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Investing in Flexport


Until 18 months ago, few of us thought much about the global supply chain. The couch we purchased showed up two weeks after we ordered it, and that was that – an elaborate system behind the scenes “just worked” to transport goods around the world. But the onset of COVID turned this reality on its head. Couches weren’t arriving in two weeks but four months, and the free shipping once offered by merchants was suddenly an additional cost at checkout.

Highly publicized events sum up the difficulties carriers and others have recently faced: a 20,000 TEU container ship stuck in the Suez canal, over 70 ships at anchor outside the port of Long Beach waiting to be unloaded, and a record number of containers lost at sea. The result has been an increase of over 100% in shipping costs and the longest lead times in decades. Demand for cargo space is at an all time high, but capacity simply can’t keep up.

In an increasingly globalized world, getting goods from Point A to Point B is no simple task. The global supply chain is an intricate network of trains, trucks, ships, planes, ports, and warehouses that are highly regional and specialized. In fact, it can take up to 20 different companies to move a single shipment to its destination. A delay in one step of the chain can have huge downstream consequences and affect the shipment’s entire schedule. And to make matters worse, most of the companies along the chain are still using pen and paper vs a digital solution.

An entire industry, called freight forwarding, has been built to handle this complexity for shippers. Freight forwarders are experts at managing the nuances of this maze of global providers. They coordinate the entire process of moving a shipment from factory to warehouse and are an essential part of a company’s logistics operation. Despite many years of accumulated expertise, traditional freight forwarders are hardly more technology-enabled than the shipping companies they coordinate. When a package doesn’t arrive on time, forwarders often have no better option than picking up the phone and “calling around.”

As a student of the industry, Ryan Petersen saw the shortcomings of the traditional forwarding model almost a decade ago – well before the current challenges we’re facing – while running Import Genius, a business intelligence provider for global trade. Recognizing the transformative power that software could have on the space, he set out to solve the problem by building Flexport, a next-gen forwarder built with technology at its core. Over the last eight years, that’s exactly what Ryan and his team have done. In 2021, Flexport more than doubled its gross revenue to $3B and moved more than $19B in gross merchandise for its clients across 112 countries.

Flexport’s product offers a step-change improvement over traditional forwarders by injecting technology into every step of the forwarding process, standardizing data and abstracting complexity from existing manual, paper-based systems into a modern software experience. While we could talk at length about the improvements in design, we think it’s most powerful to share some examples, as we were blown away by how they’re providing a better customer experience for shippers of all types.

Traditional forwarders offer an estimated delivery window of multiple weeks, but can be wildly inaccurate and is updated in nowhere close to real-time. For someone like an e-commerce merchant, this lack of visibility is unacceptable. Their customers demand accurate shipping information and real-time updates on their order progress. Flexport solves this problem by providing real-time delivery estimates that are down to a specific day. In fact, Flexport is often able to provide estimates with higher accuracy than the transoceanic carrier’s own systems! On top of this, they seamlessly integrate into the merchant’s site to keep the customer apprised of their order progress as soon as something changes.

Flexport also helps solve a chronic problem that arises before a ship leaves a port: underfilled containers. We were shocked to learn that before the supply chain crisis containers were only 70% full on average when shipped across the ocean! This means higher costs for shippers and less throughput in a supply-constrained system. Flexport helps their customers ship full containers by using machine learning to digitize packing lists and intelligently fill containers. They’re also leveraging this data to sell excess capacity at the container level to others looking for space on the same ship.

These examples just scratch the surface of what the Flexport Platform can do today. As Flexport’s data grows and the chain of companies that forwarders organize continues to digitize, the possibilities for how Flexport can continue raising the bar and bringing logistics into the 21st century are massive.

Ryan is the right person to lead the company into the future. You’ll sometimes catch us describing a founder as a “dog with a bone,” meaning they won’t give up and are obsessed with the problem they’re trying to solve. Ryan has and continues to make solving our supply chain woes his life’s work. We’ve had the privilege of knowing him for almost 10 years, and what was known to us early on is now appreciated by the world. His thoughtfulness, vision, and encyclopedic knowledge of the shipping industry has made him into perhaps the most prominent thought leader in the industry over the last 12+ months. (See Ryan’s piece in Future here) And, true to himself, he’s consistently used his platform to offer solutions to supply chain problems.

After many years of admiration, we’re incredibly excited to partner with Ryan and the entire Flexport team as they continue building the technology platform for global logistics. We are confident that Flexport will continue to improve the lives of customers, and will also serve as a critical player in the broader effort to make the supply chain more efficient, cost effective, and resilient for many years to come.

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The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; a16z has not reviewed such advertisements and does not endorse any advertising content contained therein.

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