Freight company Flexport has acquired technology and a few dozen employees from Convoy, the one-time giant of the Seattle startup world that abruptly shut down last month.
“We’ve acquired Convoy’s technology stack and are planning to retain a small group of team members from their core product and engineering team,” Flexport CEO Ryan Petersen wrote in a memo. “We are not acquiring Convoy the company or any of its liabilities and our expenses will be limited to what’s necessary to maintain the tech.”
Financial terms were not disclosed. In the memo, Petersen said that “the purchase price relative to value is modest.”
Reports emerged last week that Flexport was interested in swooping up assets from Convoy, which operated a digital brokerage that connected shippers and carriers, among other services.
Convoy CEO Dan Lewis will be joining Flexport as part of the deal, according to multiple reports.
Founded in 2015 by Lewis and Grant Goodale, former Amazon employees, Convoy reached a valuation of $3.8 billion last year after raising $260 million, which included $100 million in venture debt. It also secured an additional $150 million line of credit from J.P. Morgan at the time.
In an internal video call announcing the company’s closure on Oct. 19, Convoy execs told employees that they exhausted every possible strategic option to survive over the past four months, but it wasn’t enough to save the trucking marketplace company from a sudden and surprising collapse.
During the 13-minute video call, the executives reiterated much of the company’s memo to employees, citing the freight recession and dampened investor appetite.
More than 500 people were laid off as part of the company’s closure.
Flexport is another logistics startup that raised huge amounts of venture capital but is now struggling amid the shaky freight market. The company laid off 20% of its workforce last month and went through a separate 20% layoff in January.
Petersen wrote in a separate memo to employees last month that the cuts will help the company get back to profitability without raising prices or putting its balance sheet at risk.
Founded in 2013 out of San Francisco, where it is based, Flexport offers services including ocean, air, truck and rail freight, drayage and cartage, warehousing, customs and compliance, financing and insurance, and more.
“Thanks to this deal, we’re now in a great position to complete our product vision as a true one-stop-shop to ship any product, in any quantity, between any two places in the world,” Petersen wrote in the memo.
Flexport opened an engineering hub in Bellevue, Wash., in 2019, just after it raised $1 billion. Flexport has more than 350 employees in the Seattle area, according to LinkedIn.
Former longtime Amazon exec Dave Clark, who joined Flexport as CEO last year after a 23-year career with Amazon, departed in a surprise move in September.
Several other ex-Amazonians, including many based in the Seattle area, have also left the company in recent weeks.
Read Petersen’s full memo sent today below.
Team,
We’ve acquired Convoy’s technology stack and are planning to retain a small group of team members from their core product and engineering team. We are not acquiring Convoy the company or any of its liabilities and our expenses will be limited to what’s necessary to maintain the tech.
Although we are not acquiring the business, we will be looking to restore their full-truckload service in the coming weeks and have already received positive intent from some of their largest customers to come back.
In recent years, Convoy became the clear leader in technology for trucking, a vitally important aspect of Flexport’s mission of making global commerce so easy there will be more of it. Trucking is at least one leg of every international shipment Flexport manages. With more than 400,000 truck drivers and 80,000 carriers in Convoy’s network, we will be able to tap into an incredible supply of trucking service providers for our customers. Convoy’s tech stack also includes sophisticated procurement technology that fully automates the supply side for 98% of loads booked. This will allow us to significantly lower our carrier costs on our truckload and eventually our drayage and cartage business.
We made today’s acquisition not just because of the incredible tech stack that Convoy built. We have heard from our customers that they want Flexport to be a one-stop shop for all their logistics needs. Our strategy for the trucking business unit will be very different from Convoy’s or other large truck brokerages who have focused on driving immense scale by pursuing the biggest Fortune 500 FTL accounts. With that scale came complexity and burn, and in a highly competitive market with low barriers to entry, even with all of Convoy’s incredible tech, they were not able to reach the scale required to turn a profit. Their operating position was made much worse by the current freight recession.
Flexport’s strategy will be to offer a full range of trucking services to our customers who value us as a one-stop-shop for global logistics. We’ll offer expanded trucking services, including FTL, LTL, drayage (ocean) trucking, cartage (airport) trucking, and eventually intermodal (rail) trucking services to customers of our international freight forwarding services. Every container that comes in eventually gets trucked onward to its final destination. Thanks to this deal, we’re now in a great position to complete our product vision as a true one-stop-shop to ship any product, in any quantity, between any two places in the world.
We enter into this transaction with our eyes wide open regarding the discipline and focus required to integrate the technology successfully. We’re not talking about financial risk, as the purchase price relative to value is modest. Rather, as a company, we are already heads down focused on returning our business to profitability, so we will do everything in our power to minimize distraction and ensure that our leaders can stay focused on the mission at hand. As we succeed, the upside from this acquisition is incredibly inspiring, and we’re thrilled to integrate the incredible tech stack from Convoy and the team we’re bringing over to help us offer expanded services for our customers to realize our vision.
