Startup veteran Steve Pho joins Forager’s C-suite

Pho said that he will be responsible for allocating capital to further build out SCOUT, Forager’s technology platform, into a SaaS product capable of generating higher-quality revenue than gross margin on truckload brokerage.

“You have to build the business around what you want to be great at,” Pho said. “For us, for Forager, that means SCOUT. It will streamline the process by which something gets delivered cross-border. We’re focusing on price, service and selection to determine where we allocate dollars.”

In Pho’s appointment, Forager stands to gain a new level of financial sophistication and a greater fluency in the metrics that venture capitalists understand. In particular, when it comes to scaling a cross-border freight marketplace with sustainable unit economics, Pho said that he would apply concepts from the technology industry like LTV-to-CAC ratio, or the ratio of a customer/carrier’s “lifetime value” to the customer acquisition cost. In essence, the LTV-to-CAC ratio measures the profitability of the average customer. That ratio can be improved in any number of ways — by making carrier and customer relationships stickier, by monetizing new products and services or by driving efficiency in marketing and sales — but it’s fundamentally about helping the organization direct resources to the biggest opportunities.

“We’re taking all the functionality in SCOUT and externalizing that for enterprise shippers,” added Matt Silver, Forager co-founder and chief executive officer. “That allows us to drive completely different types of revenue such as SaaS revenue. For example, we have a very well-known customer who ships reefer out of Mexico — lots of guacamole. We also have a partnership with project44 that provides location visibility, but we want to push reefer temperatures to the customer through SCOUT and into their TMS, layering in that extra secure version.”

Pho said, “Once you get that density or audience, it opens up a lot of opportunities for you to provide services to both parties. That’s what we’re investigating now, and we have a decent idea of how we want to go about it. Right now we’re trying to get share — gotta continue to grow. Series B capital will go toward continuing to scale the business.”

In the venture capital industry, Pho said, there are similarities between how food delivery and freight logistics startups have been funded. Food delivery startups got early buzz but needed lots of capital to change consumer behavior and reach densities that could be profitable. There was a lull in VC funding when it became clear to investors that the delivery companies’ paths to profitability would be longer than initially expected. Ultimately, though, large attractive businesses emerged and were able to raise substantial new capital.

Pho thinks the same process will play out in freight marketplace businesses. Digital freight marketplace businesses founded five or six years ago raised money and grew quickly, but it has taken years to build the technology and products that yield incremental improvement to unit economics. In 2019, investor enthusiasm for marketplaces with poor initial unit economics waned, but in 2020 as the businesses matured, new money poured into digital freight brokerages like Uber Freight and Loadsmart.

“DoorDash was raising billions upon billions,” Pho recounted. “Early on, everyone identified the opportunity: a large industry that needs technology. But investors became confused, saying, ‘I don’t know what a winner looks like.’ That’s what happened during the lull. The businesses were perceived to be growth-at-all-costs with unit economics that weren’t going the right way. It was happening, but it just took a lot longer than what the founders originally said. Unit economics and take rate are the biggest things investors will look at. We have to be maniacal about how we think about monitoring, analyzing and improving unit economics. That shows you can build a great business, that you can make this — once you get density — a nicely profitable business.”