Speaking as the son of a trucker who spent a summer helping my dad negotiate and optimize his freight rates and schedules, the freight brokerage business is not one I would consider getting into. There is also a ton of competition in the freight brokerage space and the problems associated with shipping are due to poor warehouse management and unreliable truck drivers.
Unlike hailing rides in a taxi, manufacturing and shipping generally holds a regular schedule. If you build a reputation as someone who always shows up on time, you can make a lot of money as a truck driver (more than most programmers). After building a good reputation you cut out the broker and work with the manufacturers directly. All you need to do is find two manufacturers in a high paying industry, (pharmaceuticals, chemicals, specialized plastics) whose pickup and dropoff points are near one another and you can be set for years.
Most poorly run warehouses can be backed up for 4-6 hours before you can begin unloading. Most standard contracts allow 2 hours from the point of arrival to fully unload your truck. We would negotiate our billing like a lawyer. For any additional time after that grace period we would charge in hourly blocks at over $100 per hour. Companies try to abuse their power by wasting the time of drivers by not paying them to sit idle at their warehouses. Amazon and Walmart are notorious for these practices.
I think there is a lot more money to be made using technology to run a high tech fleet of trucks than there is a freight brokerage company. Trucking is an information game for sure but there is too much competition in the freight brokerage space and you can be easily side stepped by savvy truckers.
One interesting thing that Uber/Lyft/similar did in terms of markets was make it much simpler for people to track and view the reputation of a particular driver - which shapes behavior.
I wonder if something like Convoy would do similar -> rapidly highlight the unreliable truck drivers. Allow a good truck driver to carry their reputation from manufacturer to manufacturer, etc.
There's another side to that, too: Highlighting shippers that are unreliable or hostile to drivers. E.g. shippers or facilities that have disorganized staff, incur egregious waits, etc.
I feel that for most companies playing in this space, freight brokering is just a transitional step. It can't work long-term, just like Uber can't be viable without self-driving cars.
However, it's the best way to understand how the industry operates - if you're serious about disrupting it.
This really is the other side of the automated trucking coin. This way they can build enough of a network to start brokering freight for autonomous trucking companies and hiring short distance truck drivers, much like pilot/captains in shippng.
What's the cause of "unreliable truckers"? Is it that their ability to be on time is unreliable because of uncertainty in the travel time and traffic, or that the humans themselves do their job unreliably?
I was left asking, what is the real difference between Convoy and any other freight broker? The collect more data? I thought IBM was already in that business.
I guess, it gives you extra free storage and workflow contingency. You tell the trucker you need them early. If they turn up early and you happen to have the stuff ready early great - you have some warehouse space freed up. If you're late however - no biggy - the transport is available to take it, immediately, effectively in demand when it is effectively ready. Maximum flexibility, zero additional cost.
Walmart just lightly threatened carriers & owner operators that if they work for Amazon they can expect lower priority from Walmart in the future (1)
Walmart presently represents ~14% of the total capacity of one of America's largest carriers - Swift transport - and likely similarly important elsewhere. (2)
Obvious outcome down the road is that one of these behemoths snaps up a convoy / other plays in the space to secure capacity.
But would they rather buy an "asset light" business like Convoy, that has no actual trucks / drivers / or control, or will they be more interested in an "asset heavy" carrier that has technology / driver / and trucks?
Kind of tangential to the discussion here, but Walmart's threats are empty. Amazon is currently constrained by trucking capacity, and would gladly swallow up more.
YC companies beware. YC "Continuity" will come talk to you to learn the ins and outs of your business and then go fund a non-YC competitor. The whole idea of the fund was to use it to support YC companies at the next stage but now they're funding companies like Convoy that compete with YC companies like Flexport, while using their access to the YC businesses to do diligence. That's fine, normal investor behavior, but you can't treat YC like trusted insiders any more (prob never should have).
“Flexport is a licensed freight forwarder that uses people and software to manage the complexity of international trade.”
Do these companies really compete? It doesn’t seem like Convoy is focused on international trade. It also doesn’t seem reasonable that if YC funds one company in transportation (or healthcare or some other big sector), they can never fund another one in that sector.
