Courtesy of Forager
Matt Silver, CEO and cofounder of Forager
- Matt Silver is the CEO and cofounder of Forager - a cross-border freight marketplace based in Chicago.
- Forager is a year old and launched its freight platform, Scout, in October. It raised $4.8 million in seed funding in July.
- Silver started his logistics career in 2007 at Coyote Logistics, which was founded by his parents Jeff and Marianne Silver. UPS acquired Coyote for $1.8 billion in 2015, nine years after the company was founded.
- At Coyote, Silver managed sales and pricing for Canada and Mexico. That fomented his interest in cross-border freight.
- We asked Silver about the company's newest hire (adtech entrepreneur Marc Kiven), how Forager is a tech company, and the biggest challenges in building out a digital freight brokerage. Here's what he said.
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Rachel Premack: Just to kind of start off with the news peg here, having Marc Kiven part of Forager, how does that take the company to the next level?
Matt Silver: Both me and Jesse, and other leadership within the company, we have the logistics expertise. We've got the tribal knowledge that is needed to build this type of a business. I've been brokering freight for 12 years now and our CTO is a genius and is building phenomenal product for our customers.
The one area that we just didn't really have a lot of strength in is, the experience of building a rapidly-growing, rapidly-scaling technology-focused business, that ultimately could put out a marketable and scalable technology and building a sales engine around it to really build up the business.
Premack: That makes sense. And I would guess there's definitely some benefits from having someone come with an outside perspective.
Silver: Yeah. And what I'm excited about with Mark is the fact that he's got other marketplace expertise in other industries and I'm excited to have him apply some of that strategy to what we're doing. It gives him the ability to bring in a fresh perspective on the industry.
While I can still keep everything kind of grounded and say, well, drivers aren't going to like that or customers need it to look like this. So, I think it provides the exact perfect balance between the tribal knowledge and a tech entrepreneur executive experience that Mark has. Really made an insanely strong leadership team as we kind of set the vision for the next five years.
Forager is a technology company, Silver says
Premack: And speaking of tech companies, would do you consider Forager a logistics company or a tech company, if you were to just put it in one category?
Silver: We're a technology company that happens to be phenomenal at moving freight.
We do have an operating authority as a logistics company. So, we do provide logistics services, but our focus and our resources are going into building technology to positively impact all processes that are involved in moving cross border freight.
Right now, the service that we offer the customers is very straightforward. We provide them with an access to instant pricing and capacity for any clockwork rate. We have an operation team behind that, that that takes care of all the conversation and communication between all the different parties. But what the business will continue to evolve into is much more technology oriented, customer solution oriented, than just the traditional boiler room brokerage floor design that you see at a lot of big companies.
Courtesy of Forager
A meeting at Forager.
Premack: Okay, that makes sense. And, right now, what's the breakdown in sales people versus tech people? Where is the employment right now at Forager?
Silver: It's broken down pretty evenly into thirds, I would say.
You can take sales and marketing and put those together. You've got operations as about a third of the business. The development team makes up about a third of the business. Development and product kind of go together.
What sets Forager apart from other cross-border freight marketplaces
Premack: There are quite a few companies kind of looking at the cross border space. What sets Forger apart?
Silver: A lot of other logistics companies service Mexico because a customer asked for it. It's kind of an afterthought for them, or a red-headed stepchild, their business.
I started the business at Coyote, because nobody else was doing it at the time. There was a need for it and an opportunity to make some money with it. We started the business specifically for cross proliferate.
It's the only thing we're focused on right now, it's not just an afterthought, or, oh, my customer asked for it, so I guess I'll do it. We started this specifically with the intent of building a product for cross-border shipping.
Why cross border is so complicated
Premack: What's so different or what's especially important to keep in mind when operating in the cross border space?
Silver: Let's break down what a domestic shipment looks like - which is what anybody from a CH, o ar Coyote, or an XPO to a Convoy or an Uber Freight does.
It's really just a driver that goes and picks up a load in Dallas today, and they deliver it two days later in Atlanta, and somebody talked to the shipper and the receiver and they talked to the driver and that's it.
REUTERS/Esam Omran Al-Fetori
What we do, there's anywhere between seven and 10 different parties involved in a single shipment moving cross border. There are customs brokers on both sides.
There are two or three different tractors involved in a single shipment. There are one to two trailers involved in a single shipment.
Multiple vendors are involved between the two carriers and the potential trans-load facility and dealing with the customs broker.
There are way more parties involved, two languages, potentially multiple currencies. Our job is to kind of consolidate all of that communication and operations into our platform and manage them for the customer.
Let's say a customer spends 90% of their transportation spend to their US Domestic market, and about 10% is on cross border shipping.
