logistics
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Cargo.one gets $18.6M to take its air freight booking platform over the pond
Berlin -based cargo.one, which runs a marketplace for booking air freight, has closed an $18.6 million Series A round of funding led by Index Ventures.
Next47 and prior backers Creandum, Lufthansa Cargo and Point Nine Capital also participated in the round, along with a number of angel investors — including Tom Stafford of DST Global and Carlos Gonzalez-Cadenas (COO of GoCardless and former chief product officer of Skyscanner).
The August 2017-founded startup says it’s seen bookings rise during the coronavirus crisis travel crunch as airlines seek alternatives to selling seats to passengers.
Over the past 12 months the startup says it’s scaled GMV by 10x and is expecting continued fast-paced growth as COVID-19 accelerates the adoption of digital distribution in air cargo.
The new funding will go on expanding the business, with the team aiming to increase the number of airlines signed up — including beefing up coverage in Europe. Cargo.one is also targeting expanding into North America and Asia — planning to triple headcount to 70 staff by the end of the year via an aggressive hiring drive.
Currently it has 12 airlines signed up to use the platform to book in freight shipments, including Lufthansa, All Nippon Airways, Finnair, Etihad, AirBridgeCargo and TAP Air Portugal. It launched the booking product two summers ago, with Lufthansa Cargo as the first airline signed up.
“Cargo.one is a two-sided marketplace, connecting airlines with forwarders of all sizes,” says co-founder and MD Oliver Neumann, discussing the business model. “We receive a commission fee from the airlines for selling their air freight capacities on our platform. For freight forwarders the access to the booking platform is free.”
The platform offers real-time visibility of available air freight across covered airlines and routes — aiming to replace what can be an arduous process of phone and/or email back and forth for its target users (freight-forwarding offices).
Airlines set prices for air freight products sold via cargo.one .
“The air cargo market has been stuck in the ’90s when compared to the passenger business. The vast majority of air cargo to this day is booked by calling the airlines directly. Many processes are still manual and time-consuming,” says Neumann, who describes the product as “more than just a booking platform.”
“We design, build and maintain custom integrations to our airline partners, creating both the front end for freight forwarders and integrating into the systems of the airlines and helping them improve the back-end infrastructure. That’s why we refer to it as the operating system for air cargo.”
“At cargo.one we are building a 100% digital solution and enable airlines to transform their business digitally. Over the past years, cargo.one has built tailored technical integrations with airline partners that enable them to distribute their capacity online without the need to overhaul their infrastructure,” he adds.
Currently, cargo.one’s platform has some 1.1 million+ air freight offers per month, covering 120+ countries and 300 airports globally.
On the customer side it has more than 1,500 freight-forwarding offices signed up at this point — which it touts as including “21 of the top 25 companies globally.”
“From January to June 2020, cargo.one saw the number of air cargo search requests by freight forwarders quadruple. In response to increased demand from airlines and freight forwarders, we expect to triple the size of the business by the end of the year,” adds Neumann.
Index’s Martin Mignot and Max Rimpel led the Series A investment in cargo.one.
Commenting on the funding in a statement, Mignot, said: “cargo.one has formed close partnerships with major global airlines, who have subsequently seen their cargo business expand significantly. Conversations with dozens of other airlines in the Americas and Asia show the clear need for a simple booking engine for air cargo, and early signs of the far-reaching impact it will have on the airline industry and businesses around the world who rely on it to serve their customers.”
Venture capital has been pouring into the logistics space over the past decade, chasing an increasing number of startups spotting opportunities to apply digital efficiencies to the movement of physical goods — including aiming to replace freight forwarders themselves, in the case of another Berlin logistics startup, FreightHub, which raised a $30 million Series B last year for a logistics play that covers sea, air and rail freight.
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Raising $22.5 million, Liftit looks to expand its logistics services in Brazil, Mexico, Chile and Ecuador
The Colombian trucking and logistics services startup Liftit has raised $22.5 million in a new round of funding to capitalize on its newfound traction in markets across Latin America as responses to the COVID-19 epidemic bring changes to the industry across the region.
“We’re focusing on the five countries that we’re already in,” says Liftit chief executive Brian York.
The company recently hired a head of operations for Mexico and a head of operations for Brazil as it looks to double down on its success in both regions.
Funding for the round was led by Cambridge Capital and included investments from the new Latin American-focused firm H20 Capital along with AC Ventures, the venture arm of the second-largest Coca-Cola bottler in LatAm; 10x Capital, Banyan Tree Ventures, Alpha4 Ventures, the lingerie brand Leonisa; and Mexico’s largest long-haul trucking company, Grupo Transportes Monterrey. Individual investor Jason Radisson, the former chief operating officer of the on-demand ride hailing startup 99, also invested.
The new capital comes on top of Liftit’s $14.3 million Series A from some of the region’s top local investors. Firms like Monashees, Jaguar Ventures and NXTP Ventures all joined the International Finance Corp. in financing the company previously and all returned to back the company again with its new funding.
Investors likely responded to the company’s strong performance in its core markets. Already profitable in Chile and Colombia, Liftit expects to reach profitability across all of its operations before the end of the year. That’s despite the global pandemic.
Of the 220 contracts the company had with shippers, half of them went to zero and the other half spiked significantly, York said. While Liftit’s major Colombian customer stumbled, new business, like Walmart, saw huge spikes in deliveries and usage.
“Managing truck drivers is incredibly difficult, and trucking, in our opinion, is not on-demand,” said York. “At the end of the day the trucking market in all of Latin America is a majority of independent owners. They’re not looking for on-demand work… they’re looking for full-time work.”
Less than 1% of the company’s deliveries come from on-demand orders; instead, it’s a service comprised of scheduled shipments with optimized routes and efficiencies that are bringing customers to Liftit’s virtual door.
