Swedish smart locker startups Instabox and Budbee plan to merge into a new business — Instabee — valued at €1.8bn. The merger is subject to customary approval from the Swedish Competition Authority — but it is likely to be accepted since even combined, the startups only have a small percentage of the overall market.
The companies, which have helped revolutionise the delivery system in Sweden and beyond, hope that by pairing up they can better compete with large global delivery companies.
Parcel lockers — easy-access boxes that let you pick up a package at any time — are nowadays common in supermarkets, post offices and even on streets around Europe. They help delivery businesses cut down on delivery staff — and also mean parcels are at less risk of being nicked from someone's front porch.
This year alone, Instabox and Budbee, the two leading Swedish parcel locker companies, have between them raised €240m from investors such as growth equity investor Verdane and the Swedish VC Kinnevik.
But they’ve got stiff competition — there are now about 70 similar businesses, like Airmee and Smart Point, operating across Europe, along with the delivery incumbents — which means companies must compete on price (and therefore take a hit to their profits).
A competitive field
Instabox and Budbee have both expanded beyond Sweden and now cover Norway, Finland, Denmark, the Netherlands, Belgium and, recently, Germany.
By merging, Instabee says it will be able to use its resources more efficiently, both in terms of infrastructure and skills. In addition, consolidating deliveries could help further reduce the services’ carbon footprint — a focus for both businesses.
Since the merger is still pending, the companies cannot say for certain if it will lead to any job losses or decide on a common strategy, but according to Budbee’s founder Fredrik Hamilton, Instabee aims to become profitable as soon as possible.
Hamilton will become the new company’s CEO, while Instabox founder Alexis Priftis will become the chair of the board.
With an economic recession looming, consumer spending is on the decline, while higher electricity prices will also hit delivery startups. This intended merger is a clever way to decrease the risks and costs associated with the two companies' services.
Their approach to fundraising to date has not been the same, however. Budbee has long been working on raising debt to pay for its lockers, while Instabox has raised large sums of venture capital (€350m in total). Hopefully, the two founders will find a common ground to lead this company to grow sustainably in the next few years.
Smart lockers and home deliveries are in no way a high-margin business and to be able to raise more capital in the next couple of years they will either have to increase those margins or show that they at least are on a path to profitability.