{"id":9525,"date":"2017-10-06T22:36:15","date_gmt":"2017-10-06T22:36:15","guid":{"rendered":"https:\/\/rsoftsolution.com\/blog\/flexports-epic-plan-to-build-a-freight-empire-with-its-110m-raise.html"},"modified":"2017-10-06T22:36:15","modified_gmt":"2017-10-06T22:36:15","slug":"flexports-epic-plan-to-build-a-freight-empire-with-its-110m-raise","status":"publish","type":"post","link":"https:\/\/www.rbsitsoftwaresolution.in\/blog\/flexports-epic-plan-to-build-a-freight-empire-with-its-110m-raise.html","title":{"rendered":"Flexport\u2019s epic plan to build a freight empire with its $110M raise"},"content":{"rendered":"

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\u201cWe\u2019re actually out here trying to create value, not just give venture capital money away\u201d says Flexport CEO Ryan Petersen. \u201cIt\u2019s counterintuitive. The more the business works, the more cash it needs.\u201d<\/p>\n

That\u2019s because Flexport<\/a> doesn\u2019t ship bits, it ships atoms. Lots of them. Flexport is a freight forwarding logistics network<\/a>. If you produce a few metric tons of goods in China and need them in stores across the U.S., it books the trucks, ports, planes, and boats you need to get them there. While the dinosaur freight forwarders still rely on paper manifests, Flexport tracks all the data to optimize every route.<\/p>\n

Flexport sounds \u201cunsexy\u201d<\/a> on the surface, but it\u2019s multi-trillion dollar market opportunity that\u2019s attracting big-name investors. Flexport already moves 7,000 shipping containers a month for an average of $2,000 each while taking around a 15% cut, earning it roughly $21 million per month from ocean freight alone. Adding in air, trucking, customs brokerage, cargo insurance and more,\u00a0<\/i>revenue is up 3.7X in the last year. \u201cUnit economics have always worked for us, even when we were tiny. We\u2019ve always insisted on that\u201d says Petersen.<\/p>\n

Now after TechCrunch reported last month that sources told us Flexport had raised a $110 million Series C at an $800 million pre-money valuation<\/a>, the company today confirmed<\/a> the deal. The $910 million post-money valuation round was led by DST Global, whose partner Rahul Mehta will become a board observer, and was joined by Founders Fund and Susa Ventures plus other existing investors. And crucial to Flexport\u2019s audacious new business model is the addition of Wells Fargo Strategic Capital.<\/p>\n

Flexport wants to finance its customers freight, not just ship it.<\/p>\n

Forwarding + Financing<\/h2>\n

Businesses have to pay factories to produce their goods up front, but it can take months to ship and sell the inventory before they earn back that money. Flexport plans to offer trade financing funded by a big bank like Wells Fargo. Essentially, Flexport would use all its shipping data to calculate and minimize the risk, front the money to its 1800 customers, and score an added percentage when it\u2019s paid back.<\/p>\n

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\u201cIt\u2019s such a big business and a nice extension\u201d Petersen tells TechCrunch.\u00a080 percent to 90 percent of all global trade relies on trade financing, according to the WTO<\/a>. \u201cWe have all the data to assess credit worthiness\u201d the CEO says, touting the speed with which Flexport could do that research. \u201cA traditional bank might take a long time to get the money. It might take a month or two. But business happens really fast. We can lend to those customers, whether it\u2019s Wells Fargo\u2019s or someone else\u2019s money.\u201d<\/p>\n

Matt Raubacher, a managing director of Wells Fargo Strategic Capital says \u201cWhile Flexport already had a banking and credit relationship with Wells Fargo, the Strategic Capital group is excited to take the next step and also become an equity investor in this rapidly growing business with an exceptional leadership team.\u201d<\/p>\n

Customers like Ring, Osmo, and Le Tote could get their freight financed and forwarded all at once, cutting down their logistical headaches while giving Flexport more\u2026.flexibility in how it prices both the shipping and the loans. \u201cIt\u2019s pretty sticky. If you\u2019re funding your business on the platform, you won\u2019t switch\u201d Petersen says. \u201cYou could make the loan cheaper because you\u2019re making money with the freight, or offer cheaper freight because you\u2019re making money on the financing.\u201d<\/p>\n

Owning The Warehouses Too<\/h2>\n

Flexport isn\u2019t content just sticking to the money and logistics. It plans to use the new $110 million in equity funding to buy warehouses around the world that it calls \u2018cross-ports\u2019. Petersen says Flexport can have \u201cmore control\u201d with\u00a0\u201c<\/span>our software, our process in the warehouse.\u201d<\/p>\n

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Ryan Petersen, Flexport<\/p>\n