“We do scheduled trucking delivery so we integrate with existing systems that shippers have and start planning how many trucks they’re going to need and the routes they’re going to take and … tee it up exactly what is going to happen regardless what the traffic conditions are so we have been able to reduce the delivery times for the trucks,” said York.
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China’s GPS competitor is now fully launched
For decades, the United States has had a monopoly on positioning, navigation and timing technology with its Global Positioning System (GPS), a constellation of satellites operated by the military that today provides the backbone for location on billions of devices worldwide.
As those technologies have become not just key to military maneuvers but the very foundation of modern economies, more and more governments around the world have sought ways to decouple from usage of the U.S.-centric system. Russia, Japan, India, the United Kingdom and the European Union have all made forays to build out alternatives to GPS, or at least, to augment the system with additional satellites for better coverage.
Few countries, though, have made the investment that China has made into its Beidou (北斗) GPS alternative. Over 20 years, the country has spent billions of dollars and launched nearly three dozen satellites to create a completely separate system for positioning. According to Chinese state media, nearly 70% of all Chinese handsets are capable of processing signals from Beidou satellites.
Now, the final puzzle piece is in place, as the last satellite in the Beidou constellation was launched Tuesday morning into orbit, according to the People’s Daily.
It’s just another note in the continuing decoupling of the United States and China, where relations have deteriorated over differences of market access and human rights. Trade talks between the two countries have reached a standstill, with one senior Trump administration advisor calling them off entirely. The announcement of a pause in new issuances of H-1B visas is also telling, as China is the source of the second largest number of petitions, according to USCIS, the country’s immigration agency.
While the completion of the current plan for Beidou offers Beijing new flexibility and resiliency for this critical technology, ultimately, positioning technologies are mostly not adversarial — additional satellites can offer more redundancy to all users, and many of these technologies have the potential to coordinate with each other, offering more flexibility to handset manufacturers.
Nonetheless, GPS spoofing and general hacking of positioning technologies remains a serious threat. Earlier this year, the Trump administration published a new executive order that would force government agencies to develop more robust tools to ensure that GPS signals are protected from hacking.
Given how much of global logistics and our daily lives are controlled by these technologies, further international cooperation around protecting these vital assets seems necessary. Now that China has its own fully working system, they have an incentive to protect their own infrastructure as much as the United States does to continue to provide GPS and positioning more broadly to the highest standards of reliability.
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Startups are transforming global trade in the COVID-19 era
Scott Bade is a former speechwriter for Mike Bloomberg and co-author of “More Human: Designing a World Where People Come First.”
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Global trade watchers breathed a sigh of relief on January 15, 2020.
After two years of threats, tariffs and tweets, there was finally a truce in the trade war between the U.S. and China. The agreement signed by President Trump and Chinese Vice Premier Liu He in the Oval Office didn’t resolve all trade tensions and maintained most of the $360 billion in tariffs the administration had put on Chinese goods. But for the first time in months, it looked like manufacturers, importers and shippers could start to put two difficult years behind them.
Then came COVID-19, at first a local disruption in Wuhan, China. Then it spread throughout Hubei province, causing havoc in a concentric circle that eventually engulfed the rest of China, where industrial production fell by more than 13.5% in the first two months of the year. When the virus spread everywhere, chaos ensued: Factories shuttered. Borders closed. Supply chains crumbled.
“It has had a cascading effect through the entire world’s economy,” says Anja Manuel, co-founder and managing partner of Rice, Hadley, Gates & Manuel LLC, an international strategic consulting firm based in Silicon Valley.
The crisis has caused a drastic contraction in global trade; the World Trade Organization estimates trade volumes will fall 13-20% in 2020. And spinning activity back up could be tricky: Even as China starts to get back online, the slowdown there could reduce worldwide exports by $50 billion this year. When factories do reopen, there’s no guarantee whether they will have parts available or empty warehouses, says Manuel, who also serves on the advisory board of Flexport, a shipping logistics startup. “Our supply chains are so tightly-knit and so just-in-time that throw a few wrenches in it like we’ve just done, and it’s going to be really hard to stand it back up again. The idea that we go back to normal the moment we lift restrictions is unlikely, fanciful, even.”
Getting to that new normal, though, is a job that a number of logistics startups are embracing. Already on the rise, companies like Flexport, Haven and Factiv see a global trade crisis as a setback, but also an opportunity to demonstrate the value of their digital platforms in a very much analog industry.
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KlearNow raises $16 million to bring customs clearance industry into the digital age
Customs is the sieve of international supply chains. And yet despite its critical role, clearing customs for freight brokers can be a slow and opaque process reliant on manual data entry and prone to errors.
Silicon Valley-based KlearNow has developed a platform that aims to bring customs clearance into the digital age. Now, with $16 million new funding, KlearNow aims to expand its geographic reach and improve its product to cover increasingly complex export-import verticals and time-sensitive shipments.
The company has certification to handle any import into the U.S., no matter what the commodity is. KlearNow is close to getting certified in Canada and the U.K., and plans to expand to Netherlands, Belgium, Spain and Germany. KlearNow has about two dozen customers.
The Series A funding round was led by GreatPoint Ventures, with additional participation from Autotech Ventures, Argean Capital and Monta Vista Capital . Ashok Krishnamurthi, managing partner at GreatPoint Ventures, will join KlearNow’s board. Daniel Hoffer from Autotech Ventures is joining as a board observer.
“This is a significant opportunity to transform an archaic industry that is key to global commerce,” Krishnamurthi said in a statement.
The freight ecosystem is filled with different players from the factories and port authorities to the ship liners and the last-mile delivery companies. Each of them have their own systems.
