The Latest Hot Marketplace, Material Bank, Raises $100 Million To Source Architectural And Construction Products—With Help From Robots
May 12, 2021
By Amy Feldman
Adam Sandow spent the past few decades building a portfolio of publications, including Interior Design,Luxe and Metropolis. From that business, he got an idea for a marketplace for architectural, design and construction materials that could bring technology, search and ease to the old-school way of dealing with samples.
Today, his startup, Material Bank, is the latest fast-growing marketplace to get love from investors. The New York- and Florida-based company raised $100 million in venture funding at a nearly $1 billion valuation, Sandow told Forbes in a video call from the company’s new warehouse in Olive Branch, Mississippi. The new investment, led by General Catalyst, brings Material Bank’s total funding to $157 million. “The feedback we got from investors is that we have built a one-of-one business,” Sandow says.
With the new funding, he says, Material Bank is expanding its core business, pursuing acquisitions (with two deals expected to close this year) and launching new brands under the Material Bank umbrella that could bring the company closer to consumers. Sales tripled last year and are expected to pass $50 million this year. “There’s not a hotbed of companies in the space,” Sandow says. “It’s not gaming or AI or crypto or EV, where there are so many companies.”
Sandow, 52, grew up in Miami and spent two decades expanding his eponymous media network, notably launching Luxe from scratch in 2005 and buying Interior Design from Reed Elsevier in 2010. “I love design,” he says, “When I was a kid, I grew up reading design magazines.” But after a long career in media, he grew antsy to try something else. Though he still owns 100% of Sandow’s media business, he stepped back from day-to-day operations.
In 2018, he launched Material Bank with the idea of helping designers and architects source the materials they need. Historically, architects and designers had to request carpet swatches, tiles and wall covering samples from manufacturers. There was no easy way to track those samples or to keep them up to date. Delayed samples meant delayed projects—often at enormous cost and frustration.
Material Bank, by contrast, aggregates materials from hundreds of vendors, giving users the ability to search for exactly what they want in minutes. “[Adam] knew the inefficiencies in the market better than everyone,” says Holly Maloney, a managing director at General Catalyst. “We were tracking whether or not this was something he was going to dedicate his time to because he already had a lot of success in the media space and there was going to be considerable investment needed.”
When Sandow started floating the idea in test conversations, brands and designers loved the idea, he says, but didn’t believe anyone could manage tens of thousands of SKUs. “These brands would say, ‘We can barely do it on our own—how are you going to aggregate a thousand of us?’”
“We thought we’d go to Memphis and outsource logistics, and we couldn’t find a company to do it. They thought we were out of our minds.”
The answer, of course, was technology, including a massive database with close to 100 million data points, that users can search to find exactly what they want. Today, nearly 400 manufacturers, including Sherwin-Williams (paints) and Mohawk (carpets), list their wares on the platform, while 60,000 designers, architects, hotel firms, fast-food chains and the like have signed up users. To get those users, Sandow relied on a hidden edge: his own design publications. “The media side of the business has given us an unfair advantage for sure,” he says.
Revenue comes from the manufacturers and vendors who pay a monthly fee in the thousands to be included in the marketplace, and additional fees when their items are ordered. For users, the service is free and speedy. Order by midnight (East Coast time) and Material Bank will get you the samples in one box by 10:30 a.m. the next day—thanks to its warehouse in Olive Branch, Mississippi, near FedEx’s Memphis sorting center, and an army of robots.
“We thought we’d go to Memphis and outsource logistics, and we couldn’t find a company to do it,” Sandow says. “They thought we were out of our minds. They said, ‘You want to have half a million SKUs in a building, and get an order at midnight and put it on a plane at 2 a.m.?’ So we said, ‘We’ll take an empty old building in Memphis and figure it out.’”
The original Memphis building was a smaller test site, but as Material Bank expanded, it moved across the state line to a larger, new-built facility. At the nearly 400,000-square-foot warehouse, robots with bright yellow spines with the company’s name on them work alongside people who pick items off seemingly endless rows of shelves and place them onto the bots, which carry them to the next step until the order is complete. “On any given night, we handle tens of thousands of materials going out to the industry,” Sandow says. “We couldn’t do it without robots.”
Those robots come from from Locus Robotics, a top warehouse robotics firm that recently reached a unicorn valuation thanks to surging e-commerce sales. Material Bank was an early customer for Locus’ autonomous mobile robots, which it calls “LocusBots,” in 2018, when it purchased ten of them as a test. Today, 150 of them work the facility, and Sandow expects to add another 50 of them soon. The two companies have been growing in tandem, Sandow notes. “We’ve had very similar trajectories. They raised, we raised,” he says. “It feels like we have been paralleling in valuations and capital raising.”
While Material Bank employs fewer people than it otherwise would because of the robots, Sandow pays workers a starting wage of $17.50 an hour, well above the state’s $7.25-an-hour minimum wage and a premium to what he says is more typically $12 an hour for a warehouse worker. More than 200 people currently work at the facility, which opened earlier this year.
“The logistics here are extraordinarily complicated,” he says. “That’s how we’ve been able to scale.”