Convoy (with CEO Dan Lewis)

In this episode of Acquired, hosts Ben Gilbert and David Rosenthal, along with guest Dan Lewis, CEO and co-founder of Convoy, delve into the story of Convoy's rapid ascent in the digital freight network space. Starting in 2015 with a focus on local trucking in the Pacific Northwest, Convoy quickly scaled to a national level, leveraging technology to efficiently match truckers with shippers and significantly reduce empty miles and wait times. By prioritizing speed and customer trust, Convoy established itself as a credible disruptor in the traditional trucking industry. Their innovative approach includes offering instant pricing, fast payments to truckers, and valuable data insights to shippers, ultimately aiming to minimize waste and optimize the supply chain. Convoy's strategic growth has positioned them among the top 20 freight brokerages, transforming the logistics landscape while contributing to environmental sustainability.

• Ben Gilbert and David Rosenthal introduce the episode and mention the podcast's focus on technology companies and their stories.
• They highlight the topic of the episode: Convoy, a company that aims to revolutionize the trucking industry.
• Convoy's platform allows truck drivers to find nearby loads, see transparent payment, and manage it all through a smartphone app.

"Today we are going to talk about this company, which has only existed unbelievably for four and a half years, and their ambitious plans to make it easy for any truck driver to find a nearby load, transparently see what they'll get paid, and do it all as you would expect, right on their smartphone."

The quote emphasizes Convoy's mission to simplify the process for truck drivers to find and manage loads using modern technology, despite being a relatively new player in the industry.

• The trucking industry is highly fragmented with a significant number of independent companies.
• A large portion of trucking companies have a small number of trucks, making coordination and load management challenging.
• Convoy is introduced as a solution to this fragmentation, aiming to streamline the process of finding and coordinating loads for truck drivers.

"90% of trucking companies have six or fewer trucks and 97% have fewer than 20 trucks. There are over a million independent trucking companies, or carriers, as we'll call them tonight in the United States alone."

This quote highlights the extreme fragmentation of the trucking industry, which presents a challenge for efficient load management and coordination.

• Convoy's growth is compared to the podcast's own history, emphasizing the rapid development of the company.
• The hosts reflect on the perspective gained from researching Convoy's growth.

"It's freaky to see close to 1000 person company at acquired well on its way."

This quote conveys the host's astonishment at Convoy's rapid growth and substantial size within a short period.

• Pilot, an accounting firm for startups, is introduced as a sponsor and discussed in the context of outsourcing non-core business functions.
• The philosophy of focusing on core business competencies and outsourcing the rest is attributed to Jeff Bezos and AWS.

"Startups should focus on what makes their beer taste better. In other words, only spend your limited time and resources on what's actually going to move the needle for your product and customers and outsource everything else that you do as a company that doesn't fit that bill."

This quote explains the business philosophy of concentrating on what differentiates a company while outsourcing non-essential functions, using an analogy of improving a product's core value proposition.

• The hosts encourage listener participation through various channels, including a second show for deeper discussions, a Slack community, and social media engagement.
• They express excitement about the live audience interaction during the podcast recording.

"There are tons of ways to be involved with the show. You can join the slack available at acquired FM, rad us on iTunes, and we always appreciate any shout outs anybody wants to give on Twitter or the social media platform of your choice."

This quote invites listeners to actively engage with the podcast community through multiple platforms, emphasizing the value of listener involvement.

• David Rosenthal introduces the concept of applying technology lessons from consumer-focused companies to disrupt B2B industries.
• Convoy is positioned as a leader in this trend, alongside other companies like Flexport and RigUp, which are transforming traditional industries with technology.

"Taking all the lessons in tech from previous generation companies like Amazon, where Dan worked, Airbnb, Uber, DoorDash, all of them that were focused on consumer-driven businesses and using that same tech to disrupt super large, super old school B2B industries."

This quote outlines the emerging trend of leveraging technology innovations from consumer markets to revolutionize longstanding B2B sectors.

