Digital freight broker Convoy on Wednesday announced a new round of funding, valuing the start-up at $3.8 billion, even as rates for on-demand trucking fall from all time highs.
“One of the great things about our model is we’re able to thrive in all areas of all points in the cycle,” Convoy President and Chief Operating Officer Mark Okerstrom told CNBC.
Convoy will use the $260 million in new capital to improve its digital trucker-for-hire platform designed to give trucking companies and customers increased flexibility.
“We have assembled a team of really world class engineers from places like Amazon, Google, Facebook, Expedia, etcetera, which are working on solving freight customers hardest problems,” he added. “That is our primary investment area.”
Convoy is run by co-founder and CEO Dan Lewis, who formerly led new shopping experiences at Amazon and before that worked at Microsoft.
The Series E funding round was led by U.K.-based Baillie Gifford and Hercules Capital. JPMorgan is also extending a new $150 million line of credit to Convoy.
Convoy’s announcement comes as trucking rates have fallen dramatically from record highs.
According to data from Evercore ISI, on-demand trucking rates are just 1% higher year-over-year this week compared to 80% higher year-over-year in the first week of February. That shift is leading many trucking companies to reduce the capacity available on-demand, Convoy’s core business, and shift to longer term contracts with customers, which can be less lucrative but more stable.
However, Lewis said that part of the new funding round will be used to continue diversifying Convoy’s business, including Convoy Go, which provides trailers that customers can preload before drivers with trucks arrive to transport them to their final destinations.
“Convoy is doing a lot of contracts right now as well.” Lewis told CNBC. “We have a really large trailer pool and we have a whole system now in our app that lets our carriers find dedicated work on consistent, dedicated lanes. We don’t feel the competition. We’re super focused on solving customer problems and, and less focused on the competition.”
Seattle-based Convoy was founded in 2015 by Lewis and Grant Goodale, both former Amazon executives aiming to disrupt the analog and fragmented freight brokerage business, in which trucking companies are matched through customers via phone call and fax. Goodale serves at Convoy’s carrier experience officer.
According to Morgan Stanley data, thousands of private companies control approximately 60% of the U.S. freight brokerage market, with a handful of public companies like CH Robinson, XPO Logistics and Landstar Systems capturing the remainder of the business. The smartphone has increased access to digital brokers for trucking companies and created rising competition from startups like Convoy and Uber Freight.
“There will always be analog components because people need to pick up the phone and connect with each other,” Lewis said. “But I think that over the next decade, the industry is going to consolidate and it will consolidate around companies that are digitally led and data led, that are able to use data to make optimizations in the system to reduce waste.”
He said that will result in drivers having a “better experience on the road, make more money per mile,” and shippers having more confidence and visibility in those efficiencies as well.
