Convoy CEO Dan Lewis is giving a tour of the company’s headquarters in downtown Seattle. He points out the stocked kitchens (plural), the 55-person data science team, the P&G Carrier of the Year award and the Ping Pong station, then stops in front of a bulletin board featuring the “Pets of Convoy.” There he pulls out his cell phone and displays the Convoy dogs Slack channel – where employees post pictures of office canines – and shows off the “weird emoticons, rainbows and unicorns” his daughters, 8 and 10, like to post under his handle.
“I’m worried [employees] think that’s all I’m doing,” mused the affable 38-year old chief of a billion-dollar trucking services company. Actually, he explains, nothing could be farther from the truth. “I use email, text – Slack, not so much. I just can’t manage it. I can’t handle that many channels.”
That a tech CEO is distancing himself from Slack is perhaps a red flag for the newly public workplace messaging platform. Setting aside that concern, Lewis’ attitude is not inconsistent with Convoy’s mission – to streamline often cumbersome and redundant communications, in this case between shippers and carriers, while raising the bar on all manner of industry practices.
Founded in 2015, Convoy is among the leaders in digital freight-matching, a vanguard class that has upended trucking with apps that allow drivers to book loads instantly via smartphone, circumventing the slow-moving process of having a human being track down the right shipment.
In a few short years, the company has built a reputation as one of the heftiest disruptors in the trucking app space; the company boasts around 700 employees, added second offices in Atlanta last fall, and rocketed to unicorn status courtesy of the $185 million it landed in a Series C round last year.
With competition coming from all sides – rivals include fellow heavy hitter Uber Freight, legacy brokers and, more recently, Amazon – Convoy keeps a tight lid on its size and financials. The team claims “tens of thousands of carriers” on its network, thousands of shipments per week in major markets and a nationwide roster of shippers from Fortune 500 companies, yet steadfastly refuses to reveal margins, revenues and the actual number of customers.
Proprietary shields notwithstanding, a visit to the Seattle headquarters this summer did provide a glimpse of Convoy operations, corporate culture and how a tech-driven enterprise is trying to focus as much on people and businesses as it does on algorithms and data science.
“Trucking is a very underappreciated space – it’s the background noise of America,” said Lewis, sitting in a small light-filled conference room that overlooks the Pike Place Market and Puget Sound, the water dotted with ferries.
“It’s so easy to not appreciate all that goes into the comfortable lifestyle we have, the BS that truck drivers put up with and the difficulty of running their businesses,” Lewis continued. “I really enjoy knowing that if we do this really well, we can give drivers more control over their business, help them make more money and bring more respect and trust to the industry.”
The son of an English as a Second Language teacher, Lewis worked at his father’s and uncle’s office supply company delivering furniture, boxes and pallets of paper. Describing the company’s growth trajectory, he said he “definitely view[s] Convoy as part of a story-line,” with the startup seeking to define itself in an industry “that is also going through this journey, being defined and discovered as we go.”
“A big part of how we’re able to be innovative is to make sure everyone feels part of the story,” explained Lewis, who left his position as Amazon’s general manager of shopping services to co-found Convoy with CTO Grant Goodale, who also worked for the e-commerce giant. “Everyone should be thinking about what is that next big thing.”
In today’s frenetic package delivery environment, where next-day and even same day shipping is becoming the norm, Convoy’s next big things increasingly move beyond automated bookings to include a broader suite of trucking technology services that address “these really tricky problems that live at the intersection of human behavior and data science,” as Convoy chief product officer Ziad Ismail puts it.
Whether it’s unlocking capacity, speeding up driver payments or making trucking safer and cleaner, the solution “is not just a pure formula,” explained Ismail, a native Swede and former CPO of Marchex who met Lewis 10 years ago when both were working on the same team at Microsoft. “It’s, how do you get people to feel comfortable and have a better experience?”
The extent to which industry players – shippers, brokers and truckers – still favor the human relationships that for decades defined the way freight companies do business is one of the debates surrounding the new algorithm-driven disruptors.
Convoy plays both sides. The company made a big splash last winter with the announcement that it had succeeded in matching 100 percent of loads automatically in major markets (95 percent nationwide), effectively eliminating the need for any person to call or communicate between the shipper and carrier. Its latest solution is an automated reloads feature, assisting drivers who use the Convoy app to ensure that they have a load outbound when they accept an inbound load.
But the team is also tapping into physical assets – the Convoy Go product utilizes a leased Convoy trailer pool and allows owner-operators and small fleets to take advantage of power-only loads.
