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These are the digital freight start-ups disrupting the global logistics industry

BI Intelligence

Digital leaps in areas like AI and autonomous technology are fundamentally changing the way goods and people move around the world.

Startups are the lynchpin of this transformation, pinpointing areas of need that can be tackled by cutting-edge digital solutions, including digital freight services, warehouse robotics, AI in the supply chain, delivery robotics, and autonomous driving software.

That's ultimately forcing incumbents to evolve or see their core businesses erode. Monitoring these startups thus offers unique insight into the development of the transportation and logistics industries at large, and how incumbents are defending their turf.

View this content at Business Insider


Digital Freight: Easing The Shipping Burden Amid Rising Volume

Freight forwarders organize the movement of goods by finding land, air, and sea-based logistics carriers that are willing and able to ship their clients' parcels. These firms sit at the center of the $800 billion global shipping industry, which is set to see volume grow 75% between 2016 and 2026, largely due to explosive growth in e-commerce.

That's putting pressure on retailers and shipping companies, which is only compounded by consumers' expectations that their packages arrive in two days or less.

This pressure is leading businesses to turn to digital freight startups, which manage and track all these shipments through an online or mobile interface. While legacy companies can take up to two days to even set a price, digital freight players typically offer instantaneous quotes.

Moreover, these upstarts often connect directly to low-power IoT sensors placed on ships and trucks that offer a level of visibility unmatched by incumbents. In addition, the algorithms behind digital freight platforms can synthesize and analyze shipping trends to predict when certain geographies will be particularly busy and adjust shipments accordingly.

Image: BI

Top 5 Startups In Digital Freight

We selected each startup based on the amount of funding it's received, the value of its products, the potential value of the market it serves, the quality and number of its customers and partners, and the number of noteworthy investors — either from within the industry or the technology space more broadly — it has secured.

Startup: Convoy

Founded: 2015
Notable investors: Greylock Partners, Jeff Bezos, Bill Gates

Why it's worth watching: Convoy operates a mobile app that connects companies shipping goods with available truckers. The company's ability to constantly introduce new, unique features to its app — it deployed a pair of features back in May to cater to truck owner-operators and small fleet operators — could be why the firm has attracted some impressive funders, board members, and customers.

Last November, Convoy signed a multi-year agreement with beverage giant Anheuser-Busch, which shipped a whopping 613 million hectoliters (about 61 billion liters) last year to over 100 countries. Meanwhile, it signed a similar agreement with Unilever — the owner of Lipton Tea, Ben & Jerry's Ice Cream, and Hellman's mayonnaise — back in November 2016.

The company told GeekWire earlier this year that it had north of 400 total customers, including an impressive 20 Fortune 500 companies. Convoy also has partnerships in place with Tranflo and KeepTruckin, which give truckers on its platform a 20% discount on federally mandated electronic logging devices, and it now givestruckers up to 45% off Goodyear tires for their vehicles.

What's next: Convoy will continue to hone its efforts and fend off competitors in the US by attracting more drivers and shippers. After that, it will likely expand into Europe and Asia to try and capture a share of the burgeoning cross-border e-commerce market, which Business Insider Intelligence projects will reach $1.18 trillion in 2021.

Image: BI

Startup: Flexport

Founded: 2013
Notable investors: SF Express, Google Ventures, Bloomberg, Peter Theil's Founder’s Fund

Why it's worth watching: Flexport's name has largely become synonymous with disruption in the shipping industry. Whereas other companies that cracked our list offer online or app-based freight marketplaces, Flexport is a full-scale digital freight forwarder that organizes, manages, and tracks customers' freight loads.

Flexport captured a crucial early mover advantage in the nascent digital freight space when it launched back in March 2013. But, more importantly, the company has a price advantage — Flexport CEO Ryan Peterson told Forbes in an interview that, on average, the company only takes a 15% cut of what it costs to ship a container, while its competitors typically charge a 25% fee.

Its competitive pricing and early mover advantage helped it build out a broader global reach than its digital competition — it operates nine offices across three continents, and recently opened new locations in Chicago and Hamburg. Lastly, Flexport operates a handful of warehouses, where it stores customers' goods before they can be grouped with other orders.

This helps the company offer lower rates and maximize efficiency by ensuring it only ships full containers.

