What's behind the fall of Seattle unicorn Convoy
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The future of Convoy, a digital freight startup once hailed as the "Uber for trucking," is in doubt after rumors of a potential buyer emerged just days after the company closed abruptly.
Driving the news: The Seattle Times reported on Tuesday there could be a last-minute buyer for the unicorn darling. Axios could not confirm the potential sale through emails to the pressroom or calls to the main office.
- But CEO Dan Lewis said on LinkedIn Wednesday that he was "heads down working on a deal that will include some of the Convoy team and our tech/services."
- Earlier this week the company notified Washington's Employment Security Department that it had laid off 533 people, the majority of its staff.
Why it matters: Backed by Bill Gates, Jeff Bezos, Marc Benioff and Bono, Convoy was seen as another potential tech giant from the region that produced Amazon and Microsoft.
- The collapse of the company, valued near $4 billion just last year, underscores how rapidly tech fortunes can change in a tightening venture capital market.
Details: In an email sent to employees last week, Lewis wrote that a massive freight recession coupled with a contraction in the capital markets "dramatically dampened investment appetite and shrunk flows into unprofitable late-stage private companies," GeekWire reported.
The big picture: The freight and shipping industries have seen a sharp and protracted decline after a huge pandemic surge.
- Container rates on eight major shipping routes worldwide had fallen 75% in July from the previous year as lower consumer spending lowered demand for goods, according to Insider.
- Trucking firms also reported a sharp decline in freight volume, with excess capacity in the system.
- With plentiful truck capacity, shippers could find attractive freight rates with large carriers as opposed to the independent truckers and smaller companies targeted by Convoy, Avery Vise, a trucking analyst with FTR Transportation Intelligence, told GeekWire.
Background: Convoy aimed to increase efficiency in the $800 billion trucking industry through technology that connected shippers directly to truckers, bypassing the old system of relying on people to broker the deals.
- But that ploy may have been part of its undoing, writes Mark Solomon in Freight Waves.
- A transportation executive advised Convoy to set up a shop in Chicago and "hire 10 or so 'badass brokers,'" Solomon wrote.
- But Convoy "believed that it had built a better mousetrap based on sophisticated technology that could supplant traditional brokers."
Yes, but: The shipping and freight industries depend on humans with experience, expertise and flexibility to manage the unpredictable variables that arise, said Michele Taylor, president of the Customs Brokers & International Freight Forwarders Association of Washington State.
- Convoy is not the first company to aim for profit in the shipping industry by eliminating the middleperson, nor will it be the last, she said.
- "They're always trying to replace us," she told Axios. "But you just can't do it. You need actual people on the ground because nothing in the world of trade is ever cut and dried."