I used to work for startup called OpenMile in 2012. We were trying to do pretty much the exact same thing. We might have been too early, but it was hard. We had the tech, but the trucker and other brokers were not very tech savvy. The margins were low and there was too much hand holding.
I used to work at a startup called Trusker doing the same thing, I can't give your comment enough up votes on 1. not very tech savvy, 2. margins were low, 3. too much hand holding and I would add 4. a 1200 mile trip between commercial locations with weird hours and instructions is nothing like the intracity taxi markets.
In some ways, it's more challenging than building "an Uber", once you get into different cargo and body types, document management, insurance, etc. We launched in Russia first, and not being able to do electronic signatures added a set of challenges.
In any event, glad these investments are happening. Trucking is badly broken, especially in the US.
I'd like to see this supported, particularly the "especially" part, given the extraordinary scale of hauling going on in the US via trucking. The economic facts on the ground in the US overwhelmingly disagree with you.
If it's so broken, and the US economy relies so much on it, how is the US GDP per capita so high? Both can't be true. It's either functioning well, leading to the high reliability and predictable delivery times we see today, assisting the US in having the most powerful economy on earth, or it's badly broken (where is the supporting economic evidence?).
"There are also more trucks operating in Europe than there are in the United States, with 63 trucks per 1,000 people in the EU — compared to only 21 trucks per 1,000 people in the United States." [1]
The USA uses long distance rail freight far more than Europe, where the railways are full (i.e. at capacity) with passenger rail. That's in spite of much stricter controls on driving time.
(I think there's also a fair amount of water transport in Europe. When I moved house from England to Denmark, my belongings were transported on a ship across the North Sea.)
There are several ways trucking could be badly broken but still consistent with your statements:
a) Say today, company X sells a thing for $100, of which $15 covers shipping cost, $15 is profit and $70 is what they paid their middleman for the thing. Suppose further that shipping cost could be reduced to $11 just by properly managing trucking, increasing the profit margin by 27%. These are of course made-up numbers, but just because a business is successful doesn't mean there are no inefficiencies left.
b) It is well known that certain jobs take a huge toll on the people doing these jobs, causing early burnout, physical and/or mental health problems up to and including suicide, etc. E.g. drone pilots, people working with social media illegal content filtering have been covered in the media recently. If trucking causes lots of health issues, it's not just "badly broken" in the human compasdion sense, it also leads directly to reduced national economic output (with a 2x multiplier, you're taking away a taxpayer and adding an additional user of Medicaid/whatever).
I would give another example: the US government subsidizes trucking (especially long distance trucking) to a much greater degree than freight railroads through building and maintaining highways. All things being equal the marginal cost of shipping via freight rail should be lower given its higher fuel efficiency.
I owned a trucking company and my family owned a freight brokerage business.
Trucking is a hard lifestyle, especially over the road. The job is physically demanding and there are a lot of ways to do it wrong.
Owner / operators and small trucking companies are, in some cases, like sharecropping. You don't make premium money, that's taken off the top through a series of intermediaries / brokers. You have to buy sub par equipment, because it's cheaper. You can't pay your drivers as well and often times, you do so in cash, which eventually bites you. And to boot, the business is very capital intensive. If your customer pays you in 30 days, and you run coast to coast, it could costs you 1100 gallons a week (3000 per week) and you don't get paid for 5 weeks (15000). Add to that cost of maintenance, insurance (650-800 per month - physical damage, liability and cargo), truck and trailer payment ($2000 per month for something newer, but not new, that you wouldn't mind living in or), you have to eat, your cell phone, oil changes ($150 per 15-25k miles) and the 1.25-1.35 per mile you earn, doesn't go all that far. But don't worry, if you need an advance on your shipments pay, for fuel, someone will give you up to 50-60% of your cash, maybe even a little more, for 1-2% or more of all the money you're due. And if you want to get paid faster than 30 days, you can get paid a day or 2 after you deliver and turn in the paperwork, for another 1-2% of the total amount you are due.
One truck shops or small companies can't service the needs of most shippers, so shippers choose big trucking companies or 3pls to manage their transportation. By the time a little guy touches a Bill of Lading / rate confirmation, the shipment can be double or triple brokered, each hand passing paper taking 10% off the top.