• Dan Lewis, co-founder and CEO of Convoy, shares his local Seattle roots and family's small business background.
• The discussion traces his career from consulting, where he gained logistics experience, to tech startups and big tech companies before founding Convoy.
• Lewis's narrative demonstrates the value of networking, adaptability, and the drive to learn rapidly in new spaces.

"I did 26 projects, probably over four years or so, but I kept wondering, when am I going to figure out that thing that I really love?"

This quote reflects Dan Lewis's journey through various roles and industries, searching for his passion, which eventually led to the founding of Convoy.

• Dan Lewis discusses his transition from consulting to tech startups, emphasizing the importance of networking and identifying opportunities.
• He shares his experience at Skydeck, which later became Haya, and his time at Microsoft during the 2008 financial crisis.
• Lewis's story illustrates the challenges and resilience required to navigate career changes and economic downturns.

"I was trained. I got that job I mentioned out of Yale. I think I got that in the spring."

This quote underlines the significance of early career experiences and the impact they can have on future professional decisions and opportunities.

• Ben Gilbert faced difficulty securing a job due to a tight market and lack of strong internship experience.
• He applied to many places but traditional channels didn't work for him.
• His time off during junior year and work for his family's delivery business did not align with the typical internship path.

"I had taken my junior year off and went to Chile, so I became fluent in Spanish. And the summer before and after, I worked for my family's delivery business, so I didn't have the post sophomore and post junior year strong internship internships and coming out in 2003. Again, tight job market. I didn't have like I could do it, but I didn't have the story."

This quote highlights the challenges Ben faced due to his non-traditional path and the competitive job market.

• Amazon is known for producing CEOs due to its culture of ownership and responsibility.
• The company assigns single-threaded leaders to foster cross-functional leadership.
• Amazon's culture of ownership and responsibility is attractive to and cultivates future CEOs.

"There are a lot of other companies too, I think, that do a good job of spawning ceos. I think one thing that Amazon does is that it expects a lot of ownership from the people that are in the role."

This quote explains that Amazon's expectation of ownership from its employees contributes to their development into CEOs.

• Amazon encourages employees to research, propose new ideas, and take ownership.
• The planning process at Amazon allows for pitching new ideas and, if successful, building a team around them.
• Amazon's culture supports funding good ideas and internal entrepreneurship.

"So that was really, the fact that that can exist in a company is pretty inspiring. And then what I realized after I'd been there for a while was the planning process encourages people to come up with new ideas and pitch those ideas."

This quote emphasizes the innovative and supportive culture at Amazon that empowers employees to create and lead new initiatives.

• Convoy was influenced by multiple companies, not just Amazon.
• The founding of Convoy involved extensive research and problem identification in the logistics industry.
• Convoy's conception was a result of recognizing the importance of supply chain efficiency.

"The original experience coming out of Amazon was a lot of research. I wrote a document, but I didn't think about it. I wrote, like, different forms of documents to capture and structure my thoughts."

This quote illustrates the methodical approach taken in the early stages of Convoy's development.

• Convoy's founders recruited a team before finalizing the business idea.
• The team was built on the premise of shared vision and trust in the founders' capabilities.
• Convoy's strategy minimized risk by ensuring a strong technical foundation from the start.

"I need to get the best engineers around the table. Otherwise I might not be able to raise seed funding."

This quote reflects the strategic importance of assembling a talented team to secure funding and build the company.

• Convoy focused on validating the business idea before worrying about formal startup trappings.
• The company incorporated and set up banking only after securing intent to fund.
• They leveraged the Seattle startup ecosystem for initial support without funding.

"But what we did is we reached out to an attorney. I won't mention who it was. It was like, on a Monday. And they were like, great, we'll do it. And I had an attorney that I knew pretty well, but my co-founder had reached out and he was taking care of that."

This quote reveals the pragmatic and rapid approach to Convoy's legal setup once funding was assured.