Typically when containers come off those giant ships, they get put in some third-party warehouse at the port. But if Flexport owns those warehouses, it can do some neat things in the meantime. \u201cWe scan everything for dimensions and weights, and build a model of the cargo so the next time someone ships the same thing, we know everything about it.\u201d It can also mix-and-match shipments from different clients for efficiency, or redirect goods mid-journey.<\/p>\n

Flexport opened its first 12,000 square foot cross-port in Hong Kong two months ago and it\u2019s already jam-packed, so it\u2019s planning to move to a bigger space like the 100,000 square foot spot it has in LA. Petersen says the plan is to open 25 of these, beyond its nine offices that house 500 employees. I\u2019m pretty sure that qualifies as an empire.<\/p>\n

\u201cIt\u2019s just a lot to take on\u201d Petersen admits. \u201cThere are three remaining challenges that never go away. They all with \u2018C\u2019, but not because I\u2019m cheesy.\u201d<\/p>\n

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  1. Complexity \u2013 \u201cBuilding the right things in the right order\u201d, and not doing too many or too few<\/li>\n
  2. Culture \u2013 Remaining a fun place to work. Employees \u201cput a lot in. They grind\u201d so they have to feel appreciated and like they\u2019re learning and growing their careers.<\/li>\n
  3. Compliance \u2013 \u201cMaking sure we follow all the rules all the time\u201d because it\u2019s a heavily regulated industry.<\/li>\n<\/ol>\n

    That last one has destroyed plenty of startups, from the Zenefits insurance scandal\u00a0to Theranos\u2019 bunk blood tests.<\/p>\n

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    \u201cOur regulators are more serious, they\u2019re customs and border protection. It\u2019s not the taxi and limousine commission\u201d Petersen says, taking a jab at cities that have tolerated Uber\u2019s insubordination. \u201cWith dangerous goods, actual human lives can be at risk. You ship something flammable in a passenger airplane, no one is going to take that lightly.\u00a0There\u2019s not<\/span>\u00a0a lot of gray areas.\u201d\u00a0Petersen is happy to go by the book.<\/p>\n

    A Social Network For Trade, Or Is It Amazon?<\/h2>\n

    Flexport takes inspiration from today\u2019s top tech companies. \u201cThere\u2019s an\u00a0Amazon-like element for the enterprise\u201d says Petersen.\u00a0\u201cIt should feel like you\u2019re building your cart on Amazon and then 10 containers of your own products show up.\u201d Though simultaneously, he says that \u201cWe think trade is inherently social\u201d\u00a0, which is why whenever it signs a client, Flexport gets them to pull their trade partners into the system too. \u201c<\/span>Connecting them is very logical.\u00a0We borrow inspiration from Facebook.\u201d<\/p>\n

    As for whether freight is \u2018cool\u2019 now, Petersen smiles. \u201cI don\u2019t know if\u00a0it\u2019s sexy or boring.\u00a0<\/span>Wall Street\u2019s pretty [redacted] boring to me, moving money around. Money\u2019s sexy I guess\u201d he says, then suddenly gets serious about his own company. \u201cIt\u2019s hard work, it\u2019s not this overnight success.\u201d<\/p>\n

    Despite its budding empire, Flexport is still only the 23rd-largest freight forwarder. But rather than take that as an insult, investors see it as an opportunity. \u201cNone of the other top 25 were founded after Netscape\u201d Petersen is fond of remarking. They\u2019re only just adopting technology. Flexport was born in it.<\/p>\n

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    CEO Ryan Petersen diagrams his business\u2019 fortuitous cycle at Flexport\u2019s San Francisco headquarters<\/p>\n

    \u201cI don\u2019t worry about startup competitors\u201d Petersen says, noting that during the sales process, customers have never compared Flexport to those chasing it. \u201cI worry the more we\u2019re out talking to the press. I worry the big guys will stop thinking of us as such a joke.\u201d<\/p>\n

    He suspects those giants like FedEx, DHL and Expeditors might acquire the upstarts\u00a0like Freightos, Haven, or Fleet to get a grip on tech. But Flexport isn\u2019t taking offers. In fact, Flexport turned down billion-dollar-plus valuations in this round to avoid getting in over its head or ceding too much power to investors.<\/p>\n

    \u201cI\u2019m just having fun. It\u2019s really interesting. Once you sell your business you\u2019re just another rich guy\u201d Petersen laughs. \u201cI never want to sell the business. Unless it\u2019s not working, I won\u2019t sell.\u201d<\/p>\n

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    Article source: http:\/\/feedproxy.google.com\/~r\/techcrunchIt\/~3\/gcELIUj5lQ8\/<\/p>","protected":false},"excerpt":{"rendered":"

    \u201cWe\u2019re actually out here trying to create value, not just give venture capital money away\u201d says Flexport CEO Ryan Petersen. \u201cIt\u2019s counterintuitive. The more the business works, the more cash <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[19],"tags":[25],"class_list":["post-9525","post","type-post","status-publish","format-standard","hentry","category-enterprise-software","tag-enterprise"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t