Freight Startups Attract Silicon Valley’s Attention | Hacker News Reader

Freight Startups Attract Silicon Valley’s Attention

wsj.com

127 pointsshahryc51 comments

I'm involved extensively in logistics, and although I'm not Flexport's target customer nor involved in their specific space of logistics, I can easily say that they are the most exciting new thing in logistics since the container.

The thing is, they aren't doing anything revolutionary. They are doing the same exact things that a lot of companies have done for decades. What makes them revolutionary is 1) They are doing, in one point of contact, a variety of tasks that normally requires 3-10 points of contact. Tracking, quotes, customs, forwarding arrangements, carrier connections, contracts, and payments, all in one stop. 2) They are doing it faster, better, and cheaper than anybody else around.

Regulations are the hard part about freight. Each state has different rules on things, it's really crazy.

That was true in the container revolution also. Malcom McLean (inventor of modern shipping containers) had to sell his trucking business when he bought a shipping business because because the regulator at the time did not allow anyone to operate a trucking company and a shipping company at the same time. There were also rules in the US at various times which prevented people from operating a trucking/railroad company across multiple states as an anti-monopoly measure. Madness when you consider that this means shipments have to be unloaded at state lines!

Not to mention that the federal government then decided to standardize the size of shipping containers, and picked an arbitrary size that was different that the sizes used by the only two companies that had any container ships. When they offered huge subsidies to ship builders who adopted their new arbitrary 40' and 20' standards, it made the companies that pioneered the technology almost instantly non-competitive.

I know that the history of shipping containers might not sound like the most exciting thing in the world, but The Box is a great book http://www.amazon.com/The-Box-Shipping-Container-Smaller/dp/...

Shipping rules used to be crazy

This book had a profound impact on my life for a span of 1.5 years

How so? I read it too, but I didn't see much impact..

It could have done with a few illustrations.

I also thoroughly enjoyed this book, but it's 400 pages about the evolution of 1 device. And in those 400 pages there are 0 diagrams. A huge disservice to the read. I found myself using the wiki quite often when reading this book.

Shoot me an email.. Would love to chat! sean@flexport.com

"Many freight veterans and analysts are skeptical of these efforts, saying forwarding is too complex and too dependent on longstanding relationships for new online entrants to compete."

Because that's never been a problem technology has overcome.

Any industry with veterans stating this sentiment is ripe for change. Not because an online app is going to solve all the worlds ills, but because there are people resisting progress, keeping entire industries in a holding pattern.

The veterans aren't "resisting progress", as much as protecting their own interests by using their experience. It may be at the cost of other people, but I think it's short-sighted to call them luddites. Currently, they have no incentive to invest in tech in the way of a silicon valley startup backed by VCs.

If the aim is progress to everyone's benefit, tech will make its mark once it's in the hands of some of the established players through acquisition or other means. Until then, I think startups will have a hard time winning over customers from established firms, as their inexperience will cause errors, which will cost their customers more than any markup of a less efficient company.

Flexport now manages freight for several publicly traded companies. You'd be surprised how badly the market wants this solution.

For what it's worth, the historical Luddites also were protecting their own interests, rather than fundamentally motivated to resist progress. (I mention this with no judgement one way or another of their actions)

Very true!

Not to mention that a lot of the incumbent freight forwarders have admitted to price fixing and other fraudulent behavior: https://learn.flexport.com/freight-forwarding-price-fixing/

I don't know how it is in the US, but in Europe thefts are VERY common, and because of this trust/relationship plays a very important role. That said, the industry is very, very old school, spreadsheets at best. Although with the new generation taking over, the things will change (I hope).

I work for a large NVOCC/freight forwarder that has a large IT department and builds nearly all it's software in-house. My part of it has been building migrated applications for various customer service functionalities and the kinds of systems we're migrating from are beyond shockingly bad.

Today, moving a shipment requires the operator to go between 4-6 different applications and fill out the same information in multiple places. The data doesn't go anywhere and is often recorded in terse 3-letter codes that result from ancient databases that can't be upgraded. In fact, it's a custom database server running in an emulated environment because none of the hardware has long since stopped being supported. It's pure insanity.

Flexport looks like they're making a lot of the right moves and I've been following them with equal parts interest and trepidation for my company's future with competitors like that on the rise.