On top of that, there's huge theft. Gangs steal tires, cargo, trucks and drivers sometimes choose to transport drugs along with whatever you're asking them to haul...if you are in the business long enough, the stories are epic.
Next up, they will hit up on the idea of dedicated roads for truck convoys; also, a single engine to pull them all; and finally, the creation of roads with steel rails to put the trucks on.
Trains are very efficient when you need to move huge volumes between industrial centers, ports, metropolises etc. but we still need trucks for the end mile or else good luck laying tracks to every country shop out there.
Travel by interstate sometime, and you'll note that "end mile" trucking is a tiny fraction of the total. Of course this is because of the vast subsidies that truck freight enjoys.
If we get the self-driving thing figured out, I expect that last-mile freight will use fewer actual trucks than are used today. Rather, the typical robofreighter will be quite small. Every time I receive a truck freight delivery, the trailer is basically empty. They use a big tractor-trailer rig because they have to hire a driver anyway, and sometimes they have enough freight to fill the trailer.
I would assume YC, Greylock and others have wide access to deals and have many opportunities to invest. Knowing how VCs operate I am assuming that they looked at the
top companies in the sector before deciding on this company and teams.
It seems like several companies have tried to go after this market with technology, but Convoy has the best backers and most momentum. I wish them the best of luck!
Readit News
Unlike hailing rides in a taxi, manufacturing and shipping generally holds a regular schedule. If you build a reputation as someone who always shows up on time, you can make a lot of money as a truck driver (more than most programmers). After building a good reputation you cut out the broker and work with the manufacturers directly. All you need to do is find two manufacturers in a high paying industry, (pharmaceuticals, chemicals, specialized plastics) whose pickup and dropoff points are near one another and you can be set for years.
Most poorly run warehouses can be backed up for 4-6 hours before you can begin unloading. Most standard contracts allow 2 hours from the point of arrival to fully unload your truck. We would negotiate our billing like a lawyer. For any additional time after that grace period we would charge in hourly blocks at over $100 per hour. Companies try to abuse their power by wasting the time of drivers by not paying them to sit idle at their warehouses. Amazon and Walmart are notorious for these practices.
I think there is a lot more money to be made using technology to run a high tech fleet of trucks than there is a freight brokerage company. Trucking is an information game for sure but there is too much competition in the freight brokerage space and you can be easily side stepped by savvy truckers.
I wonder if something like Convoy would do similar -> rapidly highlight the unreliable truck drivers. Allow a good truck driver to carry their reputation from manufacturer to manufacturer, etc.
However, it's the best way to understand how the industry operates - if you're serious about disrupting it.
IBM has a few initiatives in transportation + blockchain (Maersk, also trucking in Brazil).
Anything else?
Walmart presently represents ~14% of the total capacity of one of America's largest carriers - Swift transport - and likely similarly important elsewhere. (2)
Obvious outcome down the road is that one of these behemoths snaps up a convoy / other plays in the space to secure capacity.
But would they rather buy an "asset light" business like Convoy, that has no actual trucks / drivers / or control, or will they be more interested in an "asset heavy" carrier that has technology / driver / and trucks?
(1) http://www.dcvelocity.com/articles/20170627-wal-mart-warns-m...
(2) http://www.zerohedge.com/news/2017-06-28/it-begins-walmart-w...
Dead Comment
Do these companies really compete? It doesn’t seem like Convoy is focused on international trade. It also doesn’t seem reasonable that if YC funds one company in transportation (or healthcare or some other big sector), they can never fund another one in that sector.
Deleted Comment
Best of luck to them.
https://cargofone.com/en/
In some ways, it's more challenging than building "an Uber", once you get into different cargo and body types, document management, insurance, etc. We launched in Russia first, and not being able to do electronic signatures added a set of challenges.
In any event, glad these investments are happening. Trucking is badly broken, especially in the US.
I'd like to see this supported, particularly the "especially" part, given the extraordinary scale of hauling going on in the US via trucking. The economic facts on the ground in the US overwhelmingly disagree with you.
