Digital freight network Convoy announced Thursday it has raised $260 million in new funding — $160 million coming from a series E preferred equity round led by current investors Baillie Gifford and T. Rowe Price and $100 million in venture-debt investment coming from Hercules Capital Inc. The company is now valued at $3.8 billion.
“When we first invested in 2019, the trucking industry was ripe for disruption and we were impressed with Convoy’s vision and early success in driving the future of freight,” said Gary Robinson, portfolio manager at Baillie Gifford. “Since then, Convoy has built a world-class management team, including seasoned executives who’ve successfully led digital transformations in other industries and further enhanced its technology platform. They’ve been able to strengthen their relationships with shippers, expand their network of truckers and deliver strong business growth. We’re delighted to lead this round and look forward to supporting the Convoy team as they grow and scale the business in the years ahead to further transform the U.S. trucking industry.”
Convoy also announced it had secured a new $150 million line of credit from J.P. Morgan to expedite the freight network’s supply chain solutions to facilitate long-term innovation that will help sustain the U.S. transportation industry.
|Funding amount||$260 million|
|Funding allocation||Series E: $160 millionVenture-debt: $100 million|
|Lead investor(s)||Series E: Baillie Gifford and T. Rowe PriceVenture-debt: Hercules Capital Inc (NYSE:HTGC)|
|Business goals for the round||Accelerate product development|
|Total funding||$928 million|
|Post-money valuation||$3.8 billion|
“Having investors like Baillie Gifford and T. Rowe Price, which are long-term-oriented investors, really sets the stage for this industry. We are going to be investing in it for a long time, not necessarily through new capital raises, but they are going to give us the time and the space to deploy the capital in smart ways and build solutions that take multiple years to do,” Dan Lewis, CEO and co-founder of Convoy, told FreightWaves.
“I think those partnerships are really important when you are trying to change a foundational part of our economy. This is not just an app. We are orchestrating a part of our economy and when that’s the case, it’s worth spending the time and energy to get it right,” he said.
Lewis said the additional line of credit will give Convoy the capital it needs to continue to invest internally “without putting a lot of pressure on the system.”
To help manage this new capital and investment initiatives, Convoy also announced Monday it has appointed Sonia Jain, former chief financial officer of Cars.com, as its new chief financial officer.
Convoy’s carrier network
Since joining the transportation market in 2017, unlike brokerages at the time, Convoy has pushed its shipper and carrier networks to use its application exclusively to do business.
Lewis found that this approach, after five years of usage, has built a carrier network of early adopters that also happen to be small carriers, something more commonly seen from large trucking enterprises that adopt their own technology.
“When you look at Convoy’s trucking network, we have been able to optimize the operations of mom-and-pop carriers and owner-operators. We have built a system that treats those groups really well and identifies the challenges they have, including cash flow and fuel cards with good financial terms,” Lewis explained.
The same holds true for the number of small brokerage firms that have leveraged Convoy’s technology and early adopter carrier network to reach the small trucking companies that often take several phone calls and chaotic operations to source.
“When I explain to [these brokerages] that Convoy has different small trucking networks that we directly access through our platform, working with us does not feel as competitive to [those brokers]. That response has been really inspiring because if you really want sustainability and efficiency, you can’t live within your own network,” he said.
With this new capital, Convoy plans to continue investing in the carrier experience, making sure to drive more efficiencies into the company’s early adopter carrier network.
While the app currently offers reload or bundling load capabilities, Lewis said it is working on day rates for carriers, obtaining more dedicated or short-term contract freight for owner-operators, partnerships with facilities to set appointment times, better fuel programs, and overall, create an ecosystem of solutions by integrating with new partners in the future.
“Once you start to open up the platform to new services, you start to realize there are a lot of interesting things we could do here,” said Lewis. “We are going to continue to support our current ecosystem and become more of a partner to companies that don’t have the same access to capital that we have and can’t afford to build the same technology. It is a lot of responsibility to raise money and go invest in the future technology stack for the freight industry, so we are going to use that responsibility to help others grow their businesses.”
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