AUSTIN, Texas (Dow Jones)–Matthew Chasen always thought his business school project had the potential to do more than merely garner a good grade and impress a professor or two.
It turns out he was right.
UShip Inc., an online-shipping marketplace that Chasen began developing in 2002 with some fellow students at the University of Texas, landed an undisclosed amount of funding over the summer from Silicon Valley venture firm Benchmark Capital. The six-employee startup also has caught the attention of Internet auctioneer eBay Inc. (EBAY), which potentially could put its service only a click away from eBay’s 75 million U.S. users.
Benchmark Capital was an early eBay investor, and Benchmark general partner Bob Kagle sits on eBay’s 11-member board. Kagle and another Benchmark representative have joined Chasen to form uShip’s board, although uShip and eBay currently have no formal business relationship.
Put simply, uShip allows people to post on the Internet items they want to ship – everything from pianos to boats – and then seek bids from interested carriers in what’s known as a “reverse auction” for the lowest price. Shippers post their items for free, but carriers are charged a 7.9% commission upon winning business.
“Everybody knows how to mail envelopes or (standard) packages,” said Chasen, 30, who graduated from UT last year with a master’s of business administration. “Our idea is to really create a consumer brand where people come to ship larger items.”
He views uShip as particularly useful in instances where standard shipping costs might exceed the value of the item to be shipped, such as in the case of old furniture. But uShip encourages users to seek shipping bids for less run-of-the-mill items as well, including pets, livestock and even long-distance “ridesharing” for themselves.
The unique business plan, in addition to uShip’s recent high-profile VC backing, could make it one to watch among the thousands of small startups constantly vying for consumers’ attention.
Still, Chasen is hardly the first Internet entrepreneur to see an opportunity in the $300 billion U.S. freight industry.
A number of Web-based shipping and moving services exists, including major players eMove.com, a subsidiary of U-Haul International Inc. parent Amerco (UHAL), and privately held Freightquote.com. But uShip is unusual in the sector in its reliance on reverse-auction bidding to set prices.
UShip, which launched on the Internet in 2004 while Chasen was still a student, currently is getting about 100 to 200 new postings a day, Chasen said, although he declined to release financial details about the company except to say it isn’t yet profitable.
The company’s service is eBay-like in its bidding feature and in its encouragement of “self-policing” feedback from users to weed out disreputable operators. Among other differences, however, uShip doesn’t require users to accept the best bid in terms of price.
Still, the similarities haven’t been lost on eBay. Freightquote.com currently offers flat-rate shipping quotes and services to people who buy or sell items on eBay, although eBay spokesman Hani Durzy said there may be a place for uShip as well.
“We are in the process of evaluating (uShip’s) service and seeing what they could bring to the table,” Durzy said. “We are intrigued in the sense that it appears the way uShip does business has a lot in common” with eBay.
Durzy made clear, however, that no decision has been made regarding a potential partnership with uShip, and he stressed that there’s no guarantee there ever will be one. Durzy added that any decision will be based on eBay’s best interest, regardless of Kagle’s dual board membership.
For his part, Chasen said he’d love to ink some kind of arrangement with eBay, a potentially huge step forward for his tiny startup.
But he contends it isn’t make-or-break for uShip. The freight market is large and highly fragmented, so uShip’s opportunity “is much bigger than just an eBay services play,” Chasen said.
He thinks uShip can lower consumers’ cost of shipping large or unwieldy items, as well as provide carriers a means of filling trucks that may be partially empty.
“There is just a tremendous amount of excess (truck) capacity on the road each day,” Chasen said.
UShip is using its Benchmark venture funding to beef up its marketing and expand its service offerings.
It plans to add new features – such as a function enabling carriers to hone in on potential jobs all along designated routes – as well as launch internationally. The company also intends to offer optional insurance.
Regardless, uShip’s competitors are skeptical. Some say they simply don’t consider the company’s central feature – its bidding system – to be particularly compelling in the shipping market.
“People want speed and certainty” when shipping goods, Freightquote.com Chief Executive Tim Barton said bluntly.
Freightquote.com operates as something of a freight broker, profiting from the difference between what it charges shippers and what it pays carriers. The seven-year-old company processes an estimated 35,000 shipments a month and is on track for $125 million in revenue this year, Barton said.
He contends he isn’t concerned about eBay’s ongoing evaluation of uShip. Without commenting directly on uShip, Barton said he’s confident the bulk of eBay users – as well as shippers in general – want up-front certainty on shipping costs, delivery timing and carrier quality.
Chasen readily acknowledges uShip’s service won’t appeal to everyone, saying there always will be demand for fixed-rate shipping. But he also thinks there are plenty of people willing to bid out their business if it results in lower costs, as well as plenty of carriers willing to accommodate them.
Preston Thompson, a 30-year veteran truck driver, is evidence of that. Thompson said he’s won more than a dozen jobs through uShip since he began monitoring it over the summer, most recently a $2,000 deal to transport a camper from North Carolina to Arizona.
The only potential drawback he said he’s noticed so far is a perception among some users that they can get “bargain-basement” rates through uShip, rather than merely better rates.
“A lot of people get on there and they expect something for nothing, so you just have to know what your requirements are and bid accordingly,” Thompson said.
Overall, however, he’s happy with uShip, and he expects to continue using it to help develop his independent trucking business.
“It’s opening up some new markets for me,” Thompson said. “I could see actually making a living off of uShip alone.”