For a company named after a slow reptile, Silicon Valley startup Tortoise has made some quick pivots into new business models over the past year.
Co-founded in 2019 by ex-Uber executive Dmitry Shevelenko, the company began with a mission of being the operating system for micromobility vehicles, one that uses remote operators to reposition shared electric scooters to locations where prospective riders are or send them back to the warehouse for a charge.
In January 2021, Tortoise began working with shared micromobility operator Spin to test three-wheeled scooters embedded with Tortoise’s repositioning software.
But right before the company scored its Spin pilot, it started realizing the potential behind remote positioning and all the cameras and sensors the company had placed on scooters. With COVID-19 causing the burgeoning shared micromobility industry to take a nose dive at the same time as people, huddled indoors, began to demand quick delivery services, Shevelenko realized it “would be malpractice” not to pursue the robotic sidewalk delivery.
Tortoise started delivering with smaller local clients first, and then with big names like grocery story chain Albertson’s, nationwide logistics company AxelHire, and convenience store chain KRS. All signs were pointing to sidewalk delivery being a success.
But then…
In early March 2022, Tortoise pivoted again, vowing to focus entirely on mobile smart stores, which are essentially fancy vending machines placed on top of Tortoise’s delivery robots and located outside retailers. Now, Tortoise has moved from a hardware-as-a-service model to a take-rate scheme that gives it 10% of any sales made from its card payment-enabled bots, whether it’s a box of pastries from a bakery or brand new headphones from an electronics store.
Shevelenko, who served as Uber’s director of business development and was behind its acquisition of Jump bikes, says these pivots are just the beauty of a startup that’s responsive to market changes. The founder has advised or been on the board of a number of mobility and tech companies, including Skip, Superpedestrian, Codi, Payfare, Skyryse, SpotHero and Cargo Systems.
While Tortoise is his first time starting a company, Shevelenko is well versed in the factors that can cause a startup to win and lose.
We sat down with Shevelenko to talk about everything from Tier’s acquisition of Spin and the future of micromobility, how to own changing business directions, the difficulties in sidewalk robot delivery and the agility of startups.
The following interview, part of an ongoing series with founders who are building transportation companies, has been edited for length and clarity.
TC: At Uber, you were behind a lot of new mobility segments and the acquisition of Jump bikes. What do you think is the value of companies having multiple pillars, instead of just doing one thing really well?
Dmitry Shevelenko: For Uber, as a consumer-centric company, it’s ultimately a strategy of capturing all your transportation spend. The ultimate end state here — and this is why I think they’re putting so much money behind this Uber One subscription — is transportation-as-a-subscription product.
Ultimately, the way to win is to aggregate all the different ownership models so it’s shared, rented and owned. Dmitry Shevelenko
It’s not really effective for Uber and Lyft to try to win your business one trip at a time by offering you special incentives. If people are constantly switching back and forth between Uber and Lyft, they both lose. So the way to win is not by competing on a per-trip basis, but almost on an annual basis. How can you lock somebody in to be yours for a year? I think the essential nature of that consumer lock-in means you need to have more than just rideshare, right?
I think in rideshare, bundling is essential, because rideshare will have ups and downs. But the demand for transportation is constant. So if you have multiple modes, you’re always going to be doing well.
Tortoise’s original idea of repositioning scooters didn’t pan out in part because of the pandemic, but do you think it’s still a good idea?
Oh, absolutely. It’s just purely a function of sequencing and relative prioritization. The only reason delivery got so good, and there’s so much demand for it is because of COVID, too, right? It’s not only shared scooters that became bad.
In some ways, the mobile smart store is a return to what we really liked about shared scooters. With shared scooters, you could create a lot of value by driving a really short distance. If you can just re-park a scooter two blocks, you potentially can 10x the likelihood it’s going to be rented in the next hour versus if it’s on a street with very limited visibility.
The commonality between shared scooters and the mobile smart store is foot traffic visibility. In delivery, you’re in the game of miles — it’s about what, on a per-mile basis, is the most cost-effective way to move something. The more driving you’re doing, the more problems you have, because there are more edge cases. So how can you introduce robotics and not have to do a lot of miles?
With shared scooters, the only reason we wouldn’t go at that business as hard now is with COVID, consumer behavior shifted away from shared toward owned micromobility. It’s almost like micromobility became so essential that people just bought their own e-bikes.
