Convoy valued at $3.8 billion after raising $260 million to reach the gas in the digital freight market

(Convoy image)

Trucking marketplace Convoy pours a lot more fuel into its tank and raises $260 million as the Seattle company looks to bolster its growing network of truck drivers and shippers.

The Series E investment round values ​​Convoy at $3.8 billion, up from $2.7 billion in November 2019. The 7-year company has raised $928 million to date. It also just landed a $150 million line of credit.

The new money will help Convoy invest more in its technology that automates transactions between carriers and shippers. It comes at a time when other tech-focused companies, including Uber Freight, are looking to disrupt the trucking industry and invest traditional brokers in their own technology.

Convoy, backed by the likes of Bill Gates and Jeff Bezos, expects to hit more than $1 billion in revenue this year. Sales for the first quarter were up 51% year-over-year.

The volatility caused by the pandemic helped shine a light on Convoy’s value proposition, said Ryan Gavin, the company’s chief growth officer. Several of Convoy’s services, such as the drop-and-hook marketplace Convoy Go, have seen demand surge over the past two years as shippers faced unpredictability in the marketplace.

(Convoy image)

“Having a technology-focused effort around productivity and efficiency becomes incredibly crucial in times of high volatility,” said Gavin.

The pandemic-driven lockdowns created mismatches in freight flows, sending huge amounts of freight into the on-demand “spot market,” said Avery Vise, vice president of trucking at FTR Transportation Intelligence.

This resulted in an increase in the number of smaller transport companies to meet the demand. Independent truck drivers and small businesses make up a majority of U.S. freight carriers and are Convoy’s target market.

For shippers, Gavin said Convoy enables “elastic capacity,” which could help amid supply chain chaos, unpredictable demand and apparent truck driver shortages.

The $800 billion US truck industry is huge, but Convoy faces stiff competition. Uber Freight generated $1.08 billion in the fourth quarter, a 245% year-over-year increase, supported by the acquisition of logistics giant Transplace. Uber expects its freight business to generate positive adjusted EBITDA in 2022.

Convoy is “on a clear path to profitability,” a spokesman said.

Traditional middlemen, such as freight brokers who have been catching up for years on newer, technology-driven services, Vise said. “Startups have certainly disrupted the market, but they will have to work hard to maintain their competitive edge,” he said.

Convoy competes with traditional brokers but also released a program late last year that gives brokers access to Convoy’s network.

The network has more than 400,000 trucks and a large number of shippers, including Home Depot, Procter & Gamble, Unilever and Anheuser-Busch.

Convoy’s key vertical markets are consumer packaged goods; food and drink; manufacturing and industry; and retail/wholesale. The startup makes money by keeping a percentage of every trade made through its marketplace.

Convoy Chief Growth Officer Ryan Gavin. (convoy photo)

Truck drivers download Convoy’s free app to find work without going through brokers who typically use emails and phone calls. The company has rolled out several new features in recent years, including Convoy Go, which allows any carrier to carry preloaded trailers; a pricing program called Guaranteed Primary, Automated Reloads, which uses machine learning to group full truckload shipments for carriers and helps reduce “empty miles” carbon emissions; Instant Bidding, which allows carriers to bid on loads; Convoy Connect, a transportation management system; and Convoy QuickPay, which pays drivers within 48 hours.

Convoy’s core thesis is that it can increase revenues for truck drivers while reducing costs for shippers by eliminating inefficiencies in the existing supply chain and helping to reduce emissions in the process.

“We’re in this place now where we have the automation, we have the technology underpinnings,” Gavin said. “Now we can really start scaling our business.”

The massive funding infusion is also giving Convoy a bigger inventory as some tech startups begin to cut jobs to save money, while venture capitalists slow their dealmaking speed, as reported by The Information this week.

Convoy will use the money to grow its 1,300 workforce and attract more technical talent. Some of the company’s leaders have left in recent years to pursue their own startups, such as Outgo and Common Room.

Gavin, a former general manager at Microsoft and Amazon, said this is a point of pride for the company.

“I think it’s a reflection of the culture we’ve built here,” Gavin said. “We have a lot of people who are excited about using blank whiteboards and turning them into incredible value for customers. You can never really turn off that entrepreneurial spirit.”

From left: Convoy CEO and co-founder Dan Lewis; Convoy CXO and co-founder Grant Goodale; and Convoy President Mark Okerstrom. (convoy photo)

Convoy is led by co-founders who previously worked at Amazon: CEO Dan Lewis and Chief Experience Officer Grant Goodale. They started the business by hanging out at truck stops and being thrown out of warehouses while doing market research when Convoy was just a core of an idea.

Former Expedia CEO Mark Okerstrom joined the company in August 2020 as president and COO. Former Cars.com CFO Sonia Jain joined Convoy this month as CFO.

Convoy is rumored to be an IPO candidate given its growth and funding to date. It also hired John Murrow as general counsel in October; he previously helped two companies to go public.

Convoy is one of the few startups in Seattle worth more than $1 billion, or “unicorns.”

The latest investment included a $160 million equity round led by Baillie Gifford and accounts advised by T. Rowe Price Associates, Inc., and a $100 million investment in venture capital from Hercules Capital. The line of credit came from JP Morgan.

Convoy’s other investors include Expedia Chairman Barry Diller; Salesforce CEO Marc Benioff; Code.org founders Hadi and Ali Partovi; former Starbucks president Howard Behar; U2’s Bono and The Edge; among other things.

“The pandemic has highlighted how important trucking is and how volatile and inefficient this industry can be,” Lewis said in a statement. “We know we can do better by using modern technology and algorithms to orchestrate freight logistics, improve service, reduce waste and help drivers. That is Convoy’s mission.”

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