The $1 trillion-plus transportation and logistics market is ripe for disruption, but entrepreneurs seeking to tap into the space shouldn’t get so caught up in the hype that they overlook startup fundamentals like building a solid team and differentiating the market.
“It’s such a massive market,” said Jake Medwell, founding partner at 8VC. “If you don’t stay focused you’re going to die.”
Medwell was one of several VC panelists who participated in a freight tech investment discussion held at the MarketWaves18 conference Monday morning in Dallas.
The speakers ticked off a bunch of reasons why the T&L market is growing so fast.
“Growing e-commerce, regulatory tailwinds make the market so exciting,” said Angel Pu, vice president, technology, media and telecommunications for Warburg Pincus. “We really like the business model. It’s mission critical.”
The ELD mandate and questions around international trade are among the regulatory tailwinds that are fueling interest, Pu said.
What differentiates freight tech today is a surge in data that “will drive tremendous efficiency in the industry,” said Nimay Mehta of Lead Edge Capital. Software investments can bridge the gaps as capacity tightens and the industry is forced to do more with less, he said. “We’re optimistic about that.”
Mehta said the freight industry is more dependent upon human resources, and he cited as evidence of that the fact that the sector is marked by all sorts of non-compete clauses.
“You don’t see that in tech, and that’s a testament to the relative balance in these tech companies between human capital and IT,” Mehta said. He said he envisions that companies will rely less on people and more on software and system, but that ultimately, people are the “net beneficiaries.” “It’s moving that way, but it’s definitely hit some bumps in the road,” he said.
Earlier this morning, FreightWaves founder and CEO Craig Fuller summed up the tech forces driving innovation in the industry. “We are good at moving freight,” Fuller said in opening the conference. “We are not good at moving data.”
But startups aren’t the only organizations catalyzing change. Fuller mentioned J.B. Hunt, which he said most people in the industry would consider “the most traditional trucking company.”
But on top of that, Hunt also put several hundred million dollars into the creation of Hunt360, one of the more successful FreightTech platforms.
“They saw this tech investment and venture capital going into the industry, and other thought they were going to be displaced by these upstarts,” Fuller said.
Their view in developing Hunt360 was: “not so fast.”
Medwell echoed Fuller when he said: “What excites me is this is one of only [sectors] where new entrepreneurs have to work with old incumbents. No matter how incredible the software is, something still has to go from Point A to Point B.”
Freight tech is growing like wildfire, but entrepreneurs shouldn’t overlook Startup 101 rules like a developing a good team and educating investors about the market, panelists said. “The entrepreneurs’ job is partly to evangelize and educate about the market ahead,” Nimay said.
Pu said growth stage investors are looking for a business that stands the test of time. “It’s growing today, but fast forward 20 years from now: Is it still going to be around?” Scalability is everything, she said.
At the end of the discussion, moderator Jenny Xu from FreightWaves asked panelists to sum up the market in one word.
Tight, hot and busy, they said, one after the other.