Freight-Booking Startup Convoy Raises $62 Million
Publication: The Wall Street Journal
Digital freight-booking startup Convoy raised $62 million in a funding round led by Silicon Valley startup accelerator Y Combinator, money the company said it plans to use to expand nationally.
Convoy runs a website and mobile application where retailers and other shippers can book trucks to move their goods. The startup says it can pair shippers and carriers faster than traditional freight brokerages where agents arrange transportation by phone and email.
The Series B round, which was led by Y Combinator’s Continuity Fund and included investments from funds managed by Bill Gates and Barry Diller, will go toward expanding nationally and adding more shippers and trucking companies to its platform.
That growth would help Convoy stand out from a pack of startups that are attempting to use technology to gain a foothold in what reserach group Armstrong & Associates estimates to be a $62 billion domestic-transportation management market. Another freight-booking service, New York-based Transfix, said earlier this month it raised $42 million, and Austin-based uShip in February received a $25 million investment from DB Schenker, one of the world’s biggest logistics companies.
The startups are trying to push their way into a highly fragmented business that includes several multibillion-dollar freight brokers, including C.H. Robinson Worldwide Inc., Hub Group Inc. and XPO Logistics Inc., as well as online truck freight exchanges, or load boards, that match up loads with available trucks. Startups hope to make up that gap by reducing back-end costs, but the largest brokerages are working on technology of their own, said Evan Armstrong of Armstrong & Associates.
“You can have the best app in the world but unless you can offer a significant amount of volume to the carriers you work with, you’re not going to be able to get as good of rates with those carriers,” he said.
Mr. Armstrong said technology firms could partner with larger players, along the lines of the deal between DB Schenker and uShip.
Convoy says it plans to grow on its own. The company works with more than 300 small and medium-sized shippers, and also moves freight for large consumer-products companies like Anheuser-Busch InBev NV and Unilever PLC.
“This investment is about taking that to a national scale, doubling down on the technology,” said Dan Lewis, Convoy’s founder.
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