Material Bank Logistics has vision for becoming the Amazon of design
Meet Material Bank, a Bain-backed logistics startup disrupting the architecture industry. Here's a look at its vision for becoming the Amazon of design.
Material Bank's robot-operated Memphis, Tennessee logistics hub. Material Bank
Material Bank is a marketplace for design materials that promises to ship design samples overnight from its Memphis, Tennessee, warehouse.
The company raised $28 million in April in a round led by Bain Capital Venture that also included funding from Starwood's Barry Sternlicht.
CEO Adam Sandow said its customers are of Fortune 1000 companies, from cruise lines to tech companies to fast-food chains.
The company's secret is its warehouse, operated by robots, and directly next to FedEx's global shipping hub, enabling last-minute overnight orders.
Amazon's famous two-day shipping guarantee for all of its Prime members is in the process of becoming a one day guarantee, prompting the company to spend billions on the goal. It has taken Amazon more than 20 years to get to that point.
But Material Bank, a marketplace for design and construction materials that launched in 2019, is able to promise deliveries for packages ordered as late as midnight by 10:30 am the next day.
While Amazon's delivery empire has grown out of the company's extensive investments in industrial real estate and army of logistics and warehouse workers, Material Bank instead partnered with FedEx and planted its warehouse in Memphis, Tennessee right next to FedEx's global sorting hub to provide speedy delivery.
The company, founded by design media magnate Adam Sandow, secured $28 million Series B funding in April in a round led by Bain Capital Venture's Merritt Hummer, and includes previous investors Raine Ventures and Starwood Capital CEO and cofounder Barry Sternlicht. Material Bank has raised a total of $55 million in funding to date.
These investors are betting that the design and construction material industry is waiting for the sort of e-commerce revolution that has changed the face of consumer retail. According to Material Bank, the bet is paying off, Sandow said that the company already has customers at almost 20% of Fortune 1000 companies, from cruise lines to tech companies to fast-food chains.
Business Insider spoke with Sandow about why he switched from media to logistics, how the company is able to deliver so quickly, and why the pandemic has been good for business, even as some construction projects have stalled.
" I want to set the bar for our industry in the same way that Amazon set the bar for e-commerce," Sandow told Business Insider. "Amazon forced the entire world to either adopt it or be roadkill."
Read more: A Bain Capital Ventures partner says construction tech is hot and short-term-rental startups are overhyped
The move from media to logistics
Sandow founded his parent company SANDOW in 2003. The company has now grown to include a design consulting firm, the NYCxDESIGN conference and multiple magazines, like Interior Design.
Sandow, always looking to expand, said that Material Bank was formed out of a range of conversations with both design firms and the manufacturers of design materials. His animating question was simple.
"How do we build next generation services, tools, and services that the industry will live on, and how do we leverage our media to grow that?" Sandow told Business Insider.
Adam Sandow, founder and CEO of Material Bank. Material Bank
Sandow decided to focus on the design materials industry. Designers searching for materials for samples to show their clients, and then order in bulk, would either need to reach out directly to multiple manufacturers or go to a physical location to see samples. Materials could take weeks to arrive, substantially lengthening the design and building process.
Sandow's idea was to create a marketplace that could bring together all of these disparate manufacturers and send materials directly to designers much more quickly than the status quo. Sandow told Business Insider that this would have been almost impossible to pull off if it wasn't for the connections his media company had made.
"Anytime you start a marketplace, you have a chicken or the egg problem," Sandow said.
The manufacturers will only join a marketplace if they know that there are potential customers already using the site, while potential customers will only use the site if there is a wide range of materials to purchase.
Sandow said that the company's contacts helped convince manufacturers to join the marketplace before it even launched.
How to ship tile overnight
While the company has attracted clients with an unprecedented aggregation of design materials, it is making its biggest bounds in logistics.
The company's operations are based out of a warehouse that borders FedEx's central sorting hub at the Memphis International Airport. FedEx flies almost all of its planes through the hub, sending packages around the country.
For a company looking for next-level shipping speeds without an Amazon-sized shipping empire, there's no better spot. Sandow said that the company formed a partnership with FedEx early on by explaining that it was working to "build a game-changing business on your logistics backbone."
Read more: Bond, which has raised $15 million from investors including Lightspeed, wants to become the Shopify of logistics by turning vacant retail space into warehouses
The factory itself is largely operated by robots, from Boston-based Locus Robotics, who do the majority of sorting and packing, which Sandow said has prevented the errors that can plague a logistics operation and made its super-fast delivery possible. Sandow said this has allowed the company to pay its warehouse staff $17.50 an hour in a state where the minimum wage is a mere $7.25.
The company ships samples in proprietary packaging that designers can use to return any unused samples for free.
The company receives orders up until midnight for delivery at 10:30 am the next day. Once the last order comes in at midnight, the company has 2 hours to fully pack up all orders and load them into a truck. Around 2:00 am, the truck drives a few minutes directly to the FedEx hub, where the packages are then loaded onto planes making overnight deliveries. FedEx then delivers the product later that morning.
Funding during a pandemic
Sandow said that the company began to search for more funding in January, when the full reality of the pandemic's impact was not yet realized. At the time, Sandow said that the company received a lot of inbound interest from VC firms who wanted a piece, but they chose Bain because of their clarity of vision for the product.
Part of that clarity was seeing how Material Bank could "carry the industry through the pandemic and beyond."
Material Bank was useful for both manufacturers and designers affected by the pandemic. For manufacturers, they could cut back on their fixed logistics and shipping costs by working with Material Bank, who instead makes money per each item sold. It also prevented them from having to deal with the headache of shipping materials during a global pandemic.
For designers working from home, the company made it possible to continue designing and sampling materials from the kitchen table, instead of their corporate office. These designers could access Material Bank's full catalogue remotely, and by the next day, they could hold the tile or carpet in their hands, while retail showrooms remained closed.
Sandow said that as a result, the company has seen record revenues each month since February.
First reported: https://www.businessinsider.com/material-bank-bain-logistics-architecture-design-materials-amazon-2020-7
