Flexport‘s Ryan Petersen says it’s the destiny of the supply chain tech company he founded in 2013 to eventually go public, but the company’s new CEO will likely be the one taking it down that path.
“Right now, we feel like we have a lot more to do to prove to ourselves before we’re ready to go prove it to investors that we’re ready to be a public company,” Petersen said Thursday during CNBC’s Disruptor 50 Summit. “So at the beginning of the year, just before [co-CEO] Dave [Clark] joined, we raised $935 million in a private round led by Andreessen Horowitz, Founders Fund, Shopify was a big investor, as well as Michael Dell’s family office. So we’re well capitalized for now. We like being private. But, for sure, the long-term destiny of Flexport is to be a public company.”
Flexport has raised $2.3 billion to date, with the most recent round, the Series E Petersen referenced, having closed in February.
“We were lucky to raise this money right before the capital markets went sour and the freight prices have started to come down,” Petersen said during his Disruptor 50 talk. “So our timing was good, but not necessarily lucky. We kind of knew those forces were out there and weren’t going to last forever and wanted to put some money on the balance sheet while we could.”
Flexport last year generated $3.3 billion in sales offering technology products for shippers to gain visibility into their cargo movements, along with help clearing customs, managing orders and reducing shipping emissions.
Petersen said this year the company hired former Amazon chief executive of worldwide consumer Dave Clark as CEO. Clark officially joined the company last month as co-CEO, a title he shares with Petersen until the founder transitions into the executive chairman role in February.
Petersen likened the hiring of Clark to having “caught a whale” as he was “out fishing” for a prospective executive to take over.
“I love being at Flexport,” Petersen said. “I’m not going to leave the company. I’m going to be [Clark’s] partner and be much more available to be free to go float and find ways to add value around the world. It’s a big, global round world and often I’m in the lab with my team building stuff heads down, and I can’t go attend that conference or meet with that investor, meet with that port CEO. And so I think we’re going to find a really natural balance.”
With Clark running the business, Petersen will have time to focus on creating new technology products for shippers in a complex web of cargo transport that had largely been behind the scenes before the pandemic. The founder gained a following with his easy-to-digest explanations of supply chain’s complexities for the average consumer.
Now, there are a number of factors defining the market for shippers: declining rates, which Petersen said have slipped as much as 80 percent in the Asia to U.S. trade lane, along with greater spending on services over goods.
Shippers are certainly celebrating the lower shipping prices in comparison to last year when rates were soaring.
“People were pretty upset with Flexport, too, but with the entire industry,” Petersen recalled. “Nobody wants when it was taking 120 days to deliver goods from a port in China to here in Oakland. That doesn’t make any sense. It’s only 15 days at sea. At the same time, the price went through the roof, like 10x increase in price. So nobody was really happy over the last year. There’s been a bit of musical chairs in the industry as everybody kind of moved around. We’ve been fortunate our customers have mostly stuck with us because of the benefits that we give them through data, through visibility and the ability to have control. But it’s been a tough time. We’ve had to show our customers we’re fighting for them.”
With less demand, there’s less to ship. Yet, new strategies set in motion in response to the worst of the pandemic may now suddenly be outdated and lessons in flexibility and pivoting may not necessarily be sticking for the long haul.
“I don’t know that we’ve learned that much as an industry,” Petersen said, reflecting on the lessons of the pandemic. “[This is a] cyclical industry. We, for example, there was not enough capacity of ships in the world. They ordered a lot of ships. Now, we probably have too many ships, and that’s something that we should have learned [in] the last cycle…five, 10 years ago when this happened before. Not exactly like this. We’ve never seen the exact circumstances, but there have been times, in 2016, when there was excess capacity. And we’re right back there where we thought we’d never be there.”
It’s Petersen and the company’s philosophy that prevention comes from a technology-first stance in managing risks. That would run counter to some of the companies that have flocked to acquiring assets, such as trucking companies or warehouses, which Petersen said comes at a significant expense that doesn’t always bear out in the expected returns.
“I think the key is understanding data flows,” he said. “It’s an end-to-end system, meaning the container liners, the people that run the ships out here, their ship goes from port to port. But the goods need to go door to door. And, ultimately, you’re talking about the data flow of that purchase order that’s going from an importer all the way to the factory and then converting that to a shipment and delivering it across multiple modes: a truck, there’s a warehouse, a port, then a ship or an airplane. And, mirror image on the other side, it needs to be delivered end to end.”
Ultimately, the entrepreneur said, Flexport sits in a unique seat that gives it a competitive advantage because, as he put it, tech companies don’t want to “get their hands dirty” in handling the actual business of transporting cargo, while it’s hard for heritage logistics firms to build their own proprietary technology capabilities.
“I think the need to get visibility is clear for everybody right now. But you also need control,” Petersen said. “It’s one thing to be able to see where your stuff is and where problems are, but then if you can’t take action on it and solve the problem, your platform is not really working for you.”