Logistics technology startup Convoy has raised $62 million in venture funding led by famed Silicon Valley firm Y Combinator Management LLC, as investors continue to pour money into small firms that say they can bring the trucking industry into the digital age.
Seattle-based Convoy will use the money to expand its trucking marketplace nationally, accelerate product development, and continue to build up its network of technology-connected trucks, the company said.
In addition to lead investor Y Combinator, the cash came from Microsoft Corp. founder Bill Gates' private fund, Cascade Investment Group Inc., as well as Mosaic Ventures and cable TV magnate Barry Diller, according to Convoy. This is the latest burst of funding for Convoy, which had previously raised $18 million in early "seed rounds" of investment.
"By improving trucking, Convoy is improving the foundation of our economy," Anu Hariharan, a partner with Y Combinator's Continuity Fund, said in a statement. "This service allows shippers to transform their supply chains at the same time that it allows carriers to grow their businesses more quickly, on their own terms. In 10 years, we'll be astonished that this was ever done another way."
The news of Convoy's latest investment follows word two weeks ago that another logistics technology startup, New York City-based Transfix, had raised $42 million in funding from the venture capital firm New Enterprise Associates (NEA) and other partners. That round brought Transfix to nearly $79 million in capital being funneled into its own startup online truckload marketplace.
Like Transfix, Convoy is a privately held company that does not reveal its revenue or profit figures. Despite the unknown schedule for when these startups will be able to return a profit to their new investors, the funds continue to roll in. Convoy explains that trend by pointing to the online retail giant Amazon.com Inc., which spent years building up its infrastructure while it slowly whittled down its delivery times from weeks to days to hours, Convoy CEO Dan Lewis said in a phone interview.
"Certainly we have a timeline in mind for creating profit for our investors and how we're going to grow revenue," Lewis said. "But the most important thing now is building the infrastructure and getting these thousands of trucking companies and millions of drivers signed up."
As Convoy endeavors to expand, it may have to contend with some of the other startups working to build up their own marketplaces. The contentious "Uber for trucking" market has attracted a large number of startup firms that all claim they can offer a more efficient way to match shippers and carriers.
"Quite a few startups have gotten involved in this space over the last few years, with a promise to take out the middleman, but maybe they didn't realize how complex this business was," Lewis said.
"Look at the services that a traditional brokerage is offering its customers now, and there are quite a lot, actually," Lewis said. "Say there are 20 steps, and maybe we can automate 14 of them. Still, there are six we can't, and we'll do those manually; there are some things you just can't automate."
Convoy's technology allows verified carriers to gain access to personalized job offers and free tools to manage their fleets, reduce overhead, and cut down on paperwork, the company said. Shippers using Convoy's network of truck drivers to move their goods include Unilever, Anheuser-Busch, Niagara Bottling, and Tenaris, according to Convoy.
Venture capitalists are continuing to throw money at logistics tech startups in a bid to quickly identify the firms with the best solutions, said Joe Vernon, a senior manager in the supply chain technology practice at consulting firm Capgemini. By picking a few early contestants, investors are relying on those firms to test emerging technologies, "fast fail" the ones that come up short, and then rapidly deploy the winners.
"There's a paradigm shift happening in the supply chain arena, and this influx of capital is likely meant to propel the organization to be on the right side of this shift," Vernon said. "Transactional and rules-based systems like transportation management and freight brokerage have started to be automated through the use of artificial intelligence. The result could be smart, aware, responsive, and automated supply chains."