William Leonard
Welcome back to another episode of the Atlanta Startup Podcast. Today, I sit down with the co-founder of Saltbox, Paul D’Arrigo. Paul graduated from Georgia Tech in 2003 and has seemingly been an entrepreneur ever since. He’s previously started multiple companies in the eCommerce and reselling space. But for the last three years, he’s been actively building Saltbox, which is an Atlanta-based startup helping small and medium-sized businesses and eCommerce companies grow their logistics footprint. During our chat, Paul gives us unique insight into the current state of eCommerce markets. Why he believes eCommerce can present the next billion and trillion dollar startup opportunities, and what he’s most excited about regarding the growth of Saltbox. Before we dive into today’s episode, be sure to mark your calendars to see some of Atlanta’s newest startups at Georgia Tech CreateX Demo Day, which is taking place at the Fox Theater this Thursday at 5 pm eastern time. Rahul Saxena and the team will welcome their latest cohort, which features more than 100 teams launching into the Atlanta Startup Ecosystem. Also, I’ll be in Tulsa this week for the ACT Tulsa demo on VC day, which is sponsored by the Atento capital. So if you’re in town, please give me a shout and I’d love to meet up for a coffee. Also, be on the lookout for Valor’s Art of Inclusion Commission Call for entries which kick off on September 1st. You can find out more about that on our website at Valor.vc. Now let’s dive into today’s episode. Paul, thank you for joining me today.
Paul D’Arrigo
Thank you for having me on, William. Really appreciate it.
William Leonard
Of course, man. You and the Saltbox team are doing some fascinating things in the world of e-commerce and logistics. Certainly want to dive into that a bit later in our conversation but I love starting with the background and the story of the guests. What’s the Paul D’Arrigo story and can you talk to us more about your background and journey to entrepreneurship?
Paul D’Arrigo
I came down here to Atlanta, went to Georgia Tech as an industrial engineer, and then my first job out of college as an industrial engineer, I went to work for UPS. This was maybe 2003/2004, some very early days of eCommerce. This is when there were sites like Smart Bargains, Webvan was still kind of a thing then. Those were my first glimpses at kind of what we would call eCommerce today. From that, worked for UPS for a while and then started my own e-commerce company with some friends from college. It was a reseller, we sold ProAudio, electronic recording, and DJ equipment. That was an industry at the time that was very based on brick-and-mortar. There were some print catalogs that were widely distributed but there was a big boom in purchasing that equipment on the internet as people were recording more and more or creating music on their computers. And so that was a very explosive growth as a reseller but as the years went on, as a reseller, it became much, much more competitive. Even the likes of Amazon started selling equipment like that. Looking at what we had built, we said okay, we’re very good at selling things on the internet but we’re a reseller right now, which is very challenging, you’re competing against very large entities. So, we developed a company that was an E-commerce as a services company. That was a company that basically, you have a product, you produce it, and you wish to sell it on the internet. Still, you don’t want to deal with posting it to the online managing marketplaces dealing with customer service so we rolled all those learnings into an E-commerce as a services company.
William Leonard
Was that a pivot or did you start a new company entirely?
Paul D’Arrigo
We started a new company. There was a new name and a new entity which was Ally Commerce. We raised funding for that but it was based on the learnings and the workforce, the colleagues, and everybody there was from the previous retailer, and so I worked on that. I was there through a Series B and then moved on and was doing some different consulting on my own, working with a small consulting firm, and got introduced to my co-founder, Tyler. He had moved here from Silicon Valley to the Atlanta area. Among other things, he was working primarily on an acquired brick-and-mortar retailer that was in the beauty space and was interested in developing its e-commerce strategy. I was introduced to him and helped him with that for a couple of years. Tyler and I got to work together on that. During that time, that company & Other Stories talked about the challenges of finding the right space, a good space that was safe, secure, and logistically functional. At the time, it was even kind of laughable or comical how tough it was. We both agreed and then one day, Tyler came to me and also came to Maxwell, our other co-founder. He and Tyler went to college together and Tyler said, “I have this idea of how we could create a space that can serve this type of need. It’s not out there and I’d like to attack that problem.”
