On-demand delivery has become big business as consumers express a growing willingness to shell out cash for convenience. One startup, Magic, is taking that convenience to new levels through its SMS-based service, and reports say venture capitalist Sequoia is betting big on its business model.
Unnamed sources told reporters that Magic is set to receive $12 million in Series A funding from the investor, which would value the company at $40 million pre-money. It’s an impressive start to a firm that only emerged from Y Combinator days ago.
Magic allows consumers to order services, food and products simply by texting the service, making anything from booking flights to grocery shopping a breeze for couch potatoes and overworked multitaskers alike.
According to reports, Magic began as a weekend side project, though when it was promoted on Product Hunt, the service went viral, which experts largely attribute to the service’s text-only function. The startup’s co-founder, Mike Chen, said the company has already seen 17,000 text messages.
On-demand delivery services like Postmates are not novel, but reports note that Magic’s business model is unique – and perhaps risky – because it uses other delivery services to fulfill its own jobs. Magic partners with GrubHub, Eat24 and Postmates, among others, to facilitate the delivery order.
In essence, reports said, Magic operates as a personal assistant of sorts, booking these orders and deliveries on behalf of clients with existing delivery services.
Reports note that the business model may see friction as customers will have to pay a fee to Magic on top of the existing delivery fee often charged by the existing services through which Magic fulfills orders. Its latest funding, however, suggests that venture capitalists are willing to bet that consumers will accept the higher fees for even greater convenience.
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