Do you know about Flexport? It is the company that handles the boring logistics of a trillion-dollar business: the transport of shipping containers around the world. Apparently, the work of freight forwarding seemed tasteless. That was the reason the company was ignored by the tech world for so long. However, as soon as Flexport digitized its paperwork, it was able to speed up shipping. And that was great in the sense that clients could keep less inventory on hand while never running out.
So the company applies that optimization to how every container full of electronics, clothes or food gets from factory to store. And Flexport keeps getting smarter as the value piles up. That is the reason why a year after raising $65 million at a valuation of $365 million, Flexport has just closed a huge new round of funding.
Originally, Flexport was receiving offers valuing it at over $1 billion. However, being as smart as it is, the company turned those down in favor of a more manageable valuation. According to multiple sources, the startup has completed a $110 million Series C at an $800 million pre-money valuation. Moreover, the round is mostly filled with existing investors, including DST.
Moving on, Flexport co-founder Ryan Petersen is a favorite amongst investors. They say he is a machine. He was buying scooters from China and fencing them online. After he co-founded ImportGenius to scan and sell shipping manifest data about imports. This helped him realize how antiquated freight forwarding was.
Apparently, Flexport appears to be trying to scale up fast enough to compete with entrenched giants in the shipping space. And when I say giants, I mean FedEx, DHL, and Expeditors. And these can’t adapt to new technology as quickly. Meanwhile, Flexport is looking to box out upstart competitors picking away at parts of the freight forwarding equation, including Freightos, Haven, and Fleet.
The company got the title of being the unsexiest trillion-dollar startup. After that Fusion’s Alexis Madrigal shined a light on how interesting the business could be with his podcast series Containers. And Flexport sponsored them. Furthermore, Flexport raised its $65 million Series B last September that brought it to $94 million in total funding. Not surprisingly, a year later, its value has more than doubled.
It turns out that currently, the company has over 400 employees in seven offices. It earns roughly 15% of the average $2,000 it costs to move a shipping container around the world. And this number is in comperison to 25% that its competitors charge.
Peterson said he expects revenue of $500 million this year, yet that still makes Flexport an underdog.
“There are 25 freight forwarders that each do more than $1 billion in revenue a year. None of them was founded after Netscape.”
And that is Flexport’s advantage. Apparently, tracking everything with paper leads its older competitors to see clients individually. Flexport analyzes all its data to optimize shipping routes. Moreover, it simplifies relationships with ports, truck drivers and anyone else that touches a container. All of this lets the company cut off five days of travel time for moving less than a container full of goods.
Moreover, the company is opening its own “cross docks.” These are warehouses where it can temporarily store clients’ goods until it can batch their transport with other shipments going to the same place. This gives Flexport the opportunity of always moving full containers with maximum efficiency. Flexport already has cross docks in Hong Kong and LA. However, Petersen predicts having a global network.
Seems bad and boring
Many of Flexport’s existing investors, and there are at least 57 of them, were shut out of the new round. And investors were happily offering it a valuation of $1 billion or more. But Petersen didn’t want to get in over his head and risk a down-round later if the market stumbled.
As Peter Thiel, the leader of Flexport investor Founders Fund, has said, there’s an old adage that the best startup ideas are often at the intersection of “seems like a bad idea” and “is a good idea.”
The mainstream embraces startup culture and aspiring founders flood Silicon Valley. And there seems to be no shortage of people going after things that seem like a bad idea. Possibly an addendum to the startup seeker’s mantra should be “Seems bad and boring.”