A Bezos-backed trucking startup now valued at $2.75 billion just raised $400 million from Al Gore's fund to dominate the digital-freight market
- Convoy just raised $400 million for its freight brokerage and software solution.
- The Seattle-based trucking tech unicorn is now valued at $2.75 billion. Convoy was unable to share the details of that valuation.
- Trucking is an $800 billion industry, and one that tech giants like Uber and Oracle are rushing to disrupt.
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One of the hottest startups in trucking tech just got a new stack of a cash.
Convoy, started by ex-Amazonians Dan Lewis and Grant Goodale in 2015, just raised $400 million in Series D funding.
Generation Investment Management, a sustainability investment firm chaired and cofounded by former vice president Al Gore, led the round. An environment-focused startup might not seem like a natural fit for a trucking business, but Lewis said Convoy's overarching aim to reduce waste.
For a trucker to get in touch with a retailer or manufacturer who needs their goods moved, for instance, they might spend hours on the phone or on email trying to find their next job. About 15% to 25% of the time, trucks end up carrying nothing - which has serious environmental implications.
There's also the issue of detention time. Truck drivers spend 2 1/2 hours on average waiting to be loaded or unloaded, and they're typically not paid for that time. In a study last year, almost 63% of truck drivers said they waited at least three hours every time they were at a shipping dock.
Both inefficiencies cost truck drivers serious money - but the leaders of trucking tech startups like Convoy say their products can slash those losses for America's 1.8 million truckers, and the environment.
"Reducing waste is this beautiful, magical thing because it improves the service experience," Lewis told Business Insider. "You're not playing telephone, you're not misinterpreting things, messing things up over the phone. You're fast, the computer's going to respond instantly."
Read more: Why Alphabet just led a $185 million investment round in a trucking startup
Joy Tuffield, a partner at Generation Investment, which is a new investor in Convoy, told Business Insider that she started researching Convoy in 2016. Generation Investment has also invested in Ocado.
"Not only do we think that Convoy is an innovator and disruptor and is only going to become more relevant in the freight market, but it's a real win-win scenario," Tuffield told Business Insider. "It's helpful for the planet, it's helpful for reducing empty miles driven, it's helping to reduce carbon emissions.
"It's also providing a fairer player field for carriers out there, increasing take-home pay and their earnings, and providing a better quality of service for the shippers themselves," Tuffield added. "We love those virtuous cycles where it's a win-win for everyone."
Other investors in the Series D included T. Rowe Price Associates, Baillie Gifford, Fidelity Management and Research Co., and Durable Capital Partners LP, as well as Series C investors CapitalG and Lone Pine Capital. Previous blue-ribbon investors to Convoy include Amazon founder Jeff Bezos and Salesforce.com CEO Marc Benioff.
Digital-freight brokerage, as Convoy's sector is called, seeks to lessen the need for a middle-man when companies are trying to move their goods.
Companies like Amazon and Uber have opened digital freight-brokerage departments, while trendy startups like Convoy and Transfix are attracting hundreds of millions of dollars in investments and big-name hires as they seek to digitize trucking.
A Convoy representative said the company is now valued at $2.75 billion. He was not able to share the details of how that valuation was determined.
That sky-high valuation contrasts with the fact that Convoy isn't actually profitable yet - a similar tale to tech darlings like Peloton, WeWork, and, indeed, Convoy's rival Uber. A representative said the company in profitable in major lanes including Los Angeles, Dallas, and Chicago.
"We forced ourselves to grow in a healthy way by concentrating our business on these lanes where we end up having really healthy economics," Lewis said. "That was a change we made about a year and a half ago."
With the raise, Lewis said the company will increase research and development investments. Convoy currently has total 800 employees in its Seattle and Atlanta offices, but Lewis said he would consider opening another office to capture more talent on the sales and operations side.
Convoy is also going to invest more in its enterprise software solutions for shippers and carriers, including free tools to help small businesses. "There's so much room for improvement that it's kind of hard for us to see an end to the level of investment we can make from a technology perspective," Lewis said.