And if you take that kind of look at that as a graph, then look at what the amount of time that they spend operating that freight, they probably only devote 70% of their time to operate in their domestic freight while they spend 30% of their time trying to figure out cross-border shipping.
So if we can help them take that from 30% down to, let's say, 5%, then we're doing our jobs and making their lives easier.
Silver uses Uber Freight as an example for why freight brokerage startups shouldn't get tied up in the idea of high revenue
Premack: Per shipment, how much is a cross border shipment versus domestic load?
Silver: I don't have that number off the top of my head. But, I would venture a guess that the average revenue per load on a cross border shipment is probably double what it is on the domestic side. But again, I'm not positive, I don't want to put a number to that.
And we're not sharing our numbers right now, publicly.
Premack: Got it. The reason I asked is because I was looking into a story around how Uber Freight's average booking is higher than the average booking for Rides.
So, it is just kind of interesting. It seems like more companies should be focusing on crossborder, if crossborder is higher revenue.
Thomson Reuters
Silver: If you want to look at Uber for a second, and the fact that they lost at least $83 million last quarter on their freight business alone, like fantastic job getting to a quarter of $1 billion in revenue, but what was their actual margin?
You can get as much revenue as you want into your network and you can move as much freight as you want at a really high revenue, but if you don't have any sort of margin on that or any sort of profit behind that, what is your business doing?
If you just keep pouring more cash into it the way that Uber Freight is doing right now, yeah, that's a higher revenue number for a (freight) load than it is for a single (passenger car) booking, where it takes me $7 to get from my apartment to my office.
So, I wouldn't think of it as much as like what the gross revenue per load is. You can look more at margin and then you can look at margin percentages. Everybody's perspective is different on that.
And when you think about the margin profile of a more traditional mature freight brokerage versus somebody like Uber, the revenue doesn't really matter as much as the actual margin does. Even though revenue is what everybody thinks is sexy in technology.
'We're not looking for getting somebody like a SoftBank to subsidize our customer's transportation spend'
Premack: I'm curious how you're kind of navigating that because that's the kind of thing we've been talking a lot about around our newsroom is this idea that so many companies that aren't tech companies are valuing themselves as tech companies.
For so many logistics startups, you know the revenue is going to be super high but the margins aren't going to be that high, so they're basically getting overvalued. Given all of that, how do you kind of navigate or resist falling into the trap of promoting a super high valuation?
Silver: So, we do have aggressive growth strategies. Keep in mind, our first load moved in December of 2018, so we don't have year over year numbers to look at quite yet.
I would say we've done exceptionally well in our first year as a logistics company, compared to what other freight startups might do. You know, I'm not going to share the actual revenue number, but I can tell you that we already have for next year alone, we already have about 25% fee books out for 2020, from our existing customers and from new customers incoming, before we even got to the end of the year. Let alone what other customers are starting to get signed up on SCOUT.
Courtesy of Forager
Some of Forager's leadership team in the company's Chicago office. From left to right, COO Jessie Essman, CEO Matt Silver, and CFO Jordan Salins.
So, we're going to have that kind of rocket ship growth pattern that you see with some of these other companies. We're just not going to go buy a bunch of volume from some of those notoriously lower price shippers that will just dump freight in any tech marketplace.
Now, the cool thing about building a marketplace is that when it comes to marketplaces, the marketplace gets impacted by both sides. Supply and demand, and the supply side is what communicates what the pricing looks like for the demand side.
And so we're not about subsidizing pricing per shipper. We're not looking for getting somebody like a SoftBank to subsidize our customer's transportation spend, the way that the way that some other providers in the marketplace are doing.
The way we like to build from a strategic standpoint and with the right type of customers, we realize that there's a lot of customers out there that move a lot of cross border freight, that just don't understand it, don't have the bandwidth to manage it, or don't want to deal with it or they feel like they're spending too much money on it.
We have two goals for our customers.
One is to provide them better transparency and visibility into the service and the pricing and everything else that goes with cross-border shipping.
Two is really to help save them money on it. This isn't like, "Hey, we've got great tech, but you're going to have to spend more money." This is the fact that we've got great tech that will help them save money and time.
Buying market share with ultra-low rates hurts customers in the long-run, Silver says
Premack: So how do you explain to investors or customers that you're avoiding those sort of strategies that other startups might be doing? Like, how do you explain to them that you're not going to be underpricing just to gain market share?
Silver: The first half of my career I was part of Blitzscaling, and sat there firsthand covering freight that we lost money on. I was part of that before, and I understand how that works.
One of the things that I will tell every single investor that I ever talk to, and I'll say it publicly, is that my number one concern is taking care of our customers. Of I give customers a rate and if we want to commit to a longterm relationship with a customer, what we can't do is pull a bait and switch.
There needs to be a delicate balance between onboarding customers in the system, while maintaining our pricing model, maintaining our cost structure, making sure that our customers experience efficiencies and cost savings, and not increasing costs because they like our software.
