Freight markets have always been a magnet for entrepreneurs. Long gone are the days of the Vanderbilts and Carnegies, but there are still fortunes to be made in freight.
FreightWaves CEO Craig Fuller has pointed out that the global freight, transportation, and logistics industries are worth over $9.6 trillion and are bigger than the global financial services markets and insurance combined.
In addition, the freight brokerage industry has been transformed by the digital revolution. Recent digital freight brokerages like Transfix, Convoy and Uber Freight now dot the freight landscape, utilizing big data to capitalize on efficiency. Established brokerages, like C.H. Robinson and J.B. Hunt, have also made tremendous efforts to digitalize operations.
Many flock to the industry every year believing there’s money to be made in brokering traditional dry van and reefer truck loads. However, Fuller and Dynamo Ventures partner and adviser Jon Bradford agree that the digital brokerage space is maturing and that new entrants should think small and start simple.
Fuller and Bradford discussed the state of the freight brokerage industry at FreightWaves LIVE in Chicago on Tuesday.
Fuller argued that new brokers will find greater success providing a service where competitors are few and far between.
“If I can be the first in that market, I can quickly become the leader, and that’s my beachhead that I can expand to,” Fuller said. “I think the mistake a lot of people make is, they want to chase the really big market without any specific differentiation.”
He noted a couple of specialized freight brokerages as examples of companies that found their niche and became segment leaders. These include VeriTread in the heavy-haul transport industry and Forager Logistics in cross-border freight.
Avoiding conflict may well be a legitimate business practice. As a founder himself, Fuller urged potential startup founders to be in a position where the competition underestimates them, isn’t paying attention to their business or simply doesn’t exist.
On the other side of the startup coin, Bradford warned venture capital investors not to view the freight brokerage industry as a “homogeneous market” and instead see it in “granular pieces.”
“There’s a fundamental view that growth trumps all and that investors are looking for places to park capital,” Fuller said. “They have a very finite five- to seven-year cycle, and they need to get the returns as fast as possible. The best guess for that is to find the companies that are leaders in their respective corners of the world. That gives you the fastest returns.”
Bradford is a managing partner at Dynamo, a venture capital fund that invests in early-stage supply chain and mobility startups, supporting them throughout the company’s growth stages. “Extraordinary founders” are high on Dynamo’s investment radar.
The Chattanooga, Tennessee-based venture capital company’s portfolio of companies includes convenience retailer data company Skupos, digital warehousing and distribution network STORD, German digital freight forwarder sennder GmbH, heavy machine and equipment rental marketplace Tendered, freight contracting startup Leaf Logistics, and software company SVT Robotics, among others.
Since 2018, Dynamo has hosted its annual fall Founders Camp in Chattanooga to bring together game-changing supply chain and logistics startups looking to raise seed or Series A round funding. FreightWaves became a headline sponsor of Founders Camp earlier this year.
Both Bradford and Fuller host “For Freight’s Sake,” a weekly podcast dedicated to innovations combining venture capital and technology. The podcast can be heard on FreightWaves.com, Apple Podcasts and Spotify.
David Tildern
At some point, the inflow of cash will dry up as the VC’s will have largely placed their respective bets and will worth their favorites toward an exit strategy so they can all cash out. This means that the next beachhead will be profitability, not just gross sales.
Gross sales are easy to generate when you actually intend to gain market share by losing money. The hard part will be seeing who can turn that growth and VC cash into actual sustainable profit.
Few will be winners. Many will fall on their swords.