Convoy Inc., a startup valued last year at $3.8 billion after raising $260 million in funding, is shuttering its core business operations after running into a “perfect storm” of freight industry challenges, founder and CEO Dan Lewis said yesterday.
Dan Lewis, CEO, Convoy Inc.
“We are in the middle of a massive freight recession and a contraction in the capital markets,” Lewis said in a memo to employees, whose ranks had been slashed to about 500 from a peak of 1,500 a year ago.
Launched in 2015 under the leadership of Lewis, a former Amazon.com Inc. executive — and operating with financial backing from such investor as Amazon founder Jeff Bezos and Microsoft co-founder Bill Gates — Convoy racked up a client base including such companies as The Home Depot, Unilever, Procter & Gamble and Anheuser-Busch.
But largely because of post-pandemic drop in demand and a challenging investment market, Lewis said Convoy had spent the last several months exploring alternatives, including possible acquirers to maintain its operations.
“Alongside this unprecedent freight market collapse, the dramatic monetary tightening we’ve seen over the past 18 months has dramatically dampened investment appetite,” he said, adding: “M&A activity has shrunk substantially, and most logical strategic acquirers of Convoy are also suffering from the freight market collapse, making the deal that much harder. The perfect storm.”
Mike Brown, general partner of investment firm Bowery Capital, commented in an email to DC360 that Bowery’s tracking of fundraising data for B2B marketplaces, in general, shows the quantity and monetary value of financings is down significantly.
He suggested that “a macro takeaway” regarding investments in B2B marketplaces “is the cyclicity of the business and difficulty of the business model (including low take rates, high servicing costs, and tough multiples) which we think will scare a lot of venture dollars away.”
Bloomberg News reported yesterday that Convoy is one of many logistics startups hurt by falling prices and demand for shipping along with a downturn in venture capital fundraising. Bloomberg noted that Flexport Inc. and Seattle-based warehousing startup Flexe Inc. have had to lay off workers as demand fell from pandemic highs.
Paul Demery is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy. paul@digitalcommerce360.com.
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