“There’s no one system that you can transmit the data to,” KlearNow founder and CEO Sam Tyagi said in a recent interview. “So everybody dumps technology down to a PDF or a PNG or some sort of format that everybody can read. The broker gets those documents, and then they print it out — so now they become non-digital.”
If you go to any customs brokers office they look like the old doctor’s office where all those folders are there with nicely arranged, really organized but very manual process,” he added. From here, Tyagi said, a broker will read off from those printed documents and type the information into another system that is communicated to Customs and Border Patrol’s system.
“It is very manual, it’s very small, and they work in a siloed system,” Tyagi said. “There is no visibility for the customer, or the importer, and it’s very costly because of the manual intervention.”
KlearNow developed a digital customs clearance platform that aims to be agnostic. This allows importers, customs brokers and freight forwarders to integrate with local customs authorities and conduct business on a single digital platform remotely and in real time. The platform automates this process to eliminate errors and reduces the time to clear customs. KlearNow says it can slash customs clearance times from hours to minutes.
The startup is also betting that its platform will find new customers in this remote work era that was caused by the COVID-19 pandemic. Custom brokers, who might normally travel into central offices and manage physical paperwork, are now faced with completing that task from home.
“Remote work is impossible for these people,” because they often need to access large-format printers, Tyagi said.
The company said its digital platform can funnel new clients, like these newly remote workers, directly to brokers for global customs clearance.
Tyagi said the company has also added new capabilities in response to COVID-19, such as expediting their FDA module to clear much-needed medical supplies, and is temporarily offering free clearance for nonprofit organizations that are importing masks, hand sanitizers and ventilators.
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SkyCell raises $62M for smart containers and analytics to transport pharmaceuticals
While human travel has become severely restricted in recent months, the movement of goods has remained a constant priority — and in some cases, has become even more urgent. Today, a startup out of Switzerland that builds hardware and operates a logistics network designed to transport one item in particular — pharmaceuticals — is announcing a significant round to fuel its growth.
SkyCell — a designer of “smart containers” powered by software to maintain constant conditions for drugs that need to be kept at strict temperatures, humidity levels, and levels of vibration, which are in turn used to transport pharmaceuticals around the globe on behalf of drug companies — is today announcing. that it has raised $62 million in growth funding.
This latest round is being led by healthcare investor MVM Partners, with participation also from family offices, a Swiss insurance company that declined to be named, as well as previous investors the Swiss Entrepreneurs Fund (managed by Credit Suisse and UBS), and the BCGE Bank’s growth fund.
The company was founded in 2012 Switzerland when Richard Ettl and Nico Ros were tasked to design a storage facility for one of the big Swiss pharma giants. The exec charged with overseeing the project brainstormed that the work they were putting in could potentially be applied to transportation containers, and thus SkyCell was born.
Today, Ettl (who is the CEO, while Ros is the CTO), said in an interview that the company now works with eight of the world’s biggest pharmaceutical companies and has been in validation trials with a further seven. These use SkyCell’s network of some 22,000 air freight pallets to move their products around the world.
The new capital will be used to expand that reach further, specifically in the U.S. and Asia, and to double its fleet to become the biggest pharmaceutical transportation company globally. With 30 of the 50 biggest-selling drugs in the world being temperature sensitive (and some generics for one of the biggest-selling, the arthritis medication Humira, now also coming out), this makes for a huge opportunity.
And unsurprisingly, several of SkyCell’s customers are working on COVID-19 medications, Ettl said, either to help ease symptoms or potentially to vaccinate or eradicate the virus, and so it’s standing at the ready to play a role in getting drugs to where they need to be.
“We are well positioned in case there is a vaccine developed. Out of the six pharma companies developing these right now, four of them are our customers, so there is a high likelihood we would transport something,” Ettl said.
For now, he said SkyCell has been involved in helping to transport “supportive” medications related to the outbreak, such as flu shots to make sure people are not falling ill with other viral infections at the same time.
SkyCell is not disclosing its valuation but we understand that it’s in the many hundreds of millions of dollars. The company had raised some $36 million in equity and debt before this, bringing the total outside funding now to $98 million.
In a market that’s estimated to be worth some $2.8 billion annually and growing at a rate of between 15% and 20% each year, there are a number of freight businesses that focus on the transportation of pharmaceuticals. They include not only freight companies but airlines themselves, which often buy in containers from third parties. (And for some more context, one of its competitors, Envirotainer, was acquired for over $1 billion in 2918; while another, CSafe, has raised significantly more funding.)
But there was virtually no innovation in the market, and most pharmaceutical companies factored in failure rates of between 4% and 12% depending on where the drugs were headed.
One key differentiator with SkyCell has been its containers, which are able to withstand temperatures as high as 60 degrees Celsius or as low as negative 10 degrees Celsius, and have tracking on them to better monitor their movements from A to B.
These came to the market at a time when incumbents were only able to (and some still are only able to) guarantee insulation for temperatures as high as 40 degrees, which was not as pressing an issue in the past as it is today, in part because of rising temperatures around the globe, and in part because of the growing sophistication of pharmaceuticals.
“We’ve found that the number of days where [one has to consider] temperature extremes has been going up,” Ettl said. “Last year, we had 30 days where it was warmer than 40 degrees Celsius across our network of countries.”
On top of the containers themselves, SkyCell has built a software platform that taps into the kind of big data analytics that are now part and parcel of how modern companies in the logistics industry work today, in order to optimise movement and best routing for packages.
The conditions it considers include not only the obvious ones around temperature, humidity and vibration, but distance and time of travel, as well as overall carbon emissions. SkyCell claims that its failure rate comes out at less than 0.1%, with CO2 emissions reduced by almost half on a typical shipment.
