kids would get car jacked in broad daylight on campus. If the backpack of product is lost who pays for it? It seems like a lot of risk if this bag of product is recognizable.

Recommendation

I’m hesitant to invest in companies on Republic or SeedInvest, but if I had an extra 500 dollars I was willing to lose or wasn’t already going to invest somewhere else I would invest in Jetpack. I am not an investor in Jetpack.

Investment Summary

Business

Jetpack will be utilizing students to sell products to other students via an app that allows for geolocation and the exchange of money. The student seller or Jetpacker will have to carry around the goods.

Market

The estimated market according to Jetpack is $13.2B for on demand college campus delivery.

If Jetpack captured 1% of sales at a large college campus at 10% EBITA then they would make about 27,000 per year at one school and if they can get 1 large campus per state in the US then they are looking at 1.35 million in sales for a year assuming that the majority of sales happen over the course of half a year during the spring and fall semesters. This assumes the average spending of a college student is 5 dollars a day. It could be higher and thus the potential revenues could be higher. Yearly earnings is denoted for half the year taking into account the summer, winter, fall, and spring breaks.

If Jetpack can get 10% of sales on campus then those numbers bump up an order of magnitude.

Financials

In contrast to my estimate Jetpack disclosed their customer acquisition costs and expected sales on Republic. Also Jetpack owns all of MyBestBox and appears to have a 100k note that they will eventually have to pay.

The company’s projected revenue model is above and I did some quick calculations to determine their projected EBITA.

I noticed they didn’t post the cost of supplying the goods to their Jetpackers. Perhaps a large portion of these goods are actually free right now which is why they don’t account for those costs, but a 39–40% EBITA business seems unlikely to me.

For a large campus considering a student would spend 10 dollars a day Jetpack needs to hit 10% EBITA/Day and capture 2.3% of the total sales on campus per day over both semesters to get the revenue they are projecting.

These numbers are closer to what Jetpack projects. This is an extremely aggressive goal for a company starting out and I doubt they initially hit 2.3% of the total sales on the Stanford campus. They should disclose their EBITA to investors.

Jetpack does also disclose that their company could be an alternative route to advertising and present a nice figure shown below.

Jetpack has an opportunity to gain new products at low cost to conduct a “market test” that could serve better than actual advertising buys for new products. Jetpack could also tell their partners what products sold best, when they sold best, and to who they sold and could better inform a partner’s future advertising buys or product development.

The current brands with Jetpack are shown below with the notable P&G or Proctor and God as they are called in Ohio.

Jetpack is currently accepting investment here

Team

Jetpack is led by former Proctor and Gamble engineer Fatima Dicko who was an Upstream Innovation Engineer for 5 years. She is also the founder of MyBestBox since 2015 — a company that she started while at P&G and this company is part of Jetpack.

She also has a number of other people at Jetpack with her that appear to have previous experience in start-ups, investing, and building the framework that will be necessary to Jetpack’s success.

I expect they will experience some sort of litigation issues in the future as they try to scale so Ryan E. Middleton will be busy. I guarantee any University or College is going to want a cut of those Jetpack sales if they are able to successfully scale and capture significant on-campus sales from students.

Problem

Jetpack seeks to solve the problem of not being able to get necessities on college campuses at any hour of the day at any location. I distinctly remember situations where I would be in the library studying for a final at 2 AM and wanting some coffee to push all the way through the night, but after realizing I couldn’t get what I wanted I just went home and went to sleep. The problem Jetpack seeks to solve is 24/7 access to necessities in very specific locations such as the 4th floor of the library at 3 AM.

Solution by the Company

Have students carry around backpacks full of everyday essentials and utilize technology to connect a buyer with the product in the fastest amount of time. This is a gig economy type job and Jetpack seeks to take a cut from every sale while the seller of the products is paid an hourly rate and sometimes 5 dollars after successful delivery.

Market Size

The average size of a large state run university is about 30,000 students. Let’s say on average a student could be spending about 10 dollars a day on various things from coffee to lunch to deodorant. There are about 20.5 million college students in the United States, but a lot of them could be attending community college or attending school online. Let’s round this down to about 15 million students for Jetpack’s target consumers.

Jetpack should adopt Facebook’s old model at going into college campuses. Slow expansion over the course of a few years while maintaining a high quality product or service. The size of college campuses are also different and Jetpack’s model makes the most sense for gigantic state run universities where the nearest convenience store is a 10 minute walk away for a student, but a Jetpack seller could be in the same class.

Product Development

There are interesting product development opportunities here outside of just buying stuff and selling it at a mark-up through existing students. The concept of using people as sales people has been done before (Amway, Herbalife, Mary Kay, etc), but Jetpack does not look like a pyramid scheme and it could be a way for a new candy company to get instant market exposure. Jetpack has already partnered with brands like GoCubes Chewable Coffee, Blowfish for Hangovers, and Sambazon Energy to name a few.

There is also quite a bit of data to be collected and sold based on what students are buying and when they are buying those products. So once they get large enough Jetpack could sell their data to the highest bidder or work out deals to get cheaper product from their suppliers by supplying them with data.

Sales and Distribution

Jetpack seeks to utilize students as their sales mechanism and as distributors. It’s not exactly clear how these Jetpackers will re-up on new product especially if something starts selling out quickly. There may also be an opportunity for “surge-pricing” on specific hot items that are in high demand, which could further increase the margins for the company.

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