If I lived in San Francisco, I'd apply there in a heartbeat because I think this industry is overdue for some serious competition and I'd rather be the disrupter than the incumbent. So many of the processes are done manually because of 25-30 years of process cruft building up and the pain of doing it differently isn't greater (yet) than building a proper system to do it.

The bigger the ship, the slower it is to turn and I'm not sure the solution is more tugboats.

I guess this is the next upheaval in shipping. I think the last upheaval was with the introduction of the shipping container. A fascinating read on the subject:

http://www.amazon.com/The-Box-Shipping-Container-Smaller/dp/...

Seconded. If you spend any time at all wondering about how things are shuttled around the world, read The Box.

It's also interesting in that it touches on many of the factors that can inhibit the adoption of new technologies: lack of standards, regulations, entrenched interests like labor agreements, and limits imposed by existing infrastructure.

I spent a decade working with and writing software for LTL freight and 3PL companies on the receivables automation side and all I have to say is I hope these companies are successful.

There are tons of opportunities for efficiency gains all over these companies as they are some of the most low-tech back office operations I've seen. There's a definite gap between the biggest companies and the rest. These companies are notoriously conservative on all facets of their business, and they are a very tight knit industry. They all know what each other are up to, and they're leery of being the first mover on a technology.

This is one of many "old school" industries that are going to see some of the biggest innovation in the coming years. That will only be accelerated if we see fuel prices start to inch up again.

Wow, want to come in and take a look under the hood at Flexport? email me: ryan@flexport.com

From this thread https://news.ycombinator.com/item?id=9799007 I learned how hard it is to do anything in this field.

None the less, if someone find a way to solve it, it's truly going to be transformative.

I think the trick will be to create a digital version of a part of the system that already exists and then gradually simplify down to something more sane.

Otherwise it'd be really easy to drown in the almost endless complexity (a lot of which doesn't need to be there but accumulated).

From what I understand a lot of the problem isn't tech dependent but rather legal, standards, union etc related.

Absolutely, which is why if I was doing it I'd focus on a small part of the industry until I had some traction then simplify that part before moving in to the next.

If you try to eat the whole pie you'll choke.

Yep, that's what we did, starting with the process of clearing goods through Customs, and then expanding aggressively into air freight, ocean freight, and trucking over the last 12 months.

Flexport's hiring for basically every role under the sun

If the idea of revolutionizing one of the most important industries in the world interests you, reach out!

https://learn.flexport.com/want-to-revolutionize-global-trad...

My dad ran a freight forwarding business for 25 years. They still use paper and fax. Half the office space is dedicated to cabinets of storage for paper files. Their main technology is an ancient IBM mainframe. Flexport is really going to change things.

yes, my dad does a lot of business with freight companies too. but, around the LA/Long Beach Ports for his import business --- --- and they are very old school

Last year a job applicant then employed by a competitor told me the reason he wanted to work at Flexport was that he was sick of using a typewriter at work. For real, not making that up.

I was the entire IT staff for Linescape (linescape.com) for its first 4 years. I was somewhat flabbergasted at the level of IT the industry was at in 2008 - 1990s at best. The industry was still trying to decide if XML was useful vs EDIFACT (straight from the 1970s) for transmitting shipping schedules. It was interesting work though, I had some very good insights into where the industry could go / was going to go and we could had made some bleeding edge improvements in terms of IT (e.g. the use of graph databases to model shipping routes and calculating various things) We could have been the first to market with a SaaS / API for dealing with shipping schedules, but management fiddled around and Maersk beat us to the punch.

Unfortunately the founders of Linescape have absolutely zero ethics and ripping off customers (and those working for the company) was more important than anything else. I only later found out about the criminal record of one of them which explains the reluctance to go find investment money. It was a classic cautionary tale about the startup ecosystem (vet the people you're doing business with / working for very carefully) and the lack of business ethics so prevalent (aka Uber et al) The CEO and his now ex-wife are now fighting over the company...

The thing was, none of the drama was necessary! We could have really made something of the company. But capitalism these days...

I fondly remember interning at major freight forwarder during university. The main input interface was paper which was them keyed into the mainframe application. Only the biggest partners have been integrated via EDI. So just putting sensible API in front of all this sounds like good idea.

