Sources: Magic Is Raising $12M From Sequoia At A $40M Valuation

Next Story

Fantasical 2 Makes Your Cal Fantastic-er

Screenshot 2015-03-26 17.30.01

Magic, an SMS-based on-demand delivery service that started as a YC company’s weekend project, is raising $12 million in Series A funding led by Sequoia, according to sources. Sources also say that the company, which is just a month old, is valued at $40 million pre-money.

Magic lets users text a single number to get anything* delivered on demand. For an extra fee, of course.

The company graduated out of Y Combinator this week after pivoting mid-session from Bettir, an app that helps monitor blood pressure. Magic started as a weekend project and after being posted to Product Hunt, blew up over the course of a weekend.

On-demand delivery isn’t novel by any means.

Postmates has been offering this functionality for years now, but Magic’s SMS-only channel has proven wildly popular. In the first 48 hours of the service going live, Magic co-founder Mike Chen said the service had already seen 17,000 text messages.

But this investment from Sequoia likely goes beyond the simplicity of SMS to something bigger: scale.

What makes Magic different, and perhaps more risky, than other on-demand services is that it actually piggy-backs off of other delivery services, such as Postmates, Eat24, GrubHub, Instacart, etc. There are no Get Magic delivery people running around doing your bidding, as is the case with a service like WunWun, which offers almost identical functionality for the consumer but uses its own helpers to make deliveries.

Rather, Magic is simply acting as a convenience layer, taking orders, estimating total cost, marking up those orders, and then placing them with any number of existing services (such as Instacart or Postmates).

Again, not an entirely novel idea. Alfred**, for example, lets users sign up for recurring weekly deliveries/services in the home (like laundry, groceries, home goods, packages, shoe shining, etc.) from Alfred helpers that go the extra mile of putting the groceries in the fridge and the laundry in the closet. Like Magic, you pay an extra premium ($100/month) for Alfred in exchange for the convenience of having the week’s chores handled entirely by someone else.

Magic’s convenience layer is far more lightweight than Alfred’s, considering Magic’s value proposition is the convenience of conducting transactions via text message, but it follows a similar model.

While this model can scale quickly — Magic says it’s currently available anywhere in the United States — it may run into pricing obstacles.

Almost all on-demand delivery services already charge a delivery fee, and that includes some of the biggest players like Postmates, WunWun, GrubHub, and Seamless. That puts Magic in the position of having to add its own markup to every order, meaning Magic users are paying two premiums (the first is for the convenience of using an on-demand service, and the second is for the convenience of doing that via text).

All that said, Sequoia seems to be betting big that consumers will pay a little extra for a layer that goes on top of niche delivery services to provide anything, with a simple text message.

Magic didn’t immediately respond to request for comment. We’ll update the post when we hear more.

*No tigers.

**CrunchFund, which was founded by TechCrunch founder Michael Arrington, invested in Alfred.