William Leonard
That’s awesome. That’s incredibly fascinating how you started out at Georgia Tech industrial engineer, got involved in the E-commerce space, and just started building. It sounds like you’ve always been a builder by nature, right? Talk to us a bit more about what Saltbox is practically doing and the type of customer that you all are solving these logistical and E-commerce problems for.
Paul D’Arrigo
At a very mechanical level, Saltbox is providing logistics enablement. This is shipping, freight, loading docks, material handling equipment, skilled labor, and fulfillment services. We’re providing those things but at smaller increments than is the predominant way that it is these days. Generally, if you just talked about space, 50,000 square foot warehouse, 100,000 square foot, and million square foot warehouse, there is really no option at 500 square feet. Same with if you need skilled labor, there are agencies out there that can get you 10 people full time but if you need just someone for 20 hours a week, that’s difficult. We’re serving those companies that have physical goods and logistical needs but are not yet at the scale that is primarily served by the logistics services industry. And then now for it to work, we physically aggregate those companies in our facilities so that their volumes and their logistics needs are combined and aggregated so that it becomes very large and economically viable.
William Leonard
This is interesting. You all are kind of enabling logistics fulfillments for, I’m assuming, smaller to medium size businesses. Are these Mom-and-Pop type shops? How do you characterize who are the core users of Saltbox today?
Paul D’Arrigo
70% are eCommerce companies. I would think you define them as more longtail eCommerce companies. There are products like clothing, swimwear, for pregnant women, or something like it’s kind of a long tail type product. But I would say that they are predominantly their own brand. They’re not resellers. They’re building their own brand with a product and working very hard to build a strong brand. Often our members are yes, there are many instances of husband and wife or family businesses and such but always a skill in fashion, they know health and beauty, they know different industries and very talented in that but they don’t have as much of a core skill set in logistics and so then that’s where we look to provide that to them. That’s how we look at them. We look at what they need, and what we can help them with, and then that’s how we go through constant thinking of how we can help them and the products and services that we can put out.
William Leonard
Thinking about this market e-commerce has really thrived throughout the pandemic as consumer shopping habits have changed with a bias towards online shopping, I think e-commerce sales are up to like $870 billion last year. Why are you all so bullish on e-commerce? Do you all believe that the next billion or trillion dollar market cap opportunities do exist in the world of e-commerce today?
Paul D’Arrigo
Well, yes, definitely. There will be many unicorns that do some sort of service or product in the e-commerce area. When I talk about this subject, I do like to sometimes take a bit of a step back and when I say e-commerce, I sometimes think that that term is getting a little blurry now. I opened up an app and bought this from a big box retailer but then I got in my car and drove over there. They brought it out curbside. You still went to a brick-and-mortar, that sales still physically traveled through a brick-and-mortar but I think a lot would say that was e-commerce. That was an electronic commerce-enabled transaction. That’s where I see all of commerce, all of our buying of anything is becoming more electronic, more and more e-commerce. That’s where just a shift in how everything is going and I don’t know where it’s going away from, you could say maybe it’s going away from cash transactions or other more paper-based transactions. But yes, so that’s where I see it going and even in a broader sense of just beyond clicking to buy something on the website and the package shows up at your door.
William Leonard
As you all think about the current state of the economy today relative to how supply chains have been impacted so negatively, how does that impact Saltbox and your customers as well?
