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19
Nov
2019
Convoy Raises $400 Million to Expand Digital Freight Business

Convoy Raises $400 Million to Expand Digital Freight Business

19 Nov 2019

Series D funding round values the company at $2.75 billion in a competitive field that includes Uber Freight

Digital freight broker Convoy raised $400 million in a Series D funding round that values the business at $2.75 billion and backs its expansion in a growing array of technology-focused upstarts making inroads in the freight transportation sector.

Sustainable investment management firm Generation Investment Management LLP and previous investor T. Rowe Price Associates Inc. led the latest funding round, with participation from previous investor Alphabet Inc. ’s CapitalG fund and others.

Founded in 2015, Seattle-based Convoy is among the biggest operators of online marketplaces that match truckers with shippers needing to move cargo. The startups, including Uber Technologies Inc. ’s Freight unit, aim to make booking shipments more efficient by using mobile apps to find available trucks and automating transactions that had traditionally been arranged through emails and phone calls,

Generation Investment Management said it was drawn to the business in part because connecting carriers and shippers more easily can reduce empty miles for trucks, potentially mitigating carbon emissions.

U.S.-based digital freight matching startups drew more than $661 million in investor funding between 2011 and 2018, according to Armstrong & Associates. Evan Armstrong, president of the research firm, said the total backing since 2011 should surpass $1 billion this year with infusions for Convoy and other operators.

The newer entrants are trying to build scale in a fragmented freight brokerage sector where even the biggest players command a small portion of the overall market.

Armstrong & Associates estimates the domestic transportation management market, which includes brokerage and other logistics services, generated $86.5 billion in revenue last year. C.H. Robinson Worldwide Inc., the largest freight broker in North America, generated $16.6 billion in gross revenue in 2018 from truck brokerage and other services, while competitor Echo Global Logistics Inc. reported $2.44 billion in overall 2018 revenue.

 

Analysts say competition from startups, including aggressive pricing, is pushing traditional transportation companies to invest billions in technology as they build their own digital offerings.

Convoy’s latest funding brings its total capital raised to more than $668 million. A previous funding round of $185 million in September 2018 valued the company at more than $1 billion and Convoy said the new round more than doubled the valuation to $2.75 billion.

The company, whose customers include Anheuser-Busch InBev SA and Procter & Gamble Co. , plans to use the money to hire more product engineers and other staff as the company looks to more than double its head count, now more than 800, over the next couple of years, Chief Executive Dan Lewis said in an interview.

The company will also expand programs such as a trailer-sharing service that allows carriers to pick up prefilled trailers and drop them at facilities without having to wait for goods to be unloaded. It also plans to extend the integration of Convoy features, such as real-time pricing data, into the software systems that shippers use to manage transportation.

Mr. Lewis said Convoy had a “clear path to profitability” with “better than industry economics in many of our top lanes” but declined to provide a timeline for when the business will turn a profit.

He declined to provide revenue figures but said the company is moving more than twice as many loads a week as it did a year ago, with revenue gains roughly in lin

Convoy is looking at markets outside the U.S. and plans to invest more in that area in the future, Mr. Lewis said.

The company is also open to potential acquisitions in the U.S., such as buying a traditional brokerage, although Mr. Lewis said there were no specific merger plans. “We’re not in talks or looking to be acquired,” he said. 

#Convoy #Maersk #Logistic #trade