VC-backed freight forwarder wants to expand geographic coverage and add freight expertise after latest cash infusion.
When venture capital funds put up $1 billion to back a company, they obviously take a long-term view of the market. Hundreds of years in fact, says Ryan Petersen, chief executive of Flexport.
The San Francisco-based company joined unicorn status in the venture capital world by raising that amount in a funding round led by SoftBank Vision Fund, the $100-billion portfolio of SoftBank Group.
SoftBank’s vision for companies to have a 300-year lifespan mirrors the long-term trajectory of global trade. Although 4 percent annual growth might not sound attractive to a VC fund, “on average the world just continues to grow trade,” Petersen said.
“There can be bad years of course, but long-term, the world just wants to trade and connect with each other,” Petersen said.
With the $1 billion in additional funding, Flexport aims to facilitate that trade by leveraging technology to assist shippers navigate modern supply chains. The Amazon-effect means cargo owners and shippers have to distribute smaller caches of inventory more rapidly across a wider network of warehouses and distribution centers.
This new distribution network entails a higher degree of technology and automation because “it just breaks if you try to manage it in email and phone-based systems,” Petersen said. In addition to managing warehousing, transportation and customs processes, Flexport’s front-end software offers an easier way to manage and route freight that’s more akin to a retail shipping experience.
“You don’t go to FedEx and tell them to send this package via their Memphis facility and then go through Kentucky,” Petersen said. “You just tell them the time you want it to get there and to offer pricing options based on that.”
Flexport’s web-based dashboards offer customers “the visibility and control to manage all that freight,” Petersen said. The dashboard offers customers a wide array of freight analytics and touchpoints to choose from. But in the end, Petersen said customers only want simplicity and not more complexity
In addition to automating workflows and providing tracking of shipments, Petersen said increasing automation in the supply chain means a more proactive relationship with shippers.
“When new tariffs are introduced, within five minutes we know every single customer that has those customs codes,” Petersen said. “We can tell them what the effects of tariffs will be, what they can expect from the tariffs and then have customer account representatives reach out to them.”
A simpler shipping process helped drive gross transportation revenue to $500 million last year, double 2017’s level. The company is still recording operating losses as it builds out its physical footprint and adds more employees.
Among the company’s leased assets are cross-docking space at the seaport in Shenzhen, China and near Hong Kong’s airport. It also has a cross-dock facility in Los Angeles connecting the airport and seaport and plans to open another facility in Chicago. Flexport also runs its own-chartered airplane running between Asia, Los Angeles and Chicago.
Petersen said the company plans to build out that network to other locations in Asia, the U.S. as well as Europe. The threat of tariffs and other ongoing trade hostilities means shippers are looking to a wider array of countries in order to source products.
“There’s a shift of manufacturing capacity from China to other parts of Asia and the Indian subcontinent,” Petersen said. “Expect to see us invest in those regions to build what we’ve built in China.”