Together, the hardware and software are covered by some 100 patents, the company says.
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How freight master Flexport’s Ryan Petersen learned to CEO
“I didn’t know what the term ‘freight forwarder’ meant until a year into starting the business.” Considering his shipping logistics startup Flexport was last valued at $3.2 billion, that quote from my first interview with CEO and founder Ryan Petersen back in 2016 seems even more surprising now.
But it also hints at why he’s one of the most talented and exciting executives in tech: He learns. Humbly. Relentlessly. About whatever the role requires as it evolves.
Right now, it means learning that 1.15 million medical masks can fit in a pasenger plane if you strap boxes to the seats like they’re people. Flexport has delivered around 62 million pieces of personal protective equipment, with delivery of over 10 million of those funded by the company’s impact arm Flexport.org. Petersen and Flexport meanwhile helped create the Frontline Responders Fund that’s raised over $7 million for COVID relief.
Flexport.org packed 3 million pieces of PPE into a repurposed passenger plane to get them to frontline responders
“He’s one of the most impressive founders I’ve known” said fellow FRF leader and Science co-founder Peter Pham . “Ryan just wants to solve problems without ego.”
In this profile, TechCrunch charts Petersen’s growth across our six interviews with him over the past four years as he raised $1.3 billion and reached hundreds of millions in revenue.
Overcoming Shlep Blindness
Petersen soon found out that ‘freight forwarding’ means coordinating all the shipping and hand-offs to get pallets and containers of goods on one side of the world, through trucks and boats and planes, to a retailer on the other. By then Flexport was going through Y Combinator in 2014, preparing to take on the trillion-dollar freight industry.
Ryan Petersen
“I thought the problem was too big, and that I wouldn’t be able to solve it” he recalls. “How am I going to fix global trade? Only much later did I realize that, well, let’s try it! It can’t just sit there broken forever.” Somehow, freight forwarding was still being organized with faxed logs and paper manifests, or Excel files and email if a client was lucky.
Freight forwarding had plagued plenty of founders but none had tackled it because it seemed so insurmountable that it engendered ‘schlep blindness’, as YC’s co-creator Paul Graham termed it.
“Schlep blindness is something so hard that your brain won’t think about it. I think it’s a necessary feature of our brains. Otherwise we’d sit here contemplating our mortality all day and never be able to do anything” Petersen explains. “Anyone who ever sold anything on the internet pre-Stripe went through this terrible process. 100% of internet entrepreneurs saw that problem and then went about their way.” With its 100 year-old shipping incumbents and endless regulatory acronyms, who’d want to wade in?
“Ryan is what I call an armor-piercing shell: a founder who keeps going through obstacles that would make other people give up” says Graham, who donated $1 million to Flexport.org’s COVID-19 relief efforts. “But he’s not just determined. He sees things other people don’t see. The freight business is both huge and very backward, and yet who of all the thousands of people starting startups noticed?” Petersen.
What really irked him was that the big freight forwarders didn’t want those clients to learn what influenced prices and timelines to keep them in the dark about how sub-optimal their routes were. “They just made money off the fact that I didn’t understand how it all works. And I assumed at the time that that was just something about entrepreneurs who are new to this space but it turns out even the biggest companies struggle with this stuff. They’re afraid forwarders are trying to take advantage of them.”
But Petersen wasn’t so naive. He’d actually been in the freight business his whole life.
From Slinging Soda To Founding Startups
“Maybe without her realizing it, she was training us to be entrepreneurs” Petersen reflects. He and his brother David grew up with a biochemist mom who ran her own food safety business while their dad did the company’s programming. “All of our childhood conversations were around using software to make government regulations more accessible.” When would Flexport would eventually be jumping through the hoops of the 43 different US trade regulators, it felt natural for its CEO.
Ryan Petersen back in 2015 before Flexport had its own planes
Petersen exudes a kinetic energy that subtly coveys that he’s always itching for the next knot to unwind. “At the time I was terribly bored by everything”. So his Mom put him to work. “She paid my allowance as a kid by having me deliver sodas to stock their office. My dad would drive me to Safeway to buy sodas for four bucks a case and sell them for nine.” With a laugh, he considers, “It was potentially a way for her to make my allowance tax-free.”
Soon Petersen was moving bigger items longer distances, buying scooters in China and selling them online in the States. By 2005, Petersen was living in China to get closer to the supply chains. The next year, he co-founded ImportGenius with his brother and Michael Klanko. They’d realized there was a ton of valuable information locked up in paper shipping manifests, so they began scanning and selling the data to importers and exporters so they could keep tabs on competitors.
Petersen’s first moment in the spotlight came in 2008 when he accidentally butted heads with Steve Jobs. ImportGenius had identified that Apple was shipping a large number of “electronic computers”, a new classification for the company. “We scooped the launch of the iPhone 3G with our public manifest data. Steve Jobs called US Customs, who called me” he told me back in 2016.
Though ImportGenius eventually plateaued, Petersen had accumulated the knowledge to lift the veil and pierce his schlep blindness. “I realized the largest problem was staring me in the face. Global trade is too hard, and there’s not software to manage it” he remembers. “I thought there was no software for SMBs. What I discovered was that there’s NO software.”
At first he wanted to build what would become Flexport inside of ImportGenius, but it was tough to get existing investors to stomach the risk. It’d be scary, but also exciting to start something separate. “My brother is my best friend and my best advisor” Petersen tells me. They’d always pushed each other with a jovial sense of competition — Ryan’s Twitter handle is @TypesFast. David’s is @TypesFaster.
So David made the first move, founding BuildZoom, which has gone on to raise $23 million to coordinate the logistics (are you sensing a pattern?) of hiring contruction contractors. In 2013, Ryan lept. “I think part of me wanted to go out on my own and prove myself . . . to prove that I was capable of running the show. It was a really, really challenging to do it. Then the day I did it, it was the most liberating, awesome feeling ever.”