In May, Convoy introduced the Innovation Lab, an incubator in which shippers work with engineers and data scientists in solving a pain point. And Aaron Terrazas, Zillow’s former head of economics research, recently signed on as Convoy director of economic research, providing industry commentary and analysis.
“We didn’t view this as, ‘let’s completely remove people from the system,’” said Lewis. “We viewed it as, ‘how do we deliver the best experience for our customer end-to-end?’ In some cases we get cost and quality improvements by choosing to automate. And in some cases the circumstances are such that a person is definitely the best thing to apply to the problem.”
Contrary to popular opinion, Convoy brokers do work the phones, said vice president of operations Kristen Forecki, with some team members “responding all day to questions they might get from a carrier.”
A former director of customer experience at the dog care marketplace Rover.com, Forecki started working at Convoy as the company’s 11th employee. “The most exciting thing about what Convoy is doing,” she said, “is how we are influencing industry to work the way it should and help it work in a way that results in a better experience for everyone.” She cited as an example the automated detention product, a feature she says was picked up by other industry players after it had been introduced by Convoy.
Convoy certainly has grand ambitions. Like many of today’s tech startups, the company takes pains to position itself as a “solutions” business, one that doesn’t automate for the sake of automation but uses tech as a tool to transform businesses, industry and ultimately, the society in which both are embedded. “Transport the world with endless capacity and zero waste,” the Convoy motto proclaims.
Aspirational messaging aside, the company’s diversification strategy reflects market realities as the new industry continues to define and redefine itself.
Numerous studies show the on-demand trucking platforms, fueled by hundreds of millions of dollars in venture capital, are not only gaining traction but are changing the way shippers, carriers and brokers operate. The notoriety – some say hype – surrounding the likes of Convoy, Uber Freight and others has raised awareness in the marketplace, and truckers, like everyone else, are far more tech-savvy today than they used to be.
Yet to be determined, however, is whether Convoy and others will take market share from their legacy counterparts in the same way, say, ride-sharing companies took market share from taxis (and buses).
“This whole digital brokerage has the potential to be disruptive, but I don’t think that’s happened yet,” said Ron Scalzo, senior managing director with FTI Consulting. “There’s a lot of downloading of apps, but that doesn’t necessarily translate into taking business away from large brokerages.”
According to a study released last spring by UBS Group AG, more than 40 percent of the trucker app download market share comes from apps introduced by the big brokers and load boards such as J.B. Hunt’s Carrier 360 and DAT’s Load Board. Uber Freight (capitalizing on name recognition) has 23 percent of the trucking app download market share, according to the study, while Convoy has 9 percent.
Adding to the increasingly crowded space are mega-players like Amazon; the Seattle-based online retailer announced it was building a freight brokerage earlier this year. Oracle is also moving into the space specifically targeting shippers that are already on its platform.
Unfazed by the competition, the Convoy team says the trucking industry is large enough – there are more than 500,000 trucking companies in the U.S., 80 percent of which are small businesses – to accommodate more than one winner in the digital solutions market. Convoy spends “zero percent of the time” thinking about rivals, said Ismail, and instead focuses exclusively on its customers.
Maybe he’s naive, Lewis said, but he doesn’t view Amazon as a threat. The e-giant, he said, is too focused on the retail customer.
The upstart brokerages face other challenges. The trucking industry is not only huge – it’s also hugely fragmented, and that fragmentation has been a pain point for decades, complicating efforts for shippers to find truck drivers and making it more difficult for smaller trucking outfits in particular to access loads.
Ideally, digital freight-matching platforms bridge the gaps and level the playing field – all the trucks go into the same database, and the system selects the best option. Their success, however, hinges on an important data point – the number of shippers and carriers on the network. Like any exchange, a critical mass of buyers and sellers are necessary for a freight marketplace to work the way it’s supposed to. “It is about density in terms of the loads that are put on the app,” said Scalzo. “There should be some ratio of loads to drivers that needs to scale.”
Convoy is devoting significant time and energy to this issue, Lewis said. “We have done a lot of work with our data science team to figure out how much volume we need to be doing under specific circumstances so that we then see the payoff in the sense of a very tightly knit technology-adopted community of truck drivers, which improves service costs.”
But he declined to reveal exactly what the “right size” of the network might be, saying only, “we kind of know what that number is.”
Anecdotal reports suggest most carriers use multiple freight-matching apps. Jimmy Nevarez, an owner-operator in Chino, California, uses five or six platforms to manage loads he acquires through the spot market – the short-notice shipments that fluctuate in price based supply and demand.
Convoy refreshes loads quickly, offers quick digital payment and allows drivers to bid higher than the asking rate – “that’s contrary to Uber,” he said, “where it’s ‘take it or leave it.’” On the downside, the rates on the different platforms vary, and it’s cumbersome “to flip and flop between different apps,” Nevarez said, adding that it’s a necessary evil as “they all carry different freight from different customers.”
