SEATTLE _ Convoy, the highflying venture-backed Seattle freight startup that wanted to digitally disrupt the trucking industry is hitting the brakes amid rumors of financial struggles in a cooling cargo market.
The privately held firm, which had hundreds of millions of dollars in backing from tech players like Jeff Bezos and Bill Gates, has canceled or rescheduled all shipments, according to media accounts.
Convoy told customers that “all shipments have been canceled from our marketplace,” according to FreightWaves, an industry news site, which said it had seen the communication. The Wall Street Journal also reported that Convoy had stopped accepting shipments and suspended operations.
In an emailed statement Wednesday, a Convoy spokesperson said only that the company is “preparing our business for a transition and we will have more information in the next 48 hours,” but declined to confirm it had canceled shipments or comment on reports that employees had been sent home.
But Convoy’s load board, which matches shippers’ cargoes to available truckers, “went blank on Wednesday,” and the company also advised customers to look for alternative shipping methods, according to FreightWaves.
Convoy has also gone through several rounds of layoffs this year, according to media reports.
Convoy’s troubles come as the freight industry has seen volumes fall amid a shifting economy, which has meant narrower profits and fiercer competition for remaining cargo, said Emily Nasseff Mitsch, an analyst at CFRA who covers trucking and rail. “You’re seeing a lot more competition in the space, which is crushing smaller companies.”
Convoy was founded in 2015 by Amazon veterans Dan Lewis and Grant Goodale. The company bills itself as a “digital freight network” that uses sophisticated software to connect shippers directly to truckers and bypass the brokerage system that has traditionally handled much of the scheduling.
Convoy was one of several firms aiming for “the Uber-ization of U.S. trucking” by using tech to disrupt a brokerage model based on deals “done with phone calls and paper,” as Bloomberg put it last year.
Convoy attracted major backing. By last year, it was valued at nearly $4 billion, according to GeekWire. The company’s LinkedIn page indicated it had nearly 800 employees.
Yet industry veterans say they were skeptical Convoy’s business model was sustainable in such a cyclical business.
Convoy aimed to compete with a brokerage system whose bread and butter was arranging cargo shipments with smaller trucking firms and independent truckers, according to industry officials.
While a large share of trucked cargo today is hauled by big national trucking firms for a pre-contracted price, a significant share still goes with smaller players, often for a price negotiated by brokers on the spot.
Convoy hoped to use “machine learning and automation” to bypass that process with an app that would allow carriers with cargoes to find truckers with empty trailers. The system would cut out brokerage fees while also reducing waste, the company said.
“On average, 35% of all miles truck drivers run are empty, and trucks spend hours waiting for poorly aligned appointments,” according to Convoy’s website. “Of all the problems in trucking, this one is the most classic computer and data science problem.”
But Convoy faced stiff competition, both from other tech startups, such as Uber Freight, but also from other players in the shipping space, including Amazon, which were developing increasingly efficient logistics and scheduling technologies.
Convoy was also a victim of industry volatility, said Jim Contreras, group manager for transportation at the Sumner office of Ryder E-commerce by Whiplash.
During the pandemic, a mix of high demand for consumer goods and a shortage of trucking capacity pushed up shipping prices and boosted revenues across the trucking industry.
But as demand has weakened over the last year, trucking companies have seen a fall in both volume and revenues.
At the ports of Seattle and Tacoma, total cargo container numbers from January through August were down 20% over the same period last year, according to data from the Northwest Seaport Alliance, which manages marine cargo operations in the ports of Seattle and Tacoma.
Arkansas-based J.B. Hunt, one of the largest U.S. trucking companies, saw revenues in the most recent quarter fall 18% versus a year earlier. Thinner profits likely contributed to the demise of trucking giant Yellow, which declared bankruptcy in August.
This “freight recession,” as some in the industry call it, has been especially hard on smaller trucking operators and, by extension, firms like Convoy, which had become accustomed to high demand, big volumes and good prices, said Contreras.
“For some of these companies like Convoy, this is their first big recession,” Contreras said. “When they got into this slowdown, they’re like, ‘What do we do now? How do we turn this around?’”
Where many trucking companies could use pandemic-era profits to get through lean times, Convoy, which was fueled by venture capital, may not have had the financial cushion and may have struggled to find additional funding from backers.
“They just don’t have the reserves,” Contreras said.
What the future holds for Convoy isn’t clear, although the company said it would release more details in the coming week.
In August, the company was reported to be considering selling itself, according to a report in The Information. On Wednesday, The Wall Street Journal reported Convoy was considering selling its technology.
In the meantime, Convoy’s troubles don’t mean the trucking business won’t benefit from improved efficiencies through technology, industry executives say. But they think Convoy may have overestimated the appetite for disruptive change in an industry that still relies heavily on sales, marketing and long-established relationships.
“At this point, I just don’t think those [online load] boards bring a lot of value,” said Bryan Gonzalez, international logistics manager for Seattle-based agriculture exporting firm FC Bloxom & Co.
Although Bloxom is one of the players Convey wanted to bypass with its technology, Gonzalez said, he notes that many cargo deals are still made with a short phone call followed by an email.
“Shippers and receivers,” he added, “are just old school.”
