Online truck brokerage Convoy has landed a gaudy $400 million in venture capital funding, the company said today, hammering a stake into the ground of the fast-growing digital freight matching (DFM) sector and serving notice to rivals that it plans to keep expanding market share.
Seattle-based Convoy said it plans to use the hefty new bank account to accelerate its plan to eliminate operational waste in the trucking industry. According to Convoy, that approach will lead to lower costs and improved quality for shippers, increased earnings for truck drivers, and the reduction of pollution from miles driven without cargo.
The "Series D" funding round was led by Generation Investment Management and by funds and accounts advised by previous Convoy investor T. Rowe Price Associates Inc. Following previous funding rounds, the move brings Convoy's total capital raised to more than $668 million. Additional participation in this round came from Baillie Gifford, Fidelity Management and Research Co., Durable Capital Partners LP, and by returning "Series C" investors CapitalG and Lone Pine Capital.
Convoy says its digital freight network moves "tens of thousands of truckloads per week in the U.S." by automatically pricing and matching shipments with carriers. The platform continually improves that process by using machine learning algorithms to evaluate all shipments and carriers simultaneously and match the right job to the right truck, the firm said.
"Through its use of data science, Convoy is driving the next evolution in efficiency across the industry," Joy Tuffield, partner at Generation Investment Management, said in a release. "This is an exceptional opportunity to achieve a reduction in carbon emissions, while simultaneously increasing earnings for truck drivers and increasing service quality for shippers."
Convoy's new funding could spell trouble for traditional brokers that are already tracking the growth of digital platforms from Uber Freight and Transfix. However, the firm says the market is large enough to sustain both digital startups and the country's 15,000 traditional brokers.
"It is a giant industry, and it will be a very, very long time until it consolidates, so we just concentrate on our own technology development," Ziad Ismail, Convoy's chief product officer, said in a briefing. "There will be lots of brokers for a very long time; we don't spend a lot of energy in the company thinking about other brokers and what their plans are."
Convoy's "own technology development" is focused on eliminating waste, he said, citing statistics that 35% of truckers' miles are driven with empty vehicles, that the average waiting time for a trucker to pick up a load is 2.5 hours, and that the average waiting time to drop off a load is another 2.5 hours.
The company has unveiled a series of recent initiatives in pursuit of reducing that waste, including products like a free transportation management system (TMS) platform and an automated reloads function, as well as partnerships with TMS vendors and third party logistics providers (3PLs).
Ismail acknowledged that the U.S. freight sector has followed a turbulent track in recent months, but said applying technology to remove trucking industry waste can generate returns in any economic climate. "The company has been around for four years, so we've seen markets where hurricanes and [electronic logging devices] have come in and have driven rates up, and where a surplus of supply has driven rates down. Creating a more efficient model really matters in both markets," Ismail said.
Investors clearly agree, since Convoy continues to attract backing from a more star-studded array of partners than the typical freight-tech startup. The co-leader of the current found, Generation Investment Management, is led by former Vice President Al Gore, and other investors include former Microsoft Corp. found Bill Gates, Salesforce.com CEO Marc Benioff, eBay founder Pierre Omidyar, KKR CEO Henry Kravis, amazon.com Inc. founder Jeff Bezos, rock band U2 musicians Bono and The Edge; Dropbox CEO Drew Houston; former Starbucks President Howard Behar; cable television magnate Barry Diller; and former U.S. Senator Bill Bradley.
In 2015, we started a movement in efficient freight.— Convoy Team (@convoyteam) November 13, 2019
Today, we announced that we have raised $400 million in funding to help eliminate hundreds of billions of dollars of waste in the trucking industry.
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