They Laugh At You, Then You Raise $1 Billion
It took a few years to get all its regulatory approvals and develop the basis of the Flexport product. But with early capital from Founders Fund, Petersen built the freight software he’d spent so long pining for. Still, “Senior execs at big companies were making fun of us. One of them compared us to Doc Emett Brown [from Back To The Future] and his ‘flex capacitor’ but we he missed is that Doc invented a time machine and it worked.”
By 2016, Flexport was serving 700 clients across 64 countries. I described it as the unsexiest trillion-dollar startup, attacking an enormous industry that was so boring that it repelled earlier innovation. Oversaturation in consumer startup verticals was pushing investors to look to where tech was evolving previously untouched markets. Flexport raised a high-profile $110 million round led by DST at a $910 million post-money valuation in 2017, and Silicon Valley was starting to take notice.
The Flexboard Platform dashboard offers maps, notifications, task lists, and chat for Flexport clients and their factory suppliers.
Luckily, the freight big-wigs were still laughing despite Flexport moving 7000 shipping containers per month for 1800 customers. “I don’t worry about startup competitors. I worry the big guys will stop thinking of us as such a joke” Petersen said that year. Soon incumbents like 25-year-old Chinese private delivery giant S.F. Express were allying with Flexport, leading another $100 million round in 2018. Meanwhile, Flexport was trying to sound more like its older competition. Petersen told me “We’re trying to retire the word ‘startup’. [Our clients] want a company that will help them grow, not the fly-by-night startup.”
At that point, Petersen didn’t care if freight was appealing or not. “I never thought it was sexy or unsexy. I just thought it was a backstage pass to the world economy” he’d later say. Yet SoftBank’s Saudi-backed Vision Fund felt the attraction. Flexport was vertically integrating, adding freight financing so retailers could pay factories for good they’d sell months later. It was also chartering its own plane and operating its own warehouses where it could experiment with next-generation logistics, scanning the physical dimensions of everything that came through its doors to optimize future shipments.
By then, Flexport had plenty of exit options. But Petersen was enjoying the ride. “I’m just having fun. You have a purpose. You get invited to interesting things. Once you sell your business, you’re just another rich guy. I never want to sell the business.” Luckily, the potential to grab more of the freight forwarding profits convinced SoftBank to invest a jaw-dropping $1 billion into Flexport in early 2019 at a $3.2 billion post-money valuation.
“It was controversial with our board. They thought it was a lot of dilution to take on but I convinced them that, this was going to go up and down and we wanted we to have cash to ride out the cycles. My view is that the world’s uncertain. You should be prepared for all outcomes” Ryan explains. As long as it could weather the storm, “we’re going to win on some time horizon.”
That strategy soon paid off. When trade with China effectively halted as COVID-19 exploded in the country and Flexport had far fewer containers to coordinate, it didn’t have to execute mass layoffs like fellow late-stage startups. It proactively cut 3% of its staff or around 50 people on February 4th, centered in recruiting that it plans to slow. “It’s painful to disappoint people” Petersen reveals.
Flexport chartered its own plane for several years to ship freight
Transitioning to a recession-era CEO and learning to reduce headcount with empathy became Petersen’s new objective. “I wanted people to know that I take personal responsibility for it. I wanted people to know that there’s transparency here” he tells me, his voice straining under the gravity of the situation. “If people feel fear and then they look at the leadership and they think the leadership is not feeling fear, then the fear amplifies. Whereas if people feel fear and they see, ‘oh the leaders are feeling fear also? Then okay, they’re going to behave appropriately.’”
Taking decisive action before COVID-19 spread widely stateside kept Flexport’s momentum strong and its runway long. Petersen is proving he can guide the company through bust as well as boom.
Flexport’s Tricks To Management
“My big learning in the last 18 months or so is that you can’t do everything. You can do anything you want, but you can’t do everything” Petersen outlines. “I see good ideas and I say ‘DO THAT!’” he tells me with a wry smile. “Soon, you’re spread pretty thin. You need some top down discipline to say ‘no’ to things. We really lacked that in the early years.”
The quest for discipline led him to develop and lean on two major frameworks for prioritizing customer needs and preserving company culture. They’re crucial now that Flexport has grown to 1800 employees across 14 offices and 6 warehouses, and 10,000 clients including Sonos, Kleen Kanteen, and Timbuk2.
Ryan Petersen whiteboards his management frameworks
The first framework is from Petersen’s mentor and American business mogul Charlie Munger. It lays out the six stake-holders or ‘customers’ a business must satisfy to succeed. Here’s how Petersen describes them:
- Clients: The people who pay you money. For Flexport, we have both importers and exporters
- Vendors: The people you pay. For Flexport, who own the planes, ships, and trucks
- Employees: Make sure they’re treated well. It has to be a win-win trade.
- Investors: They deserve a return on their money. They took a risk
- Regulators: They decide who to give licenses to. For Flexport, there are 43 regulators in just the US who take an interest in imported products.
- Communities: Where you operate. Maybe one day that’s global society
“If you don’t have at least a B grade in everything and ideally an A, you’re probably not long-term sustainable” Petersen explains. It’s a smart lens for anyone assessing companies, whether that’s ones to work at, invest in, work with, or one you’re leading and trying to improve.
Take Airbnb for example. Clients generally love its alternative to hotels, they’ve been able to continuously recruit employees effectively, and investors have offered it billions and kicked in to help it survive COVID-19. But its vendor hosts and their neighbors have struggled with disruptive guests, and communities and their local regulators have clashed with the startup over its impact on housing supply. The six customers concept identifies where Airbnb needs to work harder.