I have been working on operations data mart most of the time (and saving cca 30 000 dollars on carrier volume discount on shipped containers) but I always felt my most appreciated contribution was stitching together few Excel macros to make Request For Quotation evaluation easier.

So here are my two free ocean freight startup ideas:

- precise container reporting for carrier disputes (10 FCL 40 footers from HKG to HAM), including error detection when port is incorrectly filled in just because it has similar code

- RFQ evaluator - as simple and accessible as excel, but capturing the specifics of ocean freight (tens of port pairs, container specifications, splitting price to freight, terminal and surcharges etc).

Did you know you could have your container shipped for free - only for cost of terminal handling (on certain routes, at certain times)? Fascinating industry.

Re: last point. I did not know that. Could you provide some more information?

Sorry for the linkbaity cliffhanger.

Occasionally there exists a situation when there is huge demand for shipments in one direction (e.g. Hong Kong to Singapore) while there is not much traffic the other way round.

Shipping companies then need to get those containers back to origin, so the prices go down (better ship full container where at least handling is paid rather than empty container where carrier has to cover all the costs).

Not sure how often this happens currently, I got the information from friendly trade lane manager few years back.

This could be pretty huge. I've dealt with several freight forwarding companies while building a previous startup of mine and it definitely struck me as an antiquated industry (this was 2007ish). Maybe a good benchmark for "disruptable" industries is that you have to actually make a telephone call to get something done. Time to get out the yellow pages and do some research!

> Time to get out the yellow pages and do some research!

The.... what?

:-)

An oddly written story. Claims significant money invested in these companies ("$1 billion since the start of 2014") and proceeds to name only two -- Flexport and Freightos. The latter of which doesn't seem to fit the central disruption-of-established-industry theme because they sell software to the incumbents.

Improving the performance of the incumbents is one desired effect of disruption. They can choose to be proactive or reactive in their attempts to protect market share from new entrants.

Yeah that confused me too. The $1B must be referring to the money raised by XPO.com from private equity backers to roll up a bunch of old school freight forwarding businesses. There's no tech involved in that play though, so it's a bit misleading to call it venture capital. In fact it was mostly done as a private investment in public equities (PIPE) deal, where PE funds put cash into a listed freight forwarder.

Flexport's prices look too good to be true .. truly disruptive technology

"Since the start of 2014, venture-capital firms have pumped over $1 billion into startup freight-forwarding companies, twice the amount invested in the five years before that..."

I have no idea where they got that stat but it's not true.

Ah, it includes XPO.com -- hard to call a leveraged buyout firm doing a private equity rollup a "venture capital investment" but okay

Here's a list of startups in the logistics market:

https://www.freightos.com/the-ultimate-list-of-top-logistics...

Is this like an Uber for freight?

Bloomberg called us that[0], but the ocean / air / rail freight business has a fundamentally different set of constraints and challenges.

[0] http://www.bloomberg.com/news/articles/2015-05-11/flexport-w...

It's better to see it as a travel agent for cargo. Complexity is that cargo doesn't have legs nor a passport. The scheduling and booking is similar to Uber's dispatching. Value chain is much longer. In short: hard problem

Flexport is hiring engineers: https://jobs.lever.co/flexport

As an engineer starting at Flexport in a couple of weeks, here are some more interesting resources that shaped my thinking:

Interview with Ryan Petersen (Flexport CEO) https://theblueprint.com/stories/ryan-petersen/

Office hours at startup school 2013 with pg & sama https://youtu.be/syoqjYLDs48?t=1167

I also happened to have recently read Zero to One.

Plus, Flexport has an appealing mission. Removing friction in something as basic as shipping makes pretty much everyone in the world better off.

How do you differentiate yourselves from FreightOS?

FreightOS is a software company building tools to make incumbent freight forwarders more efficient--so it's more of a supply-driven marketplace.

Flexport is a freight forwarder that builds our own software, with the goal of providing better customer experiences with lower transaction costs--so it's more of a demand-driven marketplace.

Probably we will meet them in the middle someday and have to compete with them for customers. They founders seem very smart and accomplished, and they appear to have solved many hard problems already, so it will be a fun challenge when it happens.

Reply on news.ycombinator.com