• Convoy initially struggled to gain trust from truck drivers due to industry skepticism.
• The team discovered that starting with supply did not work and shifted focus to securing demand first.
• Convoy overcame initial challenges by adapting their strategy to the unique dynamics of their marketplace.

"We thought truck drivers would be compelled by our amazing vision. We thought the great design of our app and the vision of our ability to help them would compel them to download and use our app."

This quote demonstrates the initial misconception and subsequent learning curve in building Convoy's marketplace.

• Convoy's success is attributed to the rapid onboarding and evaluation of new carriers.
• Speed is critical as Convoy operates under tight time constraints to fulfill shipper jobs.
• Convoy developed a process to recruit, train, and prepare carriers to use their app and complete jobs within 24 to 48 hours.
• This process became the key to building the brokerage and accelerating the growth flywheel.

"The success factor for convoy was about how rapidly we could onboard and evaluate a new carrier."

The quote explains that the ability to quickly bring new carriers onto Convoy's platform was essential to their success, emphasizing the importance of speed in their business model.

• Convoy incentivized carriers to use their app by offering quick payment upon job completion and upload of paperwork via the app.
• This strategy reduced Convoy's operational costs and provided valuable data for running their business.
• Financing fast payments was cost-effective due to the operational efficiencies and data gained from app usage by carriers.

"If you use it throughout the job and you upload the paperwork to the app, then we can pay you really fast."

This quote highlights Convoy's strategy to encourage app usage by offering quick payment for services rendered, which in turn benefits the company through reduced costs and valuable data acquisition.

• The widespread adoption of smartphones among truck drivers around 2014-2015 was pivotal for Convoy's business model.
• Smartphones enabled passive data collection, such as location tracking, which improved operational efficiency.
• The ability to upload documentation directly through the app eliminated the need for manual status updates.

"Once that happened, not only could you get them to upload this stuff, but you could passively collect location data and just know, like, hey, where are the loads?"

The quote emphasizes the significance of smartphone adoption in the logistics industry, allowing for real-time visibility and data collection that was not previously possible.

• Convoy chose to be a full-stack company rather than selling software to existing brokerages.
• Being a full-stack company allowed Convoy to directly influence industry transformation and maintain control over the user experience.
• Convoy's approach aimed to solve problems for both shippers and carriers, rather than just meeting existing industry expectations.

"It's very hard to change an industry by selling a software product to the person running the industry."

The quote explains Convoy's strategic decision to operate as a full-stack company, which they believed was more effective in transforming the industry than merely selling software to existing players.

• Convoy developed a free TMS software solution for medium shippers, which also serves as a top-of-funnel for the shipper side.
• The TMS allows shippers to manage their freight through Convoy's platform, enhancing operational efficiency and data collection.
• The free offering attracts not only medium but also larger companies, potentially positioning Convoy as a marketplace for other brokers in the future.

"We've already built a transportation management system, a TMS software solution for medium shippers to use that they can run all of their freight on."

The quote informs about Convoy's strategic move to provide a free TMS to attract and retain shippers, thereby expanding their market presence and data capabilities.

• Convoy's growth strategy was characterized by aggressive scaling, doubling their volume approximately every quarter in the early stages.
• Strategic decisions were made to prioritize speed and market presence, including over-investing in support services and developing the flywheel.
• Convoy's approach to scaling was influenced by the timing of technology adoption and the need to establish a strong brand and customer relationships quickly.

"We believed that speed was a feature of a company."

This quote captures Convoy's core value of speed in their growth strategy, which they saw as an essential feature for success in a rapidly changing market.

• Convoy initially focused on local markets but expanded nationally based on customer needs and the opportunity to build a national network effect.
• Strategic decisions were made to concentrate on specific types of freight and geographies to maintain service quality and marketplace liquidity.
• Convoy's expansion strategy was guided by customer demand and the need to balance growth with the ability to provide consistent service.

"We couldn't just go national at first, but we had to really think about corridors and parts of the country where we could develop that flywheel."

The quote explains Convoy's methodical approach to national expansion, focusing on developing strong market presence in strategic corridors before scaling up.