The second framework Petersen developed himself for how to ensure a company’s core values persist as it scales. It lays out the six culture questions:
- Why?: Why do you exist? What’s your purpose, mission, vision, and impact?
- Who?: Who do you hire and what values and behaviors do you look for?
- What?: What are you focused on and what metrics do you use to measure success?
- How?: How do decisions get made and how do you shorten the feedback loop for improvement?
- When?: When should things get done and when should you ship your product?
- Where?: Where does your team feel like it belongs and how do you become more inclusive?
Petersen likens these tenets to addressing a medical condition. It’s easier if leaders build them into their culture early than trying to fix them later. “If you were to get these things right in any company, you’ll outperform” he believes.
To execute on these, Petersen built a team close to him that just “makes sure our OKRs (objectives and key results) are clear, that we’re running inclusive meetings with good documentation, that we’re holding people accountable.” The method is heavily influenced by Amazon’s corporate style. As Petersen told me last year, “The English language lacks a positive word for bureaucracy.”
Ryan Petersen
Taking process seriously has made the CEO a hit with his employees. “Working for Ryan accelerated my career at least a decade. He has the uncanny ability to push people to their peak performance” said Flexport’s long-time former VP of product Sean Linehan, who went on to found Placement. “Ryan is building the playbook for operationally-intense tech businesses. Building a global logistics behemoth from scratch is an insanely complex job. But Ryan thrives in complexity. Where most entrepreneurs fall apart, he hits his stride.”
With the economics headwinds we’re facing, Petersen will need that drive if he wants to bring Flexport public. As you might expect, he’s learning about it. “I like reading annual reports. It’s like a hobby of mine, particularly with my competitors” Petersen says. “I want to go public. But I don’t want to go public until we’re profitable because I don’t want to be at Wall Street’s whims. If you’re losing money and you’re public and Wall Street doesn’t like your stock, you can get into this death cycle.”
Being the CEO of a company that outperforms has opened doors to new mentors too, like executive coach Matt Messari, and Microsoft’s Satya Nadella. Petersen asked Nadella “How can you make learning and development measurable?”. Redmond’s head honcho answered “You don’t have to measure everything.” Petersen took the note. Sometimes, you just do what you think is right.
The Wartime CEO
Leading with his heart has steered Flexport to join the coronavirus relief effort in huge ways. “We were not put on this earth to lay in bed staying warm under the blankets. It’s time to step up and do something for the world” Petersen tweeted.
Flexport’s response started in January with multiple blog posts per week laying out how COVID-19 was impacting global trade, how aid organizers could navigate supply chain issues, and how governments and private companies could help. Then it launched the Frontline Responders Fund and began routing all Flexport.org contributions to the cause, massively discounting freight forwarding costs to help get PPE wherever it’s needed.
Flexport.org launched the Frontline Responders Fund
“100% of your donation to this cause will go directly toward shipping masks to people on the front lines as fast as possible. I give you my word that we won’t waste a penny of your money” Petersen tweeted. Despite his business encountering its own troubles with global trade and demand disrupted, he shifted to spending his full time running Flexport.org and promoting the FRF. With the help of celebs like Arnold Schwarzenegger and Edward Norton, it’s raised over $7 million. The FRF has delivered over 6.9 million masks, 240,000 gowns, 1,000 ventilators, 155,000 gloves, and 250,000 meals for vulnerable populations.
Petersen hasn’t been shy about rallying more leaders to the cause, writing this expansive guide to the major bottlenecks blocking relief. “Philanthropists should also step up, lending money to organizations that have received purchase orders for PPE, but that can’t afford to buy the equipment unless they are paid upfront. Because they’ll get their money back when the pandemic subsides, this is one of the highest impact forms of philanthropy out there right now.”
That willingness to get involved has inspired his employees to roll up their sleeves too. “During a crisis, leaders really show the values they embody” says Susy Schöneberg, head of Flexport.org. “After the COVID-19 outbreak, Ryan immediately offered us more resources to support our commercial and nonprofit clients. Over the last weeks, my days started and ended by talking to him – no matter what time is was.”
Ryan Petersen
From his vantage point, Petersen also has special visibility into who is trying to exploit the crisis. “Effective immediately Flexport will not ship personal protective equipment unless the customer can demonstrate which hospital system or other frontline emergency responder they are being provided to” Petersen wrote. “There are global shortages of these products, and it is immoral to allow war-profiteering from entrepreneurs looking to make an easy dollar.”
In the absence of proper federal crisis management, Petersen has become a defacto general in the war against coronavirus. “Given the scale of the problem and the complexity of the market failures outlined above, there’s no way for the US government to solve this on its own. But it can and must provide leadership, breaking down obstacles and coordinating the response of the private sector.” Until then, Petersen’s learning as fast as he can to become the wartime CEO needed right now.
Paraphrasing Kobe Bryant, Petersen concludes, “When you know what your goal is, the entire world is your library.”
For more of this author Josh Constine’s thoughts on tech, subscribe to his newsletter Moving Product
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If we let the US Postal Service die, we’ll be killing small businesses with it
Laura Behrens Wu is the co-founder and CEO of Shippo, which is building a shipping platform for 21st century e-commerce.
Since moving to the United States, I’ve come to appreciate and admire the United States Postal Service as a symbol of American ingenuity and resilience.
Like electricity, telephones and the freeway system, it’s part of our greater story and what binds the United States together. But it’s also something that’s easy to take for granted. USPS delivers 181.9 million pieces of First Class mail each day without charging an arm and a leg to do so. If you have an address, you are being served by the USPS — and no one’s asking you for cash up front.