As our tactic evolves and expands and grows and our products keep getting added onto it, there will be different services that could be set up in a more SAAS-oriented structure, to help them better manage all of their cross-border processes.
Courtesy of Forager
Brokering at Forager.
But from a standpoint of what we're doing right this minute, and what I'm going to say to any investor, is that right now our goal is adding quality customers who want to partner with us, want to work with us and trying to save them money, improve their experience, time out of their day that they currently spend on this, and allow us to do that for them.
"I'm not going to play in that game"
Silver: Doing the bait and switch to me is not the right method for growing a relationship with the customer. It's a really easy way to lose a customer.
You know, I've talked to a couple shippers that work with some of those big logistics-tech companies and I asked about that.
I said, "Hey, are you worried that, you know, name your digital freight brokerage is giving you really cheap pricing right now for some of your US lanes? Are you worried that a year or two from now they're going to pull out of that because they're going to realize they need to be profitable?"
He said, "No, I'll take that pricing for a year or two and I'll save the money for a year or two, and then someone else will pop up at that point that will subsidize pricing for us then."
So, I'm not going to play in that game. There are certainly some lanes that move across border that we will go super aggressive on from a pricing standpoint. If it drives better efficiency into our marketplace, but I'm not going to go and lose $200 a load for a customer in order for us to win their business. We will get our foot in the door that we... The way we need to, but I'm not going to go lower rate, move clothes for a quarter or a year and then say, "Hey, a 25% increase for you because we need to make a margin." We're building this strategically to not have to run into that problem eventually.
Forager has a margin on its freight, but isn't profitable right now
Premack: Right now is Forager profitable, or do you see kind of a roadmap for profitability?
Silver: We make a margin on our freight, but we're a brand new startup. So no, we're definitely not profitable right now.
If we were turning a profit, I guarantee you I'd be spending every single dollar of that, investing it back into the company. We do have a very clear roadmap for when we can become profitable.
It's not something we're sharing yet, but our goal is never to build that boiler room brokerage mentalities that you see at a lot of mature logistics companies.
Our goal is to build the technology that automates all the processes involved with moving freight, so that we can scale our customer base and our supply side of the equation, which is our carrier base without having to add more heads every time we want to have more customers. And so profitability certainly fits into that roadmap.
How Forager is bucking legacy brokerage norms
Premack: What else is Forager doing to avoid that culture that we see at many legacy brokerages?
Silver: Bringing in somebody like (president) Marc (Kiven) is one way to do that, (marketing manager) Paige (LaNasa) being here. Our CTO, Matt Weber doesn't come from a freight background.
We only have a handful of people at this point that have a freight background compared to the people that don't.
And so, our goal going forward and especially once we raise more capital and continue investing in building the business, our goal is to hire more people that are hungry and aggressive and smart and fresh out of school, that really want to learn how to sell a unique business.
We don't want to churn through a bunch of talent. We don't want to have to have a bunch of people come through the business that are going to leave in six to 12 months because they thought they were going to broker freight.
Scott Olson/Getty Images
This isn't the place to go with if somebody was at name your big brokerage for the last three years, they want to take a next step up, they want to be the best sales rep or the best carrier rep, and broker off a hundred loads a day.
This is the place that we want people to come to if they want to help create and design new products and new services for customers. If they want to sell a platform and a marketplace to shippers, and they want to be more of a consultant with the customer and not so much a grind it out, make the phone calls, handle everything, cradle to grave.
We're taking pricing out of our sales team's hands. Our sales team is not handling pricing anymore, everything that gets priced for cross border freight runs or SCOUT.
We've taken the need for somebody to be on the phone, have a customer call, and say I need a rate right now. All the pricing lives within SCOUT and is very dynamic in the way that it provides rates. It's different for different equipment types, different markets, different border crossings. It's all available right there and it takes less than 10 seconds just to get a quote.
The goal is that the customer can log in and get the rates themselves.
Again, we have people that are calling customers, we have people that are developing relationships with carriers, but we're not actively seeking out US domestic random spot rates. We're not hitting the spot boards where we can try to bid on a random load that we might make $200 or $300 on. We're trying to actually actively build a strategic network that feeds itself from both sides, from both supply and demand.
Silver wants Forager to scale faster yet
Premack: One last question. What would you say is the number one barrier or the number one roadblock for you building out Forager, your number one concern for the next five years?
Silver: How do we do it faster? How do we build the product faster? How do we bring in more quality talent faster? It's about speed right now.
Cash obviously plays a factor into things. One of Marc's first initiatives is building out the sales engine to really get things turning. It's important that we grow and scale quickly, but it's also super important that we continue to take care of our customers and maintain those relationships and do it strategically and smart.