Flexport secures the technology assets of the once-prominent digital freight unicorn, Convoy
Flexport, the supply chain logistics platform, is set to acquire the assets of the defunct digital freight network, Convoy, as confirmed by a memo from Flexport CEO Ryan Petersen sent to staff on Wednesday.
In the coming weeks, Flexport plans to reinstate Convoy's trucking logistics services for its customers, as detailed in the memo shared by Freight Waves. However, Flexport emphasizes that this acquisition pertains solely to Convoy's technology assets and not its business or associated liabilities. Flexport does intend to retain a select group of team members from Convoy's core product and engineering team.
Reports from the Wall Street Journal suggest that Dan Lewis, co-founder and CEO of Convoy, may be among the team members making the transition to Flexport. Lewis did not confirm this in response to inquiries from TechCrunch.
While the specific terms of the deal remain undisclosed, Petersen mentioned in his memo that the purchase price, relative to the value acquired, is relatively modest. Notably, Convoy achieved a valuation of $3.8 billion in April the previous year, following a $260 million Series E funding round.
Flexport was not available for immediate comment on the matter.
Petersen also clarified that the expenses incurred by Flexport would be limited to the essentials required for maintaining Convoy's technology. Since reassuming the role of CEO in October, Petersen has been committed to rectifying Flexport's financial situation, having criticized his predecessor, Dave Clark, for overspending on hiring and expansion. This cost-cutting strategy involved laying off approximately 20% of the workforce, approximately 600 employees.
In addition to cost-cutting, Flexport's path to profitability is linked to providing an enhanced service. Petersen stressed the importance of Flexport evolving into a one-stop solution for all of its customers' logistics needs, citing the desire expressed by their customers. Convoy's extensive customer base could prove advantageous for Flexport.
The former startup boasted a network comprising over 400,000 truck drivers and 80,000 carriers, alongside a sophisticated procurement technology that fully automates the supply side for 98% of loads booked, according to Petersen. This technology has the potential to help Flexport reduce carrier costs.
Petersen also outlined how Flexport intends to differentiate its approach from Convoy and other large truck brokerage firms that primarily focused on rapid scaling by pursuing major Fortune 500 accounts. Such aggressive scaling led to complexity and excessive spending, making it challenging for Convoy to achieve profitability, a situation exacerbated by the current freight recession.
Flexport's future strategy involves offering a comprehensive range of trucking services to customers, encompassing FTL (Full Truck Load), LTL (Less Than Truck Load), drayage (ocean) trucking, cartage (airport) trucking, and eventually intermodal (rail) trucking services to clients of its international freight forwarding services.