The online B2B equipment rental marketplace started by Robert Preville
and Rob Kaiser
, owners of the Wilmington Business Journal
, is making waves in the Wilmington startup community in early 2015.
, it's rapidly adding tool and equipment suppliers to the marketplace, along with a team of strong angel investors and board members. The founders' mission is to quickly be global in scale—they'll customize the site for language, cultural dissonance (ex hire = rent in Europe), international trade requirements and currency. So far, they've got suppliers in Canada and several European countries.
But like any marketplace business, the challenge will be building the market on each side of the equation—they have yet to make their first rental. I recently sat down with the founders to learn all about the business, the background story and the plans for scaling up.
How did KWIPPED come about?
Preville is a serial entrepreneur in B2B e-commerce, starting his career as a founding employee at Atlanta’s MFG.com, a similar online marketplace for custom manufactured parts. It eventually became a portfolio company of Amazon’s Jeff Bezos.
Preville left shortly before that happened, but was part of the team that negotiated the sale of stock to Bezos.
At MFG, Preville learned from MFG's subscription-based model. Suppliers paid an annual fee to receive and quote RFQs. The biggest learning lesson was that it was too difficult to meet the expectations of all suppliers. That's because markets tend to conform to Pareto’s rule—20% of the supply base will receive 80% of the business, and for reasons outside of the marketplace’s control. A subscription model implies everyone receives equal value, but that is not the case.
That is why KWIPPED is based on a transaction fee revenue model. KWIPPED only generates revenue from the suppliers who directly benefit from participation in the marketplace.
After his move to Wilmington in 2004, Preville started GlobalTestSupply.com, which rented and sold electronic industrial equipment for the electrical, environmental and construction industries. It was there that he worked with and received investment from Randy Swartz, now an investor and board member in KWIPPED. Global Test Supply was purchased by ITM Instruments in the summer of 2011. Soon after, Preville saw a need for an MFG.com style marketplace to solve the cumbersome sourcing and procurement process in the very large equipment rental industry.
How it works, and the traction
KWIPPED launched the website in December 2014. Since then, it has signed up 37 suppliers from numerous verticals, adding about five to seven per week. There have been 44 rental requests, of which 27 quotes were delivered, but they are still waiting for the first rental.
Here's how it'll work once it happens: When a renter accepts a supplier’s quote, he or she is prompted to enter credit card information and electronically sign the rental contract. KWIPPED collects the first term’s rent, security deposit and any shipping fees. KWIPPED then notifies the supplier that the rental is secured and the supplier makes the arrangements to ship the equipment or have it picked up.
What is the opportunity?
KWIPPED is about helping companies utilize idle assets. Examples of companies that could benefit from this are the foundation contractor who is not fully utilizing an excavator and the manufacturer who doesn’t always need its 3-D printer. The foundation contractor is not in the rental business, but a credible and liquid marketplace gives the company an opportunity to make money off of idle equipment. It also helps them justify new equipment purchases—KWIPPED helps offset the high cost.
Like Airbnb and Uber in the lodging and taxi industries, KWIPPED also introduces new suppliers that do not currently exist, and potentially with more attractive rental rates than traditional bricks and mortar rental outposts. KWIPPED makes money on rentals by charging a transaction fee.
But KWIPPED isn’t just for the contractor. It supports existing rental businesses with better technology. The equipment rental market is made up of 27,000 companies, most of which are small businesses and use unsophisticated back-office solutions like spreadsheets or complicated software systems to manage their businesses. KWIPPED’s SaaS-based offering lets suppliers embed a plugin on their websites, pay a monthly fee and use KWIPPED’s quoting engine with their customer base.
Currently, the SaaS offering enables quoting. Going forward, KWIPPED will explore a mid-range solution for rental companies to manage their rental inventory. That would allow suppliers to track equipment availability (check-in/check-out), report on utilization rates, log and schedule equipment maintenance, and track cost basis and depreciation. A solution would likely interface with simple accounting programs like Quickbooks.
How KWIPPED will scale
According to Preville, scaling KWIPPED will require focused execution, but should be straight forward. Because it doesn’t carry any inventory and charges a fee for every transaction, KWIPPED can take its time to get to critical mass, while still making money. An inside sales team works to bring on one supplier at a time. The marketing team then executes an online advertising strategy to drive renter leads for that specific capability. KWIPPED is using SEO, SEM and content marketing to drive renter leads. Pay-per-click advertising allows it to quickly generate leads for a given product category and buys time for organic search efforts to be realized.
It only takes one renter and one supplier for KWIPPED to generate revenue. KWIPPED has started with equipment verticals that are characteristic of easy delivery logistics—equipment that comes in a box and can be shipped. This includes medical, laboratory, electronic and audio/visual. The approach is to build a supply base via a sales effort and then market against that capacity.
As KWIPPED grows, software developers will automate as much of the marketplace as possible to keep overhead low. They’ll use credit and background reporting APIs to automate renter pre qualification and develop event-driven emails that will provide ongoing customer service. They also plan to build user trust by implementing a rating system within the marketplace.
Preville and Kaiser have built a strong team to help scale. They've hired Robin Salter as chief marketing officer. He most recently worked for the Martin Agency in Richmond, VA, a firm with Fortune 500 customers but best known for the “Geico” commercials. Advisors include Swartz and Eileen Markowitz, the New York-based former president of Thomas Publishing Co., which publishes the famed Thomas Register of American Manufacturers and ThomasNet.com. Another advisor is William Salter, a former president of several Sears divisions who now lives in Wilmington.
Preville won't disclose the amount of investment KWIPPED has received, but its key investor is Swartz, the ex-CEO of Wilmington-based Chemtex and a partner in Cornerstone Business Advisors. According to Swartz, “KWIPPED offers a simple and convenient way for companies that want to lease equipment to be matched up with potential suppliers and get competitive bids all in one place. This will save time for the equipment renters and add customers for rental companies that they would not have otherwise—a win-win for everyone."
KWIPPED expects to pursue a more structured round of equity financing by the third quarter of 2015, Preville says. The third quarter raise will be used for continued build out of the supplier network, renter marketing efforts and technology development.
KWIPPED has a good opportunity to benefit from a market that needs innovation to provide true value to its suppliers and customers. With proper execution, it can really make a mark on the industry and add another strong and well-funded startup to the Wilmington community.