Convoy, a digital freight network that connects shippers with carriers, has raised $260 million in fresh funding to scale up initiatives that will push the trucking tech industry into new ground.
The Seattle-based startup’s latest influx of capital is made up of two parts — $160 million in Series E equity led by Baillie Gifford and T. Rowe Price that brings Convoy’s valuation up to $3.8 billion, and a $100 million venture-debt investment from Hercules Capital. Convoy also secured a new $150 million line of credit from J.P. Morgan.
Startups that use machine learning software to automate dispatch for carriers and create more efficient and lucrative routes have seen new waves of funding in recent months as e-commerce continues to pick up globally. In December, CloudTrucks raised a $115 million Series B to broaden its digital integration between shippers and carriers, and earlier this month, SmartHop raised $30 million to improve on its fintech products like its fuel card to help truckers lock in good deals on gas.
A later-stage company, Convoy already has fintech offerings like a fuel card and quick payments. Now, the company wants to expand on recently introduced products. Last year, Convoy launched its drop-and-hook service that allows shippers to pre-load Convoy trailers and set them aside so truckers can pick them up during more flexible windows. Since it launched, this service has been consistently sold out, which is why part of the funding will go toward expanding beyond the current 3,000 trailers Convoy has leased out nationwide, according to CEO Dan Lewis.
“We’re going to grow that program by adding a bunch more trailers and building a bunch of technology to optimize the routing and efficiency of these trailers and the whole pricing around it,” Lewis told TC. “It’s a pretty complicated system to build, which it doesn’t look like from the outside.”
Convoy is looking to grow its team of 1,300 across all areas, particularly in engineering as it continues to try to solve for the hard problem of optimizing routes when there are seemingly endless variables to account for. Every person involved in the process — the person who loads the truck, the warehouse manager, the procurement manager, the driver, the dispatcher — all need to interact with a different software experience, says Lewis.
Convoy also intends to scale up a new initiative that allows other brokers in the industry to run their brokerage business on the Convoy technology platform, giving them access to the trucks running on Convoy’s digital network, according to Lewis.
“There are 15,000 brokers and they don’t have the investment dollars or the technology access and know-how to build their own technology platform, so we’re saying, that’s fine, you can actually put your loads into our system and use our marketplace to find trucking capacity through our digital system,” said Lewis. “We’ll just build a business around that, as well. And it’s actually better for our truck drivers because it means more freight comes into our platform, the network gets stronger and the truck drivers have a better experience because there are more options for them.”
Having more brokers and truckers on the network can also lead to more stabilized trucking rates across the industry, says Lewis. The last couple of years have seen volatile truck rates due to erratic supply and demand and a fragmented system, which has resulted in frustration and unsecured deals. Trucking tech platforms like Convoy’s can tap into real time pricing to coordinate for better visibility and planning.
Convoy is on track to earn more than $1 billion in revenue this year, the company said. As the startup continues to grow, an initial public offering is potentially in the cards, although Lewis said there is no specific plan around that. However, B2B companies can often go further on the public market, in large part because partners want to know if the company they’re working with has been vetted and will be here for the long haul.
