Cargomatic picks up $11M to bring local trucking into the on-demand era

Share

trucks

The global taxi industry is estimated to be worth less than $ 100 billion annually, $ 11 million of which comes from the US. The global trucking (freight brokerage) industry is worth $ 150 billion, with $ 41 billion coming from the US alone. This begs the question, if Uber is today valued at $ 41 billion, how much could an “Uber for trucking” be worth?

That’s the question investors are surely asking about Cargomatic, and LA-based on-demand platform for connecting local shippers and local truckers. The company today announced $ 8 million in Series A funding in a round led by Canaan Partners, with participation from Volvo Group Venture Capital, Rob Estes of Estes Express, Morado Venture Partners, SV Angel, Sherpa Ventures, Winklevoss Capital, Structure Capital, Nicolas Berggruen, Scott Banister, Fritz Lanman, and Hank Vigil. The company has raised a total of $ 10.6 million to date.

Cargomatic’s founder and CEO, Jonathan Kessler, grew up in a family trucking business (called Triangle Group) and knows first hand the challenges the industry is facing. Currently, it takes multiple manual phone calls and often the use of paper documents (and God-forbid, fax machines) to schedule a freight shipment, a slow and costly process that means most trucks are badly underutilized.

“I call it the cable guy problem. You’re waiting for the cable guy, you don’t know when he’ll show up,” Kessler has said in the past. “We try to give as much transparency into the transaction as possible. That allows people to act efficiently and doesn’t require as much communication.”

Much like Uber has done for personal vehicles and black cars, Cargomatic’s platform is aimed at adding liquidity and improving utilization of the nation’s commercial truck fleet. Those looking something shipped simply post the details as a request on the Cargomatic platform and local truckers with full or partially empty vehicles can volunteer to accept the trips. More than 50 percent of shipments on the platform are completed same-day. And shippers can see the location of their truck in real-time on an in-app map. Additionally, automatic notifications are sent when the truck crosses a predetermined geofence boundary so that shippers can ready their cargo.

Cargomatic is focused on routes of 150 miles or less and on shipments from one palette to a full truckload – leaving the smaller stuff to FedEx, couriers, and Postmates. Cargomatic works primarily with single truck owner-operators or small fleet owners with ten vehicles or less. At this end of the market, there is an intense demand for additional revenue, making the demand generated by this platform a welcome addition.

Even a small job completed during what would be a cargo-less trip to a driver’s next pickup can be enough to offset the cost of gas or even turn a small profit. The average Cargomatic order entails moving 1 ton of freight 20 miles and costs about $ 145. This is less than such a shipment would traditionally cost, meaning that shippers save. Drivers take a small haircut on what they might otherwise earn, but according to Kessler, it’s a trade-off they’re more than happy to make in exchange for higher utilization, the ability to avoid time-consuming administrative work, and guaranteed payment with fewer delays. Cargomatic charges a 20 percent commission on all shipments.

Cargomatic has focused its efforts on the LA and New York markets to date, having moved over 100 million pounds of freight since launching in 2013, while revenue grew 75-times in 2014. The company’s clients include household names in retail, according to Kessler, who declined to name names but adds that it’s common for these giants to seek excess local trucking capacity, often for same-day shipments. With the latest funding round, Cargomatic plans to expand to other major metros around the nation.

This is good news, because “Uber for trucking” is not as novel an idea as it may sound. In fact, there are a number of other startups using the same shorthand to describe their business, including DashHaul, Transfix, and Keychain Logistics. Where Cargomatic differentiates itself is in its focus on local shipments, rather than the long-haul routes that most people think about when imagining the trucking industry and where these other startups are competing.

“Local trucking is a $ 70 billion industry,” Cargomatic co-founder COO Brett Parker says. “Giant retailers like Home Depot, Office Max, and Amazon are all looking for excess capacity in local market. And this is where we can offer the most benefits because the trucks are already in the area, and often times already driving the desired route, empty. Long-haul is difficult because of the high amount of driver turnover and the difficulty of building [marketplace] density.”

Kessler and Parker must be onto something considering he attracted several industry heavyweights as strategic investors. This includes Volvo Group, which owns Mac Truck and could be a key partner in offering drivers access to new vehicles and preferred financing plans – a strategy that Uber has utilized, to controversial results. Additionally, Estes Express is one of the largest trucking companies in the nation and outsources over 100,000 routes per year, potentially representing enormous strategic demand for Cargomatic.

“We’re thrilled to have this stamp of approval from industry leaders,” Parker says.

Canaan is also a savvy addition, as the veture firm brings deep marketpace experience having invested in eBay and Lending Club. A current investment in Instacart should also offer insights into the challenges of building an on-demand delivery platform.

Like Uber, Cargomatic positions itself as simply a software middleman that helps to connect demand with available supply. As such, all contracts are executed directly between the trucking provider and the shipper. Cargomatic provides an additional umbrella of insurance coverage, but the liability is primarily on the driver partners. The company says it prioritizes working with the best trained and most reliable truckers and conducts all legally required background and license checks.

In the big picture, platforms like Cargomatic are a boon not only for retailers and the logistics industries, but also for consumers as well. If goods move around more efficiently and less expensively, it could eventually translate into lower prices and shorter delivery times. And with trucks taking less empty trips, we could see fewer vehicles on the road and less air pollution.

Unlike transportation network companies which turn everyday citizens into amateur livery drivers, Cargomatic works with professional truck drivers who already have access to vehicles and have the necessary licenses and insurance. In this sense, it poses far less issues from a regulatory and public safety perspective. The company managing a rare trifecta by is adding value two constituencies of customers, shippers and drivers, and also to society as a whole.

Logistics is a massively complicated business governed by global macroeconomic forces, frequent protracted labor disputes, and often costly and unpredictable factors like vehicle mechanical issues and traffic. Dragging this industry into the mobile-on-demand era won’t be easy, and Cargomatic certainly has a long way to go to prove it’s developed a viable and sustainable solution.

With Uber raking in billions moving people from point A to B, there’s no doubt that there is as much or more riches waiting for the person who solves the same problem for freight. It’s the kind of disruption we all should be rooting for.

  1. Cargomatic is disrupting the $ 70B local trucking industry. We are on a mission to power the world’s most innovative metropolitan trucking network, and we’re doing it one block from the beach in Venice, CA.

    You may have used a car service like Uber or Lyft, and we’re just that simple. The Cargomatic platform lets businesses order a truck on demand, and drivers accept the job via our mobile app. Once accepted, shippers can then follow their cargo in real time, all the way through delivery. We offer competitive rates, a superior customer experience, and automatic billing, making local shipping easier than ever before.

PandoDaily

Share