What’s next: The company will continue its international expansion, fortifying existing offices in Shenzhen and Hong Kong, while also likely launching new ones throughout the Asia-Pacific Region. This expansion will help it secure a position in a market that includes four of the top five exporting countries in the world.

It'll also continue to build out its network of warehouses, helping it maintain a key price advantage as it expands to new geographies.

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Startup: Full Truck Alliance (FTA), also known as the Mangbang Group

Founded: 2017 (upon the merger of Huochebang and Yunmanman)
Notable investors: Baidu, Tencent, CapitalG, SoftBank

Why it's worth watching: FTA, which operates an Uber-like app that connects shippers with truck drivers in China, was formed after Huochebang and Yunmanman, the two largest players in the Chinese freight matching space, merged last November.

The company's ability to combine the technology and customer data from the two most prominent players in the Chinese digital freight space helped it build a massive reach in its home country — a whopping 5.2 million of the approximately 7 million semi-trucks in China sell their services on the FTA mobile app.

In China, logistics spending will grow nearly 7% to reach a whopping $43.5 billion in 2018, making the country's logistics market one of the largest in the world. That'll ultimately make FTA one of the most formidable digital freight startups globally, even if it never expands outside of China.

What's next: The company is in the early stages of developing autonomous technologies, and it could introduce a truck with at least semi-autonomous features in the next three to four years.

Such a move might allow FTA to gain a crucial price advantage over other freight companies that'll need to buy autonomous trucks or form a partnership to get access to them.

It's therefore likely that the company's sky-high valuation — its latest funding round valued it at $6.5 billion, making it the most valuable company to crack our list — will only continue to climb.

Image: BI

Startup: Freightos

Founded: 2012 (freight marketplace launched in 2016)
Notable investors: GE Ventures

Why it's worth watching: Although Freightos' first product was a Software-as-a-Service solution for supply chain management when it launched back in 2012, it now offers a full-scale online freight marketplace that competes with the other startups that made our list. The marketplace primarily serves companies shipping goods from Asia to North America.

Freightos' initial product helped it gained clout in the industry, which enabled it to secure several valuable customers and partners when it launched its freight marketplace two years ago.

The company has a partnership with e-commerce fulfillment software company ShipBob to help its customers quickly route their goods, and another with shipping technology giant Pitney Bowes to help it monitor shipments in transit.

Meanwhile, it counts both Sysco Foods — which grossed a whopping $55.4 billion in sales last year — and backer GE as customers.

What's next: The Hong Kong-based company has zeroed in on the market for managing shipments traversing the Pacific Ocean from Asia to North America, which includes the five busiest ports in the world by annual volume.

However, Freightos will ultimately need to defend against challengers also eyeing this lucrative space. Meanwhile, the company's international ambitions — it only operated in the US, China, and Taiwan as of last fall — will likely grow to include Europe and other lucrative Asian geographies, such as India and Southeast Asia.

Image: BI

Startup: CargoX

Founded: 2013
Notable investors: Qualcomm Ventures, Agility Logistics, Goldman Sachs

Why it's worth watching: CargoX — whose app connects shippers with drivers exclusively in Brazil — was one of the first digital startups to hit the country's massive trucking market, helping it to become one of the top 25trucking companies in the country.

The World Economic Forum estimates that 60% of goods in Brazil are transported via truck, and the country has 2.6 million semi-trucks on its roads, making it the third-largest trucking market globally.

CargoX told Forbes in March that it grew its annualized revenue from $115 million to $200 million in the last year. Although this figure is dwarfed by the $26 billion DHL earned globally from freight forwarding last year, it's still impressive for a five-year-old company.

This growth has helped it secure the reputation needed for partnerships to explore new, cutting-edge shipping technologies — CargoX partnered with Milsped, one of the largest logistics providers in continental Europe, to trial blockchain to track cargo shipments in transit.

What's next: CargoX has denied any near-term ambitions to expand beyond its home country, and says it's relying on the Brazilian market to remain robust for the time being. PagBrazil estimates that the country's e-commerce market is the largest in Latin America and will expand another 12% this year.

However, truckers in the country have been on strike since May, due to worries about the rising cost of diesel fuel. If the strike lingers much longer, CargoX will need to consider expanding outside Brazil, perhaps to other potentially lucrative Latin America markets like Mexico and Argentina.