A lot of technology startups make their living by seeking to completely upset old, established markets. When it comes to adult beverages, however, tossing out the old regulations isn’t quite so easy.
That’s a big reason Boston-based Drizly, the company behind a smartphone app that arranges local liquor-store deliveries for consumers, has spent so much time mastering the arcane world of US liquor laws.
The approach appears to be paying off. Today, Drizly says it has raised another $13 million in private investment cash to help it expand. Drizly plans to nearly double its employee base to about 70 by the end of the year, and hopes to expand its reach from 15 to about 30 markets.
That market expansion will be helped by one of Drizly’s new investors, the Wine and Spirits Wholesalers of America, a trade association that represents wine and liquor wholesalers around the country.
Nick Rellas, Drizly’s co-founder and CEO, said the involvement of the wholesalers’ group gives the young startup a stamp of legitimacy when dealing with large liquor retailers, and also could help the company by sharing data about wine and liquor inventories in different parts of the country.
“The scope of their expertise is more or less unparalleled in the industry as a result of their members being the middlemen,” Rellas said. “They’re as connected as anyone. They’re going to allow us to be really the experts of alcohol delivery.”
The wholesalers’ group spent more than a year checking into startups that were trying to expand the market for liquor-store delivery, which has historically been a small-scale service dependent on phone and fax orders.
The final analysis of which company to work with “was an easy call,” said Craig Wolf, the association’s CEO.
Rellas “had a better understanding of the marketplace than certainly any of the other players we talked to,” Wolf said. “He understood the importance of the way the market was structured and was not coming in to be a disruptor, but was coming into be something that added value.”
Drizly’s smartphone app ties into the inventory software of local liquor stores that offer delivery and gives users an easy way of seeing what’s available on the shelves. Once an order is received, Drizly helps route the delivery driver to the correct address, arms drivers with ID-scanning apps, and passes the payment along to the retailer.
The company makes money by charging licensing fees, which can range from of hundreds to tens of thousands of dollars per month, and from in-app advertising. It doesn’t mark up the liquor prices or take a cut of sales, although there can be delivery charges.
Liquor delivery isn’t offered in every state in the country — another consequence of America’s patchwork liquor laws — but Drizly still has been expanding pretty steadily, recently adding Minneapolis, Baltimore, and Providence.