As CEO of Shippo, an e-commerce technology platform that helps businesses optimize their shipping, I have a unique vantage point into the USPS and its impact on e-commerce. The USPS has been a key partner since the early days of Shippo in making shipping more accessible for growing businesses. As a result of our work with the USPS, along with several other emerging technologies (like site builders, e-commerce platforms and payment processing), e-commerce is more accessible than ever for small businesses.
And while my opinion on the importance of the USPS is not based on my company’s business relationship with the Postal Service, I want to be upfront about the fact that Shippo generates part of its revenue from the purchase of shipping labels through our platform from the USPS along with several other carriers. If the USPS were to stop operations, it would have an impact on Shippo’s revenue. That said, the negative impact would be far greater for many thousands of small businesses.
I know this because at Shippo, we see firsthand how over 35,000 online businesses operate and how they reach their customers. We see and support everything from what options merchants show their customers at checkout through how they handle returns — and everything in between. And while each and every business is unique with different products, customers operations and strategies, they all need to ship.
In the United States, the majority of this shipping is facilitated by the USPS, especially for small and medium businesses. For context, the USPS handles almost half of the world’s total mail and delivers more than the top private carriers do in aggregate, annually, in just 16 days. And, it does all of this without tax dollars, while offering healthcare and pension benefits to its employees.
As has been the case for many organizations, COVID-19 has significantly impacted the USPS. While e-commerce package shipments continue to rise (+30% since early March based on Shippo data), it has not been enough to overcome the drastic drop in letter mail. With this, I’ve heard opinions of supposed “inefficiency,” calls for privatization, pushes for significant pricing and structural changes, and even indifference to the possibility of the USPS shutting down.
Amid this crisis, we all need the USPS and its vital services now more than ever. In a world with a diminished or dismantled USPS, it won’t be Amazon, other major enterprises, or even Shippo that suffer. If we let the USPS die, we’ll be killing small businesses along with it.
Quite often, opinions on the efficiency (or lack thereof) of the USPS are very narrow in scope. Yes, the USPS could pivot to improve its balance sheet and turn operating losses into profits by axing cumbersome routes, increasing prices and being more selective in who they serve.
However, this omits the bigger picture and the true value of the USPS. What some have dubbed inefficient operations are actually key catalysts to small business growth in the United States. The USPS gives businesses across the country, regardless of size, location or financial resources, the ability to reach their customers.
We shouldn’t evaluate the USPS strictly on balance sheet efficiency, or even as a “public good” in the abstract. We should look at how many thousands of small businesses have been able to get started thanks to the USPS, how hundreds of billions of dollars of commerce is made possible by the USPS annually and how many millions of customers, who otherwise may not have access to goods, have been served by the USPS.
In the U.S., e-commerce accounts for over half a trillion dollars in sales annually, and is growing at double-digit rates each year. When I hear people talk about the growth of e-commerce, Amazon is often the first thing that comes up. What doesn’t shine through as often is the massive growth of small business — which is essential to the health of commerce in general (no one needs a monopoly!). In fact, the SMB segment has been growing steadily alongside Amazon. And with the challenges that traditional businesses face with COVID-19, more small businesses than ever are moving online.
USPS Priority Mail gets packages almost anywhere in the U.S. in two to three days (average transit time is 2.5 days based on Shippo data) and starts at around $7 per shipment, with full service: tracking, insurance, free pickups and even free packaging that they will bring to you.
In a time when we as consumers have become accustomed to free and fast shipping on all of our online purchases, the USPS is essential for small businesses to keep up. As consumers we rarely see behind the curtain, so to speak, when we interact with e-commerce businesses. We don’t see the small business owner fulfilling orders out of their home or out of a small storefront, we just see an e-commerce website. Without the USPS’ support, it would be even harder, in some cases near impossible, for small business owners to live up to these sky-high expectations. For context, 89% of U.S.-based SMBs (under $10,000 in monthly volume) on the Shippo platform rely on the USPS.
I’ve seen a lot of talk about the USPS’s partnership with Amazon, how it is to blame for the current situation, and how under a private model, things would improve. While we have our own strong opinions on Amazon and its impact on the e-commerce market, Amazon is not the driver of USPS’s challenges. In fact, Amazon is a major contributor in the continued growth of the USPS’s most profitable revenue stream: package delivery.
While I don’t know the exact economics of the deal between the USPS and Amazon, significant discounting for volume and efficiency is common in e-commerce shipping. Part of Amazon’s pricing is a result of it actually being cheaper and easier for the USPS to fulfill Amazon orders, compared to the average shipper. For this process, Amazon delivers shipments to USPS distribution centers in bulk, which significantly cuts costs and logistical challenges for the USPS.
Without the USPS, Amazon would be able to negotiate similar processes and efficiencies with private carriers — small businesses would not. Given the drastic differences in daily operations and infrastructure between the USPS and private carriers, small businesses would see shipping costs increase significantly, in some cases by more than double. On top of this, small businesses would see a new operational burden when it comes to getting their packages into the carriers’ systems in the absence of daily routes by the USPS.
Overall, I would expect to see the level of entrepreneurship in e-commerce slow in the United States without the USPS or with a private version of the USPS that operates with a profit-first mindset. The barriers to entry would be higher, with greater costs and larger infrastructure investments required up-front for new businesses. For Shippo, I’d expect to see a much greater diversity of carriers used by our customers. Our technology that allows businesses to optimize across several carriers would become even more critical for businesses. Though, even with optimization, small businesses would still be the group that suffers the most.
Today, most SMB e-commerce brands, based on Shippo data, spend between 10-15% of their revenue on shipping, which is already a large expense. This could rise well north of 20%, especially when you take into account surcharges and pick-up fees, creating an additional burden for businesses in an already challenging space.
