Freight is a trillion-dollar industry, and it has not moved with the speed of the 21st century, long reliant on ledgers, email and (even) phone calls to communicate. But there is a new generation of start-ups using technology to tackle the biggest issues in a complex global supply chain, ten of which made the 2022 CNBC Disruptor 50 list.
One in particular, Flexport, not only topped this year’s CNBC Disruptor 50 list, but also believes that it’s poised to compete with the world’s biggest logistics player: Amazon. That is according to founder and CEO Ryan Petersen, though he doesn’t make the claim in a boastful manner.
“We could be one of the biggest companies in the world if we live up to our potential,” Petersen said in an interview on CNBC’s “TechCheck” Tuesday. “It’s a lot to do though,” he added.
“Amazon is the best logistics company in the world, and I say that very humbly, because I’d like Flexport to be the best logistics company in the world,” Petersen said. “But we haven’t earned that right, and I really look up to Amazon, and try to learn as much as we can from how they operate,” he said. “There is still so much hustle in that company.”
Petersen started Flexport in 2013 because he figured there had to be a better way to manage the flow of goods that get put on cargo ships, planes, trucks and railroads and transported all over the world. The company’s freight forwarding and brokerage services are in the cloud, enabling it to analyze costs, container efficiency, and greenhouse gas emissions quickly and with more accuracy than legacy systems.
Last year, as the supply chain crisis persisted, Flexport had its own bottleneck: a waiting list. “We couldn’t take more customers. We couldn’t even serve all the customers we had,” he said.
The waiting list has been worked through, and growth in revenue has been significant. In 2019, before the pandemic, Flexport did $650 million in revenue. Last year, revenue over $3 billion. This year, it is on track for $5 billion, according to Petersen.
“We’re still a tiny sliver,” he said. “We think we’re less than 1% or 2% of global container shipping and that doesn’t count in all of our other businesses — air freight, customs, cargo insurance, we have a trade finance group that does inventory financing.”
Flexport investor David George, a general partner at Andreessen Horowitz, told CNBC, “It’s a massive, massive space with very, very little technology in place.”
The company has more than 10,000 clients and suppliers in 112 countries and in addition to the revenue growth reported its first EBIT positive year in 2021.
In February, the company announced a $900 million Series E funding round at an $8 billion valuation, with investors including Andreesen Horowitz, Shopify, and Softbank.
As the supply chain remains defined by uncertainty, Petersen is hesitant to make any predictions, but says that the company is seeing demand disruption.
“We’re definitely seeing some slowdown in consumer demand, demand destruction as they say,” Petersen said. “We’re seeing that warehouses are starting to really fill up and a lot of our cargo is coming out of the ports. The warehouses don’t have any place to put it so it’s a pretty ugly situation out there, especially for direct to consumer brands that are newer and hotter and don’t have a really long track record by which to forecast demand.”
The situation in China, meanwhile, may not be as bad as some people assume, at least at the ports. “The ports are actually running really smoothly in Shanghai,” Petersen said. “It’s more that factories are slowing down a little bit. The early signs that it’s starting to open back up, in companies are ramping back towards production, it’s a little bit to early to say exactly what that bubble will look like, the bubble in sense of all of these orders that have been placed as those move through the systems to come down. We’ll know in a few more weeks.”
Amid market volatility and other inflationary pressures over the last year, Petersen also said he’s faced internal pressure to take the company public, which he resisted.
“I thought that the market was kind of overheated,” he said. “I mean, there’s always people who would love to see that, to celebrate that, but we decided it was better to stay private and yet put some money on the balance sheet given the craziness of the markets and we’re very, very happy that we did.”