The other really bad thing for shared micromobility that happened is, public transit usage went to zero. Shared micromobility is fantastic for public transit, because it’s the first and last mile connection, but if you’re going straight from your home to the office, shared is not going to be more convenient than owned.
Where do you see the future of shared micromobility then? Everyone’s trying to reach profitability, but sometimes it seems like all shared did was show people these new modes existed, and now people will buy their own.
I think Bird has actually positioned themselves to execute this probably in the best way, because they’re selling vehicles, as well. The big advantage you have doing shared micromobility is you’ve already pulled the Band-Aid on a lot of infrastructure. You have bodies, and you have that network.
I think the ideal model is if you have a company like Bird or any shared scooter operator, they’ll sell you a scooter or a bike directly. They’ll also rent you one for a week or a month. When somebody cancels their rental, you can put those scooters in the shared fleet, because the good thing about shared scooters is they don’t need to be brand new.
Ultimately, the way to win is to aggregate all the different ownership models so it’s shared, rented and owned.
With Tier’s recent acquisition of Spin, there’s been chatter about whether it’s better to build organically or to purchase companies in new markets as a means of entry. Thoughts?
As with every acquisition, it all depends on the terms. My purely speculative hunch that’s not from any sources is that Spin was burning a lot of money, so from Ford’s vantage point, I’m pretty sure Ford received $0 in cash, and the fact that they still have an equity stake in Tier now, that’s a win. Because they offloaded it but got to keep some value.
For Spin, the alternative was that Ford would just shut it down cold and get nothing. So now, hopefully some people keep their jobs. I think this ended up being a pretty sweetheart deal for Tier, where, yes, they had to take on burn, but they gave up only a little bit of equity and got a relatively well-known U.S. brand.
But for Tier, the real question is, is the U.S. a good enough market? What’s revealing about this acquisition is there are not too many technology spaces where you have a larger European company acquiring a smaller U.S. company for market entry. It’s usually the other way around.
When was the moment that you decided to switch business directions away from last mile?
It was a combination of several things. To be brutally honest, we were very successful in getting into large retailers and grocers, but I wasn’t thrilled with the rate of expansion. To go from zero to one was hard, but going from one to 100 wasn’t happening at a pace that I felt good about.
There was this Spidey-sense from being around enough other hypergrowth ideas. It wasn’t like things weren’t working or people didn’t like the service, and it’s not like there were obvious signals that something was wrong. It was more like you have subtle signals that something isn’t blowing up right. Always having a somewhat paranoid sense of like, “Are we wrong?” You have to second guess yourself.
In parallel to this, as we built our delivery robot, I had this idea of building a mobile app to find our ice cream truck for everything. There was something powerful in the seed of that idea, but we didn’t have conviction around it. Then around November last year, we realized the real magic isn’t having payments happen in a mobile app; it’s having them happen with the robot.
Once we had enough conviction at the top, we thought, “Well, actually this works well for retailers, and it works for SMBs.” We reached out to smaller merchants that can move really fast and can give us quick feedback, and that gave us comfort in going full speed.
We can keep the B2B business model, but we can actually solve some of what was slowing us down before, which is that these large enterprises move slowly. It makes sense for SMBs, because they don’t have their own delivery flows; they couldn’t have plugged into robotic delivery because they didn’t have the other infrastructure needed. But with the mobile smart store, you don’t need any infrastructure, you just need a product that goes in the box, and a location where you can keep the robot that has foot traffic.
These quick pivots demonstrate the agility of startups. How can other startups bake agility into the business model?
When we built our own delivery robot, we were very intentional to build it in as modular a way as possible. The biggest product design innovation in our robot is the containers being modular and swappable, so we could build on top of them. We knew we were going to learn new things as we launched, so we decided to not back ourselves into a corner and be tied to grocery delivery.
The most important thing with agility is actually being able to gracefully admit you’re wrong, or that you’ve learned new information and are adapting. I think the hard thing for a lot of entrepreneurs is, you put yourself out there to receive any attention, whether it be from an investor company, and you have to have absolute conviction in whatever you’re doing.
You can’t tell a story being like, “Well, this might work, but sometimes there are these issues that we don’t know how to figure out.” If that’s the way you tell the story, you’ll never have customers, you’ll never have a company. So you have to have this almost zealot-like conviction that whatever it is, is The Thing.