I urge our lawmakers and leaders to see the full picture: that the USPS is a critical service that enables small businesses to survive and thrive in tough times, and gives citizens access to essential services, no matter where they reside.
This also means providing government support — both financially and in spirit — as we all navigate the COVID-19 crisis. This will allow the USPS to continue to serve both small businesses and citizens while protecting and keeping their employees safe — which includes ensuring that they are equipped to handle their front-line duties with proper safety and protective gear.
In the end, if we continue to view the USPS as simply a balance sheet and optimize for profitability in a vacuum, we ultimately stand to lose far more than we gain.
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Improving the logistics of trucking, San Diego’s Flock Freight raises $50 million
“We want to change the way freight moves,” says Oren Zaslansky, the chief executive and founder of Flock Freight.
His company, which has been operating in stealth mode for the last two years, has finally emerged with a new solution for freight shipping that purports to bring in more money to shippers, remove inefficiencies in the current hub-and-spoke model for freight and offer better deals to shipping customers.
He’s also got $50 million in financing in the bank in what is one of the largest recent investments in a San Diego-based company.
For Zaslansky, the shipping business is a family affair. “My parents grew up in the moving business… I grew up around both entrepreneurship and freight,” he says.
Those twin passions led him to start his own trucking business out of college in the San Diego area. He also launched a brokerage business to support supply chain logistics. The exposure to both is what led Zaslansky to launch Flock Freight and its big new financing round, which closed earlier this week.
The company raised its cash to change the way shippers move small amounts of goods — those less-than-a-truckload-sized amounts that have to move through hub-and-spoke operations which increase the time goods are on the road and the possibility for breakage as they’re unloaded and reloaded onto different delivery vehicles.
“We want to disintermediate the infrastructure of hub and spoke,” says Zaslansky. “We want to carpool. We use our technology to change the way freight moves.”
Zaslansky isn’t talking about very small orders that can be delivered through a service like Roadie — the delivery company that raised $39 million from investors led by Home Depot back in February 2019.
This is still trucking — it’s a carpool in a 70-foot-long tractor trailer. Flock Freight works by reaching out to small and mid-size trucking companies and integrating their orders onto the shipments that these firms are already making. “We go to the carriers that are much more used to working with a third party to fill up empty trucks,” Zaslansky says.
Right now, that’s about 15% of the $110 billion freight and logistics trucking market, Zaslansky says.
The new investments into Flock Freight came from SignalFire and GLP Capital Partners in mid-February and they were likely drawn to the company’s claims that its service can eliminate damage claims, collect freight from multiple shippers and optimize route delivery for a 40% savings in fuel emissions, and the guaranteed delivery rate of 97.5%.
Companies like Tuft & Needle and Titan Supply Group are already using the company’s services, according to a statement from Flock Freight.
Flock Freight makes its market by having a window into the spare capacity of trucks and charging shippers for the exact amount of capacity that they’re using. “We want to go to a shipper and say — that [cargo] is 75% of the truck and we’ll charge you 75% of the truck,” said Zaslansky. For carriers, they can say that the price they’ve charged is for 100% of the truck and Flock Freight will add another 10 feet of freight and an additional $1,000 into a carrier’s pocket, Zaslansky said.
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OptimoRoute raises $6.5M Series A to help businesses better plan their routes
Route planning sounds like it’s a problem for big logistics companies like Amazon, FedEx and UPS, but in reality, it’s something every small business with more than a few mobile employees deals with. OptimoRoute, which today announced that it has raised a $6.5 million Series A round led by Prelude Ventures, is tackling exactly this problem. Built by a team of former Google and Yelp engineers, the service allows businesses to set their specific constraints and then automatically creates daily routes for their drivers, no matter whether they are doing deliveries or cleaning pools.
What makes OptimiRoute stand out from some of its competitors in this space isn’t just its often significantly lower prices but also that it offers drivers and customers a mobile experience that includes live tracking and ETAs and the ability to change routes in real time as necessary. With OptimoRoute, companies can plan for specific days of the week or up to five weeks in advance. The company is also currently testing a pickup and delivery system for both passengers and goods, as well as support for multi-day long-haul routes.
As the company’s co-founder and CEO Marin Šarić told me, route optimization is obviously a popular academic problem. “On the one side, you do have these academic problems that are very proof of concept and minimalistic,” he said. “And then, in the commercial space, you have software that is running — in our estimation — algorithms that have been well known in the previous century, literally, you know there’s even things from the 80s. […] We at OptimoRoute really worry about the real-world constraints of what it means to build an effective schedule.”
OptimoRoute takes into account a number of variables (how much material can fit into a van, hourly wages, skills needed to perform a certain repair, etc.) and lets companies choose different priorities for optimizing their routes.
“We’re really focused on trying to make this technology available for everyone and this is appreciated even by very senior experienced logistics managers because they can focus on problems they’re trying to solve as opposed to working around hiccups with the software,” explained Šarić.
Currently, OptimoRoute has about 800 customers that range from small businesses to large energy companies like Southern Star Central Gas Pipeline, which manages the routes of more than 300 maintenance technicians with the help of the service. By reducing the mileage employees have to drive, users not only see increased productivity from their employees but, as Šarić noted, also reduce their overall carbon footprint.
The team spent a lot of time on developing the basic algorithms that power the service. The team, though, expected that a lot of its users would be very sophisticated logistics managers, but it turned out that there was a lot of demand from small and medium businesses, too.
“Prelude is excited to help OptimoRoute expand its reach and further develop its offerings for a multitude of mobile workforces,” said Victoria Beasley, partner, Prelude Ventures . “We strongly believe that OptimoRoute is set to have a huge impact on the route optimization market, saving time, money and resources, while also reducing carbon footprint, for their many diverse clients.”
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