• Convoy sometimes prioritized growth over unit economics when scaling quickly to meet customer demands and develop their network.
• The company made calculated trade-offs to ensure a high level of service and to build the necessary infrastructure for their technology-driven brokerage.
• Convoy's scaling decisions were influenced by the need to maintain a competitive edge and establish a strong market position early on.

"So the two probably prominent reasons why we've done that is we have a customer, that customer wants to ramp in a time frame that we could not reasonably do with the support services that we have today."

The quote reflects Convoy's willingness to adjust their focus on unit economics in favor of growth opportunities that required rapid scaling and investment in customer service and support.

• The trucking market operates daily, with supply and demand constantly fluctuating.
• Efficiently matching supply with demand is key to a trucking network's success.
• Growth in a trucking network involves balancing the acquisition of demand and supply.
• Over-demand can be used strategically to attract more supply.
• Unit economics may suffer temporarily during growth phases to build a healthy ecosystem.
• Building supply involves accepting lower efficiency initially to eventually achieve better matching.

"If I take five shipments today and I have five trucks in my network already, I can probably service all those shipments with the right economics and pretty efficiently because I already have the trucks in my network."

This quote explains how having an existing network of trucks can efficiently meet the current demand.

"But if I want to grow my network, I'm going to say to the shipper, give me ten. I only have five trucks. I need to go get five more trucks that are less conveniently located that I don't know yet."

The speaker is describing the growth strategy of intentionally taking on more demand than the current supply to incentivize expanding the network.

"You don't get a bulk discount in trucking. You get like a bulk surplus, because the more jobs you take any broker, the more jobs they take on a given lane, on a given day, spends more per average to cover them because you're buying a variable cost product that goes up with the amount you use."

This quote explains the counterintuitive economics of trucking, where costs increase with the volume of jobs due to the variable cost nature of the industry.

• Convoy uses sales to onboard demand, which in turn attracts supply.
• Traditional marketplaces focus on onboarding supply first, whereas Convoy focuses on generating demand to pull in supply.
• Convoy has leveraged technology to build a marketplace that can match jobs to trucks more efficiently than traditional industry players.
• Sacrificing short-term unit economics is strategic for long-term platform liquidity and health.
• Investments in product, data science, and engineering are made to support growth and establish a strong brand and infrastructure.

"It's getting to the reverse of the traditional marketplace. Like, oh, you're going to invest like, let's onboard a bunch of supply. And then when the demand, we'll run adwords for the demand for you guys, you're like, let's use sales to onboard a bunch of demand. And then that'll attract the supply."

David Rosenthal highlights Convoy's strategy of using sales to generate demand, which is the opposite of the traditional approach of focusing on supply first.

"But that's how you build supply. And then once you get enough, then you have a healthy ecosystem where you have a lot of trucks, you get the data to where they are. You can then start to efficiently match a job to a truck better than the traditional industry player can, who's just calling around."

The speaker outlines the process of building a robust supply network that enables efficient matching, surpassing traditional methods.

• Convoy competes in a $600 billion trucking market in the US.
• The company ranks in the top 20 among freight brokerages, a significant position given the age of competitors.
• Being an early player in the market allows Convoy to define the future of the industry.
• Convoy's credibility and scale enable it to influence industry standards and practices.
• Early market presence and scale are critical for shaping industry perceptions and driving adoption.

"Thus far, we're still a fraction of the total trucking market. The truckload market is about $600 billion a year in the US... We would probably be in about the top 20. Top maybe 15."

The speaker provides context on Convoy's current scale and position within the large trucking market.

"We wouldn't be able to define the future unless the major players in the industry viewed us very credibly and were using our service."

The importance of credibility and usage by major industry players is emphasized for shaping the future of the industry.

