Flexport CEO: Convoy Deal Will ‘Significantly Lower Our Carrier Costs’
Flexport is officially acquiring the technology stack from now-defunct digital trucking marketplace Convoy.
In an email to staff Wednesday that was also posted on Flexport’s website, founder and CEO Ryan Petersen said the digital freight forwarder will retain some of Convoy’s core product and engineering employees as part of the deal.
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The financial terms of the deal have not been disclosed, but Petersen said “the purchase price relative to value is modest.”
The returning CEO expects to restore the full-truckload service “in the coming weeks,” and said that Flexport has already heard that some of Convoy’s largest customers want to come back.
Convoy CEO Dan Lewis will join Flexport as part of the acquisition, according to a report from The Information. Lewis had been shopping Convoy for four months prior to its shutdown last month.
Petersen said Flexport is not acquiring Convoy itself or any of its liabilities, and that “our expenses will be limited to what’s necessary to maintain the tech.”
Convoy officially went out of business on Oct. 19, just 18 months after it was valued at $3.8 billion in its final $260 million funding round.
The acquisition builds on Flexport’s prior trucking ambitions, which included hiring ex-Amazon and Uber Freight exec Bill Dreigert in May to lead its end-to-end trucking services business. But Convoy’s tech can advance Flexport’s desire to expand its trucking brokerage unit, which arranges trucking shipments to customers’ warehouses.
“With more than 400,000 truck drivers and 80,000 carriers in Convoy’s network, we will be able to tap into an incredible supply of trucking service providers for our customers,” Petersen wrote in the note. “Convoy’s tech stack also includes sophisticated procurement technology that fully automates the supply side for 98 percent of loads booked. This will allow us to significantly lower our carrier costs on our truckload and eventually our drayage and cartage business.”
The tech stack drives Convoy’s app, which was designed so truck drivers could be connected with shipments without going through brokers who typically use emails and phone calls. The app can automate the matching, pricing and scheduling of trucks for shippers, ultimately reducing their costs. And carriers of any size could use the app to find and bid on loads, effectively reducing the legwork and hassle involved with finding cargo to transport.
Petersen indicated that the strategy of Flexport’s trucking unit will be “very different” from Convoy’s or other those of large truck brokerages. He pointed out that many in the space focused on driving immense scale by pursuing major Fortune 500 FTL accounts.
“In a highly competitive market with low barriers to entry, even with all of Convoy’s incredible tech, they were not able to reach the scale required to turn a profit,” Petersen said, blaming the freight recession for making the marketplace’s operation much worse.
Petersen believes Flexport’s breadth of coverage will make the difference going forward. The company plans to offer a full range of trucking services to its international freight forwarding customers, including FTL, less-than-truckload (LTL), drayage trucking, cartage trucking and eventually intermodal trucking services.
Flexport, a partner of Convoy since 2018, dealt with similar problems involving collapsing revenue and an inability to remain profitable due to the overall decline in freight volumes and demand.
Operating a profitable digital freight brokerage, whether it’s Flexport or Convoy, has been a difficult task as venture capital funding isn’t as available as it has been in years past and excess capacity is clogging up the market.
A major factor in Flexport’s favor is that the freight forwarder still had $1 billion in cash reserves when it decided to but Convoy’s technology, Petersen said last month. Flexport, which laid off another 20 percent of employees last month in the wake of Petersen’s return as CEO, has been reining in the spending to focus on its core freight operations.
When former CEO Dave Clark left, Petersen has said he wants to restore Flexport’s focus on customer engagement. The company has launched new technology solutions since Petersen returned.
The freight forwarder recently launched two new supply chain tools—an end-to-end supply chain platform for SMBs called Revolution, as well as a $149 per month membership program, Flexport+.