Trucking marketplace Convoy is pouring a lot more fuel in its tank, raising $260 million as the Seattle company aims to bolster its growing network of truckers and shippers.
The Series E investment round values Convoy at $3.8 billion, up from $2.7 billion in November 2019. The 7-year-old company has raised $928 million to date. It also just landed a $150 million line of credit.
The fresh cash will help Convoy invest more heavily in its technology that automates transactions between trucking companies and shippers. It comes as other tech-focused firms including Uber Freight look to disrupt the trucking industry and traditional brokers invest in their own technology.
“This pattern of digitization has played out in nearly every other industry, and it’s happening in trucking right now,” Convoy CEO Dan Lewis wrote in a blog post.
Convoy, backed by the likes of Bill Gates and Jeff Bezos, expects to surpass $1 billion in revenue this year. Its revenue for the first quarter was 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 its “drop-and-hook” marketplace Convoy Go, saw a surge in demand over the past two years as shippers dealt with market unpredictability.
“Having a technology-focused effort around productivity and efficiency becomes incredibly critical in times of high volatility,” Gavin told GeekWire.
Convoy is one of many fast-growing logistics tech startups — including many in the Seattle region — that have raised billions of dollars in recent years amid supply chain chaos. The latest round of funding is the largest for a Seattle-area startup this year.
The pandemic-driven lockdowns created mismatches in freight flows, which sent huge amounts of freight to the on-demand “spot market,” said Avery Vise, vice president of trucking at FTR Transportation Intelligence.
That caused an uptick in the number of smaller trucking companies to meet the demand. Independent truckers and small companies make up a majority of U.S. freight carriers and are Convoy’s target market.
For shippers, Gavin said Convoy enables “elastic capacity,” which can help amid unpredictable demand and the apparent truck driver shortage.
The $800 billion U.S. trucking industry is massive, but Convoy does face stiff competition. Uber Freight generated $1.08 billion in Q4, up 245% year-over-year, which was buoyed by the acquisition of logistics giant Transplace. Another direct competitor, Transfix, is set to go public this year.
Uber expects its Freight arm to generate positive adjusted EBITDA in 2022. Convoy, meanwhile, is “on a clear path to profitability,” a spokesperson said.
Traditional intermediaries such as longtime freight brokers are “catching up” to newer tech-fueled services, Vise said. “Startups certainly have disrupted the market, but they will need to work hard to maintain their competitive position,” he said.
Convoy competes with traditional brokerages but also late last year released a program that gives brokers access to Convoy’s network.
Its network has more than 400,000 trucks and a roster of shippers including Home Depot, Procter & Gamble, Unilever, and Anheuser-Busch.
Convoy’s primary verticals are consumer-packaged goods; food and beverage; manufacturing and industrials; and retail/wholesale. The startup makes money by keeping a percentage of each transaction made via its marketplace.
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 various new features over the past few years, including:
- Convoy Go, which lets any carrier haul pre-loaded trailers;
- A pricing program called Guaranteed Primary;
- Automated Reloads, which uses machine learning to group full-truckload shipments for carriers and is helping reduce “empty mile” carbon emissions;
- Instant Bidding, which lets carriers bid on loads;
- Convoy Connect, a transportation management system;
- Convoy QuickPay, which gets payment to drivers in 48 hours.
Convoy’s core thesis is that it can increase earnings for truck drivers while simultaneously reducing cost for shippers by removing inefficiencies in the existing supply chain, and helping reduce emissions in the process.
“We are now at this place where we’ve got the automation, we’ve got the technology underpinnings,” Gavin said. “Now we can really start to scale our business.”
Looking ahead to a potential world with self-driving trucks, Convoy says it is well positioned, calling it “a significant opportunity for Convoy and an exciting area to partner in.”
“This shift in fleet management is a natural fit for digital freight networks like Convoy,” Lewis wrote in the blog post. “The machine learning investments we’ve made in automated brokering and asset rebalancing are the foundation to managing the mixed fleets of the future.”
The giant funding infusion also gives Convoy a bigger warchest as some tech startups begin to cut jobs to conserve cash while venture capitalists slow their dealmaking velocity, as reported by The Information this week.
Convoy will use the cash to grow its 1,300-person workforce and attract more tech 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 that’s a point of pride for the company.
“I think it’s a reflection of the culture we’ve built here,” Gavin said. “We’ve got a lot of people who are excited about taking blank whiteboards and turning them into incredible value for customers. You can never really turn that entrepreneurial spirit off.”
Convoy is led by co-founders who previously worked at Amazon: CEO Dan Lewis and Chief Experience Officer Grant Goodale. They started the company by hanging out at truck stops and getting kicked out of warehouses as they did market research when Convoy was just a kernel of an idea.
Former Expedia CEO Mark Okerstrom joined the company in August 2020 as president and COO. Former Cars.com CFO Sonia Jain just joined Convoy as its CFO this month.
Convoy has been rumored as an IPO candidate given its growth and funding to date. It also hired John Murrow in October as general counsel; he previously helped two companies go public.
Convoy is one of a handful of Seattle startups valued at 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 venture-debt investment from Hercules Capital. The line of credit came from J.P. 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 others.
“The pandemic highlighted how important trucking is and how volatile and inefficient this industry can be,” Lewis said in a statement. “We know that we can do better by using modern technology and algorithms to help orchestrate freight logistics, improve service, reduce waste, and help drivers. That is Convoy’s mission.”