Paul D’Arrigo
I do watch very closely and wonder what kind of macro effects will happen, if just spending on everything just goes down, if we just all buy less of everything, then there will be effects. Now, I think where this, again, becomes very important is about those that have really strong brands where they make a product and it connects to people where people are like, “Okay, I have to buy a set of bed sheets. Because I have a bed and I’m not going to stop sleeping in the bed, I only want this specific brand. I don’t care if it costs 10% more or if it costs 20% more.” That’s what I see with a lot of our members is they’re building very strong brands, their products are very direct in that way, and those are the things that will retain customers versus if you’re just trying to sell the cheapest set of bed sheets, and then somebody just comes in and their set of bed sheets is $1 cheaper or something like that. Consumers who are in their mind may get even more strict but if they’re not looking at the brand, that would be very challenging.
William Leonard
You bring up an interesting point when you talk about branding for some of the customers that you all serve. High level from what you’ve seen, what are some of the characteristics of a strong brand that you all are enabling? Is it oversimplified in that you just have great products and great customer service? Or are there other things that are kind of behind the scenes that are enabling this customer to thrive no matter what the macroeconomic situation may look like?
Paul D’Arrigo
I would say there is the, of course, the product has to work, right? It must have some sort of function. But for most consumer products, there are many alternatives for something and you’ll see a select few do a hundred times better than the rest, then you see that clearly in a larger data set like that, how it’s the brand, and it’s how it connects with the customers. Going back to how I see in many of our most successful entrepreneurs, they have a lot of experience in the vertical that they are working in. They know the health and beauty space, they know the home good space. They might know it at the level where they were formerly a designer or something like that, but they deeply understand that market. And then that shows in the success of their product, how it attaches to customers, how the customers align with it, and then how they’re able to grow.
William Leonard
Awesome. I want to transition the conversation here a bit, Saltbox isn’t your first co-founding experience, right? You’ve built businesses in the reselling commerce and e-commerce as a service space. Talk to us about how you draw on prior experiences as you’ve built Saltbox. Are there any transferable lessons or perspectives that you took from other building experiences to now, as you all have built Saltbox today?
Paul D’Arrigo
I would say, certainly, personally, I feel more mature with this versus when other earlier times founding. I think a lot of that was understanding how successful people are very self-aware of their strengths, and some admissions of weaknesses and stuff like that. I think many early founders, myself included, just believe going to be good at everything and going to be able to muscle through everything. I would say an understanding that you have to be aware of weaknesses and things. I think that’s important with Tyler, Maxwell, and I, being very upfront and deliberate about what each one of us is very good at, what each one of us needs some development with, and having those very mature conversations, allocating the responsibilities just then leads to just a much higher chance of success. I would say that was a big evolution of myself in this new one. Going back, and this is kind of relates to what I keep touching on, is understanding for ourselves how it’s important that we put out a product that works great, and delivers value to people, but I also have learned how we as well, Saltbox, have to have a very good brand. We have to have a brand that resonates with our customers, the customers that we’re seeking, and we have to have a connection with them. I would say in earlier startups, as an engineer, I was very technical. As long as it works and it works great, then people will buy it. I’ve come to learn that takes a little more than that.
William Leonard
It certainly does. That’s fascinating that you touch on some of the aspects of the leadership perspective of Saltbox. You and I were talking before the call about how the team has grown as well. As you kind of think about being a co-founder, how do you think about company building and team building from a general perspective? At Saltbox, you all have raised several rounds of capital now, and been able to make several key hires, and key expansion initiatives, have you all thought about company building and team building at this stage of the business now?
Paul D’Arrigo
At all stages, one of the most important things that we really are always working at, can’t say you’re always perfect, is to be as transparent as possible. That’s with everybody inside and that saying, this broke, this didn’t work, we’re really struggling with this, that’s at a company-wide or that’s at a personal level. That’s important for us as founders, and I think about myself to definitely show that as a founder, I’ve had several responsibilities as the company has evolved but I have to be comfortable that I am handling this responsibility for the company right now until this responsibility grows and then we have to go and find a new member of the team, who, frankly is much better at this than me. This is their core subject matter expert. There’s this constant admission of where help is needed, who made the determination to find the right person who was very, very good at what is needed, then it goes to that person that as it grows, they then are aware and speak up at what they’re good at, maybe what they need some help with, and what else we need to add to the organization?
