After serving 14 years for the Royal Canadian Navy, Ira Lawrence was ready for a new adventure. He and his wife decided to start a trucking company in 2017, but several hurdles nearly caused them to quit before even getting started.
But then Lawrence found Convoy, a Seattle startup that developed an app to match truckers with shippers. The sign-up process was easy and he quickly found work delivering wine from Woodinville, Wash. Best of all, Convoy paid out drivers in just two days with no extra charge.
“The experience was just flawless,” Lawrence told GeekWire during a phone interview this week from his truck, on his way to Puyallup, Wash., carrying a load he got through Convoy.
Investors are betting big — again — that Convoy can help thousands of drivers like Lawrence with its technology-infused platform.
The Seattle-based company today announced a whopping $185 million Series C round led by CapitalG, the late-stage venture capital arm of Google parent Alphabet. It’s the fourth-largest funding round ever for a Washington-based company and the largest of 2018, according to data from PitchBook.
New investors including T. Rowe Price and Lone Pine Capital participated in the round, as did existing investors Greylock Partners and Y Combinator, which led Convoy’s $62 million Series B round via its Continuity Fund. They are part of an all-star class of backers from Convoy’s previous rounds, including Microsoft co-founder Bill Gates, Amazon founder Jeff Bezos, Expedia Chairman Barry Diller, Salesforce CEO Marc Benioff, Code.org founders Hadi and Ali Partovi, and former Starbucks president Howard Behar.
The fresh cash propels Convoy to unicorn status with a $1 billion-plus valuation, one of few Seattle-area startups to reach that milestone. Total funding in the 3-year-old company is $265 million.
Lewis said Convoy has received acquisition offers in the past, “but we have a big vision and we’re in an ideal position to go after it and see it through,” he told GeekWire.
“We can do that as Convoy. Raising money is the best way to do this quickly via technology investment and rapid scaling to build our network/pool of data,” he said.
The funding will help Convoy further develop its on-demand technology platform that provides an alternative to brokers who traditionally use phone and email to facilitate transactions between trucking companies and shippers. The company and its investors see huge opportunity in the U.S. trucking industry, a market valued at $700 billion according to the American Trucking Association, which forecasts 3.4 percent in annual growth of freight volume until 2023.
Convoy’s vision has expanded since Dan Lewis and Grant Goodale left Amazon to launch the company in 2015. As they’ve developed more relationships with truckers and shippers, the co-founders see inefficiencies on both sides that can be solved with data-driven software around the existing marketplace that matches them together.
“We can build so many tools for them,” Lewis said.
Convoy is developing new products to help truckers combine several different jobs, which can be attractive given that trucks run empty 40 percent of the time, according to Lewis. It is also working with shippers — customers include big brands such as Unilever and Anheuser-Busch — to provide better tracking and pricing data.
The startup makes money by keeping a percentage of each transaction. It mostly works with smaller trucking carriers across the country.
Lewis previously compared Convoy to his former employer and that analogy still rings true for the fledgling startup. The CEO, who led shopping experience teams at Amazon, recalled how the tech giant aimed to solve a set of customer wants and needs — convenient delivery, lower prices, great selection — that would exist for a long time, in part by analyzing hoards of data.
“We do the same thing — what’s difficult about being a truck driver or a small trucking business? What do you need if you are a shipper?” Lewis said.
One challenge for Convoy is convincing enough drivers and shippers to use its platform; getting more people using Convoy will fuel the company’s marketplace and create what Lewis described as a “virtuous cycle.” Convoy has competition in the form of traditional brokers such as publicly-traded giant C.H. Robinson, while freight operators themselves are also investing heavily in technology to keep up with demand. There are also newer direct competitors including Uber Freight; Transfix; Trucker Path; DAT; and others.
Tim Denoyer, a transportation analyst with ACT Research, said truck brokerage has been growing at a faster rate than the broader trucking industry as shippers look to reduce logistics costs through outsourcing. He said software for logistics management is not a new phenomenon, but added that Convoy can grow if it wins the trust of truckers in a largely relationship-based business.
“If Convoy can provide customer service more efficiently than most because of their tech, there’s potentially a large place for them in the industry,” Denoyer said.
There are market dynamics that could affect Convoy’s growth. Ed Taylor, owner of Taylor Driving School in Burlington, Wash., said that a booming economy has created more demand from shippers. But at the same time, there’s a truck driver shortage.
“A lot of younger people want to go into something besides truck driving,” Taylor said.
Lewis sees the shortage as opportunity if the company can solve issues such as getting paid on time, being treated fairly, and finding efficient routes.
“We can make the profession of being a truck driver more attractive,” Lewis said.
Taylor, a former driver who has logged more than 3 million miles, said providing transparent and consistent brokerage rates can help Convoy differentiate itself.
“If I had to go to a broker, I’d love to go with someone like that,” he said.
Self-driving technology also looms in the distance for the trucking industry, with companies such as Waymo, Tesla and Uber developing their own automated freight services. Many experts agree that even if self-driving trucks proliferate, the vehicles will still require a driver due to complexities with loading/unloading, insurance, and other regulations.
But Lewis said that one potential change is trucks staying on the road longer than the 11-hour limit imposed on human drivers today.
“When it’s ready, we will be in a great position to work with self-driving companies,” he added.
Convoy, which won the Next Tech Titan award at the GeekWire Awards in May, employs 300 people and expects that number to double by the end of next year. It will use the fresh cash to hire salespeople across the country and engineers to continue developing its technology.
“Seattle is a phenomenal place to build a company like this,” Lewis said.
David Lawee, partner at CapitalG, will join Convoy’s board as a result of the new funding. Recent investments made by CapitalG include Lyft, Robinhood, CrowdStrike, Freshworks, Oscar Health, Manbang Group, Aye Finance, Gusto, and UiPath.
“Convoy has the potential to transform the trucking industry,” he said in a statement. “The team has built a leading tech-enabled marketplace that provides shippers with a more efficient freight solution and truck drivers with increased access to work. We believe Convoy will continue to leverage its technology and data capabilities to drive increased efficiency for the industry overall.”