Digital freight startups focus on growth, not offerings
Two of the hottest digital load-matching startups say they are sticking to their plans to use their technology to grow organically, even as rival Uber Freight takes it up a notch with a big acquisition to accelerate its path to profits.
“There is no pressure or need to make a deal,” said Dan Lewis, managing director of Seattle-based Convoy Inc., which has raised $ 668 million in venture capital funding since its inception in 2015. He said the company is not actively researching. target of merger or seeking to sell itself, although it may be open to future strategic acquisitions.
“Any type of major chord is extremely distracting,” said Lewis.
New York-based Transfix Inc. said it also remains focused on a business plan that has taken it through multiple rounds of funding. The company said it raised $ 128.5 million in its most recent public fundraising round in 2018, when it had a valuation of $ 800 million according to research and data firm PitchBook Data Inc.
“Companies can obviously take different routes,” said Transfix CEO Lily Shen. “We are very focused on high-quality, high-growth, sustainable growth. “
Uber Technologies freight unit Inc.
announced last month the takeover of logistics service provider Transplace for $ 2.25 billion. The acquisition comes as digital freight startups look to expand their market share and add services beyond transactional load matching tools, as large transportation companies assess acquisitions and strive to develop their own technology.
Digital freight startups are using technology to streamline the sometimes tedious process of matching truckers with shippers looking to move cargo. Such companies attracted more than $ 2 billion in investor support between 2011 and 2020, according to logistics industry research group Armstrong & Associates Inc.
Armstrong & Associates President Evan Armstrong said Convoy “is well positioned” to grow organically, for example by expanding outside of the United States or expanding into other markets such as the brokerage of partial loads. Transfix has not grown as fast, he said, but could try to grow through acquisitions if it can secure financing or seek out a potential buyer.
The growing field of tech-driven newcomers has pushed traditional freight brokers to invest billions in technology to automate their operations. But digital businesses still represent only a small portion of the overall national transportation management industry, which Armstrong & Associates said generated $ 92.1 billion in gross revenue last year.
Startups also compete with large freight brokers like CH Robinson Worldwide Inc.
and Echo Logistique Globale Inc.
who have billions of dollars in annual sales and long-term contracts with thousands of companies. Freight operator JB Hunt Transport Services Inc. has invested heavily in its digital freight market and uses Google AI to better match shippers with carriers. CH Robinson said in 2019 it would spend $ 1 billion to hire more data scientists, engineers and developers.
Uber Technologies is working to improve the profitability of its ridesharing, delivery and freight segments, and the company said the acquisition of Transplace, which is expected to be completed later this year or in the first half of 2022, is expected to accelerate. Uber Freight’s path to profitability. .
The freight unit last week reported a 64% year-over-year increase in gross cargo bookings, to $ 348 million for the second quarter. The segment recorded an adjusted loss of $ 41 million, an improvement of 16% from the second quarter of last year, but a decline from the loss of $ 29 million in the first quarter.
Convoy and Transfix, like other private digital freight startups, operate outside the control of public procurement. The two declined to discuss their timelines to become profitable.
Mr Lewis said Convoy is investing heavily in engineering and data science to develop additional products in different markets, adding that “there is a clear path to profitability”.
Ms. Shen said Uber’s decision to acquire Transplace highlights the importance of combining digital investment with industry expertise. Last month, Transfix appointed Sophie Dabbs, a former executive at logistics provider Transportation Insight, as Chief Commercial Officer.
“You cannot build technology in a vacuum,” Ms. Shen said. “You need a deep understanding of the industry. “
Write to Jennifer Smith at [email protected]
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