Actual innovation has become scarce in the world of on-demand startups. JoyRun would be easy to write off as merely the latest "Uber for something else" app--except that it boasts a business model with some genuinely distinctive twists.

Unlike the generation of wildly inexpensive on-demand startups that subsidized their low prices with venture capital, JoyRun has its eye on unit economics from the get-go. In Uber terms, it's less like an UberX ride that just transports one person and more like UberPool, the version of the ride-sharing service that lets commuters offer to drive other people to work with them. Only instead of ridesharing, JoyRun enables its users--currently only college students--to piggyback on each other's coffee and takeout trips.

This Thursday, the company announced an $8.5 million Series A round led by Floodgate, following an earlier $1.3 million seed round led by Norwest Venture Partners. Until now, JoyRun has only been available on select college campuses, but they're opening up to any school with at least 25 interested students. Eventually, JoyRun plans to expand beyond young adults to everyone else with a smartphone.

JoyRun is easy to situate in the larger on-demand ecosystem. The service is an UberPool-style reimagining of the popular food-delivery app Postmates. It works like this: Someone announces through the JoyRun app, say, "I'm going to the Starbucks on Main Street. Does anyone else want a latte?" Other users can scroll through their JoyRun feed and choose between various offers. Each runner can choose to request a delivery fee, in addition to payment for the requested items, or they can offer to pick up everyone else's orders out of the goodness of their heart.

JoyRun's business innovation is aggregating disparate demand into one order, thereby increasing the dollar value of each runner's trip, and activating "me-too" instincts among consumers. You might not want Indian food quite enough to go across town to get it yourself, but if someone in your neighborhood is offering to pick it up, then hey, why not pay $5 for the convenience?

JoyRun investor Josh Goldman, a general partner at Norwest Venture Partners, said in a statement, "Food delivery has seen only minor incremental changes to the challenging operational issues, and no previous startup had really changed the unit economics in a sustainable way. JoyRun's social commerce approach activates local communities and makes the experience much more rewarding for consumers, while its inherent order aggregation model finally fixes the economics of the category."

JoyRun makes money by taking a cut of those delivery fees. According to the FAQ on its website, "JoyRun's service fee helps pay credit card transaction fees and other similar costs and varies between 3-16 percent." The company clarified, "The percentage varies on a case-by-case basis based on the profits made from each order." JoyRun also told Inc. that fees do not apply if the runner makes $5 or less on a given delivery. "We consider under $5 as just picking up for a friend and charging gas money, so we do not take a cut," a spokesperson said. "JoyRunners can also earn money through tips and JoyRun will never take a portion of this gratuity."

If the runner decides to ask for a delivery fee--the majority choose to, JoyRun says--that fee is replicated across every person who joins the order. In a scenario where five people are charged a $5 fee, the runner could earn a sum anywhere from $24.25 to $21, plus tips on top of that. There's also a social aspect. Each viable run creates a chatroom for the runner and all of the other participants, either for logistical coordination or lively banter. The food (or whatever the ordered items may be) is dropped off in a nearby central location, so orderers can chat while they wait.

Founder and CEO Manish Rathi told Inc. that he decided not to launch in the Bay Area because the high concentration of tech-savvy early adopters might skew the business results. JoyRun is active on 50 campuses, with a particularly strong presence in Davis, California. "Lazi Cow, a coffee and dessert shop in Davis, California, now sees over 80 percent of its deliveries happening on JoyRun," according to the company.

Published on: Mar 30, 2017