If it's so broken, and the US economy relies so much on it, how is the US GDP per capita so high? Both can't be true. It's either functioning well, leading to the high reliability and predictable delivery times we see today, assisting the US in having the most powerful economy on earth, or it's badly broken (where is the supporting economic evidence?).
"There are also more trucks operating in Europe than there are in the United States, with 63 trucks per 1,000 people in the EU — compared to only 21 trucks per 1,000 people in the United States." [1]
The USA uses long distance rail freight far more than Europe, where the railways are full (i.e. at capacity) with passenger rail. That's in spite of much stricter controls on driving time.
(I think there's also a fair amount of water transport in Europe. When I moved house from England to Denmark, my belongings were transported on a ship across the North Sea.)
[1] https://www.theglobalist.com/america-and-europe-keep-on-truc...
a) Say today, company X sells a thing for $100, of which $15 covers shipping cost, $15 is profit and $70 is what they paid their middleman for the thing. Suppose further that shipping cost could be reduced to $11 just by properly managing trucking, increasing the profit margin by 27%. These are of course made-up numbers, but just because a business is successful doesn't mean there are no inefficiencies left.
b) It is well known that certain jobs take a huge toll on the people doing these jobs, causing early burnout, physical and/or mental health problems up to and including suicide, etc. E.g. drone pilots, people working with social media illegal content filtering have been covered in the media recently. If trucking causes lots of health issues, it's not just "badly broken" in the human compasdion sense, it also leads directly to reduced national economic output (with a 2x multiplier, you're taking away a taxpayer and adding an additional user of Medicaid/whatever).
why do you say that?
Trucking is a hard lifestyle, especially over the road. The job is physically demanding and there are a lot of ways to do it wrong.
Owner / operators and small trucking companies are, in some cases, like sharecropping. You don't make premium money, that's taken off the top through a series of intermediaries / brokers. You have to buy sub par equipment, because it's cheaper. You can't pay your drivers as well and often times, you do so in cash, which eventually bites you. And to boot, the business is very capital intensive. If your customer pays you in 30 days, and you run coast to coast, it could costs you 1100 gallons a week (3000 per week) and you don't get paid for 5 weeks (15000). Add to that cost of maintenance, insurance (650-800 per month - physical damage, liability and cargo), truck and trailer payment ($2000 per month for something newer, but not new, that you wouldn't mind living in or), you have to eat, your cell phone, oil changes ($150 per 15-25k miles) and the 1.25-1.35 per mile you earn, doesn't go all that far. But don't worry, if you need an advance on your shipments pay, for fuel, someone will give you up to 50-60% of your cash, maybe even a little more, for 1-2% or more of all the money you're due. And if you want to get paid faster than 30 days, you can get paid a day or 2 after you deliver and turn in the paperwork, for another 1-2% of the total amount you are due.
One truck shops or small companies can't service the needs of most shippers, so shippers choose big trucking companies or 3pls to manage their transportation. By the time a little guy touches a Bill of Lading / rate confirmation, the shipment can be double or triple brokered, each hand passing paper taking 10% off the top.
On top of that, there's huge theft. Gangs steal tires, cargo, trucks and drivers sometimes choose to transport drugs along with whatever you're asking them to haul...if you are in the business long enough, the stories are epic.
- hard to make money - people work too much and sleep too little - various abuse by trucking companies
For a more methodical analysis - USA Today did a piece a month ago:
https://www.usatoday.com/pages/interactives/news/rigged-forc...
I've seen UPS and FedEx semis pulling 3 short trailers on interstates. I assume they're only limited by current regulations on weight and length.
If we get the self-driving thing figured out, I expect that last-mile freight will use fewer actual trucks than are used today. Rather, the typical robofreighter will be quite small. Every time I receive a truck freight delivery, the trailer is basically empty. They use a big tractor-trailer rig because they have to hire a driver anyway, and sometimes they have enough freight to fill the trailer.
It seems like several companies have tried to go after this market with technology, but Convoy has the best backers and most momentum. I wish them the best of luck!
Also Amazon, and Uber are working on competing products. So that 62m might not go so far.
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