In the same vein, the big advantage of being a startup is, you can move fast, so you can be agile and you can adapt to new information better than traditional organizations can.
The generic piece of career advice I give is, you have to look back six months ago and be embarrassed about whatever you were doing. Obviously, you need to give whatever you’re working on enough resources and time to see the light of day, so there’s a clear balancing act here.
How do you know mobile start stores are ‘The Thing,’ now? There’s agility, but what about strategy?
Our three pillars are low speed before high speed; light mass before heavy mass; remote control before autonomy. Throughout our pivots, those core truths never changed.
For us, the strategy was always the way you win in automation is being very intentional about sequencing. Not starting with the hardest use cases, but starting with the simplest ones and building up from there. So we’re executing on that strategy, and in response to market conditions and in our own learning of consumer behavior, we’re changing what the simplest use case is.
The thing for startups is to recognize the original insight that was the catalyst and galvanized the founding team, and not to give up on that. But in terms of what the product is, what is the go-to-market, you have to stay flexible there.
The other thing is that you can’t do too many things at the same time. The way we’re keeping this in check is, we’re turning down last-mile delivery not because there’s no revenue, but because we’re going all out on the mobile smart store. So if you have enough conviction to make a pivot, it has to be the only thing you’re doing.
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What do your investors think about these pivots?
In early-stage startup investing, if the founding team has conviction around something and they’re unified in their view, investors aren’t going to be like, “Oh, I know your business better than you founders do.” Ultimately, investors want a great return, and we do, too.
You mentioned that you might consider raising funds again soon. How, generally, do you think about investment?
Take on as little as you need to grow as fast as you can. Until you’re profitable, there’s survival, and then there’s growth. As we saw with Spin, and as I saw firsthand with Uber’s acquisition of Jump, if there’s more capital, you will waste more of it. There are more distractions. If we had hired a larger team, it would have been harder to pivot.
We view it through the strategic angle that certain investors will unlock certain enterprise customers, which is a lot more interesting to me than pure financial investors. There are still open questions like, “Do we finance the robot with equipment lease financing or venture debt?”
So that will shape what the next round looks like for us. Part of it is getting more data from the mobile smart store deployments and seeing what the payback looks like.
What does growth look like for this business model?
It’s so simple. I love it. Number of mobile smart stores, revenue per day, per mobile smart store. It’s just like any other retail business. How many stores do you have and what’s your sales per store?
There’s a quality metric that is an under 1% error rate. So if somebody has a valid payment credential and they’re trying to buy something in the store, it should work 99% of the time. So our entire internal dashboard is just those three things: Error rate, number of stores, revenue per store.
Will doing smart stores over robotic delivery lead to more revenue growth or just bigger cost savings?
Oh, definitely more revenue growth, because there are actually more segments that you can service with a store than it makes sense to with delivery. If you think about retail as a [Total Addressable Market (TAM)] versus delivery as a TAM, retail is a bigger TAM, and so I do think there’s more revenue growth.
In a more practical way, there’s the regulatory piece where it’s just a no-brainer. If all I’m doing is delivery, I can’t be in New York. I can’t be in London. There are all these markets where I’m blocked. Whereas now, we’ve got this private property ability, and I’m calling it a Trojan horse, because we’re getting started with the simplest use case, getting into these markets, and then going from there.
You rely on remote operators for movement now, but is the end goal going to be autonomy and an entry back into sidewalk delivery?
Autonomous driving is not a development focus for us, except in one scenario, which is crossing the street. We’re putting all of our autonomy energy into a scenario where we lose connectivity in the middle of an intersection. From a safety management point of view, this is what you want to use autonomy for.
In terms of autonomous sidewalk driving, it’s very well something we could partner with others on, because there are plenty of folks building the pure software side of autonomy. Ultimately, the decision will be if it’s easy to integrate somebody else’s autonomy stack that works well with our system.
If we were trying to drive the most miles, not owning the autonomy stack in the long term would be a strategic mistake. In a world where we’re just trying to not drive the most miles, but to sell the most stuff, owning autonomous driving is less important. You want to have the capability, but it doesn’t need to be your technology.
Final question. Where do you expect Tortoise to be a year from now?
I want us to be have at least 20 mobile smart stores in every major U.S. city. A year from now, we could have 500 stores live.