• Convoy had to overcome initial skepticism from traditional industry players.
• Convoy's early narrative was that they handled unwanted freight, which they leveraged to build their network.
• Trust was essential for Convoy to convince shippers and truckers to use their platform.
• Being an early and fast-moving player allowed Convoy to define industry innovations and gain recognition.
• Convoy's success in building trust and overcoming negative perceptions was crucial for its growth.

"Convoy, who are those guys? Computers don't match freight. People match freight. Right. It just doesn't happen."

This quote reflects the skepticism Convoy faced, with industry insiders doubting that technology could replace traditional freight matching methods.

"So it's sort of like you need to be buzzy in this particular instance because you need them to be very receptive to working with you."

The quote emphasizes the need for Convoy to create a buzz and be persuasive to gain the trust of shippers and truckers.

• Convoy provides valuable data insights to customers, improving their operational efficiency.
• Features like instant pricing and batching jobs for carriers are examples of Convoy's innovation.
• By reducing empty miles and unnecessary wait times, Convoy improves productivity and environmental impact.
• Convoy's technology enables them to offer lower costs and better service than traditional methods.
• The company's ability to provide real-time data and insights is a significant differentiator in the market.

"You can correlate data across all these experiences and go back to our customers and say this particular facility is underperforming other facilities in the region from your competitors that are competing for trucks."

Convoy's data insights allow them to provide feedback on customer facilities, leading to operational improvements.

"We launched something this year called batching. You can take two or three jobs together... and we found that carriers will take that job for a significantly lower price than they would have taken each of the jobs in combination if you add them up as individual."

The speaker describes how Convoy's batching feature creates efficiencies and reduces costs for carriers.

• Convoy experienced difficulties in hiring, especially early on, due to competition with established companies.
• The company used various tactics to convince potential hires, including demonstrating the potential impact on their careers.
• Convoy's growth and ability to attract talent were tied to its ability to present a compelling vision and potential for impact.
• The speaker acknowledges the challenges and strategies involved in scaling the team and the importance of hiring in a startup's success.

"It was hard to hire early on, like convincing someone to leave a job."

This quote illustrates the difficulty Convoy faced in attracting talent away from secure positions in established companies.

"I remember drawing. What I would do is I would take a piece of paper and the x axis was someone's career, and I'd be like, year zero... And I'm going to draw a curve that shows how much money you'll be making every year and, like, your total wealth accumulation from your salary or like what you expect to make here and beginning you're making about this much."

The speaker used a visual representation of potential career earnings to persuade candidates to join Convoy, highlighting the opportunity for growth and impact.

• Convoy's approach to the B2B marketplace is characterized by using demand to drive supply.
• Timing, particularly in terms of payment and cash flow, is crucial for growth.
• Starting with less desirable jobs allowed Convoy to build a network that could later tackle more profitable opportunities.
• The goal is to efficiently set prices in the industry through technology and data insights.
• Convoy's early actions and positioning have allowed it to influence industry standards and shape the future of digital freight networks.

"David, is demand drives supply. If you're bringing the money, you can align incentives in a market and get people to adopt a new technology that otherwise would be really hard."

David Rosenthal agrees with the principle that demand drives supply, emphasizing the role of financial incentives in market adoption.

"And because we plug all the trucks into our technology platform as we scale. We effectively have partnerships that lead to this virtual fleet, which we have visibility into and a direct connection with, which gives us capabilities that feel like it's a more like first party network for the shipper."

The speaker highlights how Convoy's technology platform creates a virtual fleet, providing visibility and direct connections that benefit shippers.

• Convoy's future success depends on expanding its network and reducing waste in the industry.
• The company aims to make truck drivers more productive by reducing empty miles and wait times.
• Convoy's ability to scale efficiently while managing capital is crucial for long-term viability.
• The speaker discusses the importance of creating a cost structure that allows for growth and options.

"And getting that in place at scale with the capital we have is the key."

The speaker notes the importance of scaling the business in line with available capital to ensure success.

"So it's the empty miles we talked about. So convoy can significantly reduce empty miles."

Reducing empty miles is presented as a central goal for Convoy, with implications for cost savings and environmental impact.