Freight is a trillion dollar industry, and it hasn’t moved at the speed of the 21st century, long relying on logs, emails and (even) phone calls to communicate. But there’s a new breed of startups using technology to solve the biggest problems in a complex global supply chain, ten of which made the 2022 CNBC Disruptor 50 list.
One in particular, Flexport, not only tops this year’s CNBC Disruptor 50 list, but also believes it’s poised to rival the world’s biggest logistics player: Amazon. That’s according to Founder and CEO Ryan Petersen, although he doesn’t make the claim boastfully.
“We could be one of the greatest companies in the world if we realize our potential,” Petersen said in an interview on CNBC’s “TechCheck” on Tuesday. “It’s a lot to do though,” he added.
“Amazon is the best logistics company in the world, and I say this very humbly because I wish Flexport were the best logistics company in the world,” Petersen said. “But we haven’t earned that right, and I really admire Amazon, and try to learn as much as I can from how they work,” he said. “There is still so much turmoil in this business.”
Petersen started Flexport in 2013 because he believed there had to be a better way to manage the flow of goods that are loaded onto cargo ships, planes, trucks and railroads and transported around the world. The company’s freight forwarding and brokerage services are in the cloud, allowing it to analyze costs, container efficiency and greenhouse gas emissions quickly and more accurately than existing systems.
Last year, as the supply chain crisis continued, 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 exhausted and revenue growth has been significant. In 2019, before the pandemic, Flexport made $650 million in revenue. Last year, revenues of over $3 billion. This year, it’s on track for $5 billion, according to Petersen.
“We are still only a small piece,” he said. “We believe we represent less than 1% or 2% of global container shipping and that doesn’t count in all of our other businesses – airfreight, customs, cargo insurance, we have a trade finance group that finances inventory. “
Flexport investor David George, general partner of Andreessen Horowitz, told CNBC, “It’s a huge, huge space with very, very little technology in place.”
The company has more than 10,000 customers and suppliers in 112 countries and, in addition to revenue growth, reported its first year of positive EBIT in 2021.
In February, the company announced a Series E funding round of $900 million 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 predictions, but says the company is seeing demand disruption.
“We’re definitely seeing a slowdown in consumer demand, demand destruction as they say,” Petersen said. “We’re seeing that the warehouses are really starting to fill up and a lot of our cargo is going out of the ports. The warehouses don’t have a place to put it, so it’s a pretty ugly situation there, especially for dropshipping consumer brands that are newer and trendier and don’t have a very long track record to predict demand.”
The situation in China, meanwhile, may not be as bad as some assume, at least at the ports. “Ports actually work very well in Shanghai,” Petersen said. “It’s more that the factories are slowing down a bit. The first signs that it’s starting to reopen, in companies that are returning to production, it’s a little too early to say exactly what this bubble will look like, the bubble in the sense of all of these orders that have been placed as they go through the systems to come in. We’ll find out in a few weeks.
Amid market volatility and other inflationary pressures over the past year, Petersen also said he faced internal pressure to take the company public, which he resisted.
“I thought the market was kind of overheated,” he said. “I mean, there’s always people who would like to see that, celebrate that, but we decided it was best to stay private and yet put money on the balance sheet given the craziness of the markets and we’re very , very glad we did.”
Sign up for our quirky weekly newsletter that goes beyond the annual Disruptor 50 list, offering deeper insight into the companies making the list and their innovative founders.