Digital freight company Convoy, who raised $925 million and peaked at a $3.8 billion valuation in 2022, shut down in October only 18 months after a $410M funding round. After experiencing decreased demand for shipping, this Bezos and Gates-backed business was unable to find an acquirer or raise additional money.
For the longer story from WSJ:
Retailers and other shippers looking to move goods by road rely on third-party companies called freight brokers to match their cargo with available trucks. Convoy, founded in 2015 by Dan Lewis, a former general manager of new shopping experiences at Amazon.com, saw an opportunity to drag the industry into the 21st century as the “Uber of trucking”—making booking freight shipments as simple as ordering a car.
Convoy’s technological innovations included dynamic pricing, real-time shipment tracking and a smartphone app. At the time, traditional freight brokerages used phone and email to connect shippers with trucks.
The company claimed its platform helped smaller trucking firms find a steady supply of customers, and said its fees were less than those of other brokers. Convoy’s hundreds of shipping clients included Anheuser-Busch InBev, Unilever, Land O’ Lakes and GE Appliances.
In 2017, the startup began testing a “drop-and-hook” service, where shippers could preload Convoy-branded trailers for truckers to pick up, speeding up transfer times. It rolled out the program nationally in April 2019.
In the early days of the Covid-19 pandemic, supply-chain snarls and an e-commerce bonanza helped Convoy gain customers and additional funding. Freight brokering is “not exactly the sexiest sector of what many people think of as an unsexy industry,” said WSJ logistics reporter Paul Berger, who covered the company’s downfall. Still, Convoy reached a peak valuation of $3.8 billion in April 2022.
Convoy was just one of many freight startups vying for a slice of the market, with competitors including Transfix, uShip, Cargomatic, Trucker Path and the actual “Uber of trucking,” Uber Freight.
The ride-hailing model also didn’t apply perfectly to shipping. Most companies lock in contracts for moving freight, rather than shop around for an available truck as the need arises. If something goes awry with a shipment, it can be costly and time-consuming to remedy.
Startups like Convoy were no match for the scale and clout of established companies. The net income of C.H. Robinson, the largest freight broker by revenue in the U.S., topped $300 million in 2023, while Convoy was losing $10 million a month. In part spurred by upstarts like Convoy, C.H. Robinson and other large logistics firms spent hundreds of millions on technology to offer the same kinds of services as their smaller competitors.
While Convoy was able to make a profit on individual shipments, it was never profitable overall due to significant fixed costs, including its hundreds of highly paid software engineers.
In early 2022, Convoy raised another $160 million and secured a $150 million line of credit from JPMorgan Chase and a $100 million loan from specialty finance company Hercules Capital. Executives hoped the new funding would buy the startup enough time to find a strategic investor or buyer.
Unfortunately for Convoy, rising interest rates and general concerns about the economy meant investors weren’t as quick to open their wallets as they had been.
Convoy also couldn’t count on the pandemic-induced surge in shipping demand for continued growth.
“During the pandemic, they benefited like everybody else did,” Berger said. “But as soon as the freight market dropped they were exposed.”
Freight volumes plummeted as retailers’ supply-chain struggles abated and consumers eased up on online purchases.
As funding dried up, the company cut its workforce from 1,500 to 500 employees.
In 2023, Convoy got close enough to being acquired by a larger competitor that it created a plan for integration, but a deal never came together. By October, Convoy had just $40 million in its coffers, and Hercules came to collect on its loan. Convoy suspended operations and laid off most of its remaining workers. Hercules oversaw the sale of Convoy’s assets.
Freight forwarder Flexport acquired Convoy’s technology but not its overall business or liabilities. A few dozen Convoy employees, including Lewis, joined Flexport. In an effort to rein in costs, Flexport has gone through multiple rounds of layoffs in 2023 and 2024.
