NCPA - National Center for Policy Analysis

Post Office Shuts Down Innovative Startup

May 7, 2014

The Post Office refused to work with an innovative startup that would digitize customers' mail, reports the Fiscal Times.

Evan Baehr and Will Davis, former Capitol Hill staffers and Harvard Business School graduates, wanted to create a private business that could tackle the problems plaguing the U.S. Post Office and make mail simpler and more convenient for customers.

With that in mind, Outbox -- a mail digitizing service -- was born. The two partners launched their new business in Austin, allowing customers -- for just $5 per month -- to have their snail mail redirected to Outbox, opened, scanned and made available online or on their smartphone. Customers who wanted a hard copy of a particular letter could have it delivered, and they could choose for certain letters not to be opened.  Those signed up for the service were able to save a digital copy of their mail forever, just as email allows users to do, and they could access their mail from anywhere.

The business was a hit, and Baehr and Davis were able to expand from Austin to San Francisco, where the local post offices allowed residents to sign forwarding contracts to have their mail sent directly to Outbox.

Baehr and Davis saw enormous potential for cost savings were their model to continue to expand. It would allow the Post Office to ship letters directly to Outbox, saving the agency from having to ship mail across the country.

So when the Postmaster General requested a meeting with the two innovators, they were thrilled about the prospect of partnering with the Post Office to revolutionize modern day mail.

But according to Baehr and Davis, Post Office officials told them that their market model would never work, that digital was a fad, and that Outbox was disrupting their service. "We will never work with you," the Postmaster General reportedly said. Baehr and Davis were stunned when he went on to say that junk mailers, not the American public, were the Post Office's customers and that their service "hurts our ability to serve those customers."

Undeterred, the two entrepreneurs hired drivers to "undeliver" mail from their customers' mailboxes, continuing to expand their business.

  • They helped customers unsubscribe from more than 1 million senders of mail, and they scanned more than 1.5 million pages and redelivered 250,000 mail packages.
  • While their small team had only 2,000 customers in just two cities, they had a nationwide brand awareness of 10 percent.
  • They were able to build new logistics software to run their operations, create industrial-grade scanning machines (at a whopping 80 percent cheaper than the market rate), and they developed new character recognition technology.

Unfortunately, they could not sustain the business, as it was too expensive to undeliver the mail.  Unless the Post Office changed its mind, Outbox could not continue its services, and they announced that they were closing their doors in February 2014.

That same month, the Fiscal Times notes, the Post Office had a net loss of $354 million. In fiscal year 2013, it lost $5 billion.

Source: Derek Khanna, "How The U.S. Postal Service Crushed an Innovative Startup," Fiscal Times, April 29, 2014. 


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