Occupying three floors in Seattle’s Century Square building, the Convoy offices hum with energy. The inevitable rows of computer workstations contrast with homages to trucking’s past and present, from the conference rooms with names derived from industry – “Hot Shot,” “Lowboy” and “Kingpin” – to the poster of Convoy, the “super cheesy” (Lewis’ descriptor) 1978 movie after which the company is named. For a time, Lewis said, the startup used to play the title song after each company meeting.
A peculiarity of the building’s design is that the exterior windows resemble those gracing the Washington State Ferries; along with the views of Puget Sound and some strategically placed blue furniture, the offices convey the feeling of being on a very large boat, adding another shipping element to the Convoy enterprise. (Citing proprietary information, the company did not allow this reporter to take any photos of the actual office space; a product meeting FreightWaves attended was off the record.)
As Convoy grows – the company counts 78 job openings as of this week – maintaining the energy and intensity of a startup gets more difficult, Lewis said. “One of our mottoes is: ‘How do we stay smaller as we get bigger?’” he said.
Home to two of the biggest tech companies in the world – Microsoft and Amazon – but comparably few startups, Seattle offers Convoy access to some of the country’s best-in-class tech talent. The hiring advantages come at a cost of limited and expensive real estate, deficiencies that Lewis said the office in Atlanta helps correct.
Ismail singled out several key ingredients that help keep decision-making from becoming “muddled” as the company gets bigger. Convoy encourages people “not to drive toward consensus,” he said, because “if they disagree, there is something interesting to uncover.”
Pods are another feature of the Convoy landscape. These are sub-teams that include employees from different divisions – data science, engineers, product managers, marketing – and operate as an autonomous startup within a startup. “Mixing all these disciplines in an entrepreneurial way has given us our very best innovations,” said Ismail.
The team alluded to future plans. It took two-and-a-half years for one pod to achieve the 100 percent matching milestone, Ismail said. Automating pricing is the next big mountain to climb. “People say it can’t be done. That motivates the team.”
Convoy probably will raise more money in the future, Lewis said, but declined to specify further. Global expansion is another important part of the company’s next phase, he said, again declining to comment on specifics. (Uber Freight expanded to the Netherlands in May and earlier this month announced its launch in Germany.)
As he juggles investment, expansion and the next big freight-matching solution, Lewis tries not to lose sight of the bigger picture.
“If I ignored all metrics for my company, and if all I focused on was making our country better, making people’s lives better, reducing waste, reducing fuel emissions, reducing congestion, lowering cost – if that’s all we measured and did those things successfully, we’d have an incredibly successful business,” Lewis said.
Before he signed on with Convoy, Ismail wasn’t interested in the trucking or automotive space. He laughed. “Now, I’m like: ‘that’s the power unit.'”
Ismail continued, “You drive, and you think about statistics, about how much wasted time and fuel and environmental impact. It’s very clear why it’s happening – we need trucks, and of course there’s going to be emissions and pollution. “
He added, “But once you get deeper into the industry, you see you have something like the traveling salesman problem – millions of different combinations of lanes, fragmented across 15,000 brokers – and that part of the reason we have all that waste is it’s a human trying to solve what is fundamentally a computer science problem.”
Trucking has been around for 100 years, he concluded.”But it’s clear in the past three, four, five years that there’s a new trucking industry that starting to take shape.”
I can only imagine the massive amount of money that Convoy is losing every month. Uber Freight lost $71m in Q1 this year (and they gave 99% of the money they got from their customers to the drivers according to news articles).
I wouldn’t be able to sleep at night LOL. I’m sure it’s easy to grow a business when you are determined to bankrupt yourself by actually paying your customers to move their freight for them.
Maybe I’m just dumb – and losing millions every month is the new model of sustainable business success LOL.
Good luck to ’em I say. At least the drivers and carriers will be all happy for once they are working with a broker that gives them every single red cent in the load. Jobs would be a lot easier if we were allowed to lose money on every load moved lol.
I agree with Mr. Tilden comments to a certain extent. In saying that, with greater technological efficiencies the net margin brokers realize will compress dramatically. For example, a broker who is making 15% on a $1,000 Freight Movement for a Shipper is securing $150 above the purchased transportation cost. A totally integrated, efficient network model should yield a transactional cost comparable to what a transportation management system provider charges a shipper. Convoy and Uber Freight are pursuing a similar development path as Amazon did in experiencing major front end development losses to eventually achieve the Network efficiencies to dominate the market.
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