William Leonard
Transparency is huge. I think having this constant line of communication as well kind of is in parallel with that aspect of communication and transparency. As we kind of wrap up the conversation here, Paul, thinking about the background of yourself, Tyler, and Maxwell, you all are seemingly Atlanta-centric guys, right? Is there ever thought as you all were talking to build Saltbox outside of Atlanta at some point or was Atlanta always where you all felt like Saltbox could have the most network effects and the most opportunity to grow as a startup?
Paul D’Arrigo
We’ve never thought to leave Atlanta personally. Now that Saltbox is growing all over the country and we have talented team members all over the country, I would say strategically, Atlanta is a logistics services company, just a real epicenter. There’s a lot of talent and power and everything in that industry here. You have Delta Airlines and UPS, and you have other transportation companies and such here. Saltbox doesn’t own any trucks or anything like that but we are closely knit with that logistics industry. I would also say that in the last 10+ years, I’ve definitely seen Atlanta and its startup community gets to be much more on the map. Over 10 years ago in Silicon Valley, I don’t recall many conversations or anything about any Atlanta companies. But now, if you go anywhere, there are multiple unicorns and people like Calendly, SalesLoft, or any of these other incredible companies here in Atlanta now and it definitely shows a lot of health for the startup community here.
William Leonard
The city has a lot of grit and resilience. I think you said a burgeoning startup hub here. As we kind of finalize the conversation here, as you and the team think about the remainder of this year, I saw recently that you all opened a new 80,000-square-foot fulfillment column in Columbus which think is your sixth location nationwide now. As you all think about 2022 and beyond, what are you all most excited about for the remainder of this year and the next couple of years?
Paul D’Arrigo
At the rate of this year, we have a lot going on. As you mentioned, we opened our sixth location in Columbus. Now, that is a fulfillment and logistics services dedicated location. There isn’t a workspace but we will be opening seven more workspace locations the rest of this year, expanding to five new cities. And in two cities, we will be expanding our footprint there. We should, I believe, end the year with over a million square feet under our control. That’s great. I’m so looking forward to all the new members and the hundreds of hundreds of companies that are going to join. As we have a thousand companies and beyond that are in Saltbox, that many members, you think about the aggregated GMV or the economic power of that. That will continue to provide a step changes in the level and the type of services and products that we can provide for them when you have that many motivated, talented entrepreneurs and small businesses collected. That much growth, that many companies, and that much aggregation by the end of the year is really, really going to be amazing to see then what we’re going to be capable of.
William Leonard
A million square feet is a huge North star for the team. That’s exciting. As an e-commerce company that may be listening to this episode today, what is the best way for them to reach out to the Saltbox team if they’re interested in utilizing some of the services and logistics enablement that you all provide? What’s the best way to get in touch with somebody else?
Paul D’Arrigo
You can go to saltbox.com. You can see all the cities that were open right now, in any of those cities, you can go and book a tour. One of our colleagues is happy to show you around, you can see Saltbox yourself. If you’re not in one of those cities, you can submit and mention what city would you like us to come to, we’re always very curious about that. We also offer fulfillment services to people all over the country for SMBs that don’t get the level of service and what they need from other 3PLs and such that just aren’t designed for the stage that they’re at.
William Leonard
Awesome. Well, Paul, this has been a lot of fun. I think we could probably spend hours talking about everything that Saltbox powers, how e-commerce is growing more, more definitions of what e-commerce really entails, and I think the key drivers of how your customers are growing as well. But I look forward to seeing you all continue to grow here in the city of Atlanta and across the country. Really appreciative of your time today, Paul.
Paul D’Arrigo
Thank you so much, William.Thank you for this.
William Leonard
Cheers.
Lisa Calhoun
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