Silicon Valley supply chain fixer Flexport tops CNBC Disruptor 50

Aerial view of containers stacked at the Port of Los Angeles on January 19, 2022 in San Pedro, California.

Qian Weizhong | CGV | Getty Images

After a year in which supply chain bottlenecks rocked the global economy, Flexport, which uses technology to improve supply chains, topped the CNBC Disruptor 50 list.

Freight transportation, the official name of the industry that Flexport disrupts, is the age-old, trillion-dollar global business of connecting companies that make things with companies that move things over land. , sea and air. The industry tends to be opaque, filled with arcane regulations, bogged down by analog processes and has no “major players”, according to research firm IBISWorld.

In other words, it’s ripe for disruption, at a time when the world needs industry disrupted – and revamped.

Flexport’s technology is critical to keeping goods moving around the world, and it has grown rapidly at a time when labor shortages are rampant in warehouses and ports, and work stoppages in factories in China are struggling with growing consumer demand.

The company uses data to streamline the movement of goods on ships, planes, trucks and trains, analyzing costs, improving container efficiencies and calculating greenhouse gas emissions for its more than 10,000 customers and suppliers. What’s particularly notable is that the platform is used not only by Fortune 500 companies, but by emerging brands as well – the company said its customers have moved nearly $19 billion worth of goods across 112 countries in 2021.

“They have a huge addressable market where the technology in that market is fundamentally broken,” says David George, general partner at Andreessen Horowitz, who led the company’s latest $900 million funding round. “They have about 2% market share in their market and they win 75% of the time when they’re in front of customers, so it’s a very simple formula.”

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Flexport founder Ryan Petersen is a lifelong entrepreneur, who markets himself as a CEO who wants to lead the entire industry — even its rivals — toward solutions.

“Technology has a big part to play,” Petersen told CNBC last November. But growing from a small market share, even with the rapid growth Flexport is experiencing, will require relationship building as much as innovation. “We have to convince many different parties to change the way they work,” he said.

“It’s his life’s work. He’s curious, he’s determined, he’s overly focused on customers and problem solving. Things like how he approached the problem in Long Beach are prime examples of his courage, his tenacity and his ability to solve problems,” said George. .

Ryan Petersen, CEO of Flexport, participates in a panel discussion at the Milken Institute Global Conference in Beverly Hills, California, U.S., Wednesday, May 4, 2022.

Bloomberg | Bloomberg | Getty Images

Petersen also has a flair for the dramatic, using high-profile issues, and Twitter, to showcase Flexport’s capabilities. Last October, he called attention to the Port of Long Beach’s extensive delays and recommended specific ways to “overwhelm the bottleneck,” as he put it.

Petersen wanted to understand the piling up at the ports of Los Angeles and Long Beach, so he hired a boat to see the bottlenecks of ships and containers up close, finding more than 70 idle container ships at anchor with 64 billion dollars of freight waiting to be unloaded. The problem: The docks were too crowded for the truckers to return the empty containers, so the truckers couldn’t pick up a new full container, so those full containers were stuck on the dock and the empty ones on the trucker’s chassis, with more than full stuck on ships.

“This is a negative feedback loop that is rapidly spiraling out of control and if continued unabated will destroy the global economy,” Petersen tweeted.

He then tweeted a solution to target the bottleneck of lack of yard space, offering five recommendations, including an executive order overriding zoning rules to allow truck yards to store empty containers for up to six height instead of the previous limit of two, and the creation of a new temporary container yard on government land. The city quickly lifted its restriction on stacking empty containers to just two high, raising it to four, and California Governor Gavin Newsom called on him to figure out how they could work together. It was called the “Tweetstorm that saved Christmas”.

Over Christmas, Petersen was back on Twitter, this time tweeting about a French fries shortage in Japan. McDonald’s had to limit its sales in the country due to difficulties in acquiring potatoes. Flexport found three cargo planes that were to carry cargo from Japan to the United States and then leave empty. Instead, Flexport arranged for the planes to return with 300 tons of potatoes. The stunt was far from a long-term solution, but it made headlines and Petersen played the hero, demonstrating the power of logistics.

George Frey | Getty Images

Two months later, the company announced a Series E funding round of $900 million at an $8 billion valuation, with investors including Andreesen Horowitz, Shopify and Softbank (which happens to be based in Japan) .

“He’s got big, bold goals, and the industry is huge and broken, and there’s a lot of work to do and it’s a tough problem he’s facing,” George said. “Raising a large war chest gives it the ability and flexibility to do what it needs to do over the coming years, in terms of introducing new technology products and expanding geographically in new ways. .”

“We have a billion in liquid assets and we believe strongly in the principle of having a fortress-like balance sheet to weather things like geopolitical crises and falling stock markets,” Petersen told CNBC in March.

Since that fundraiser, Petersen has brought his passion for problem solving and Flexport’s logistics expertise into the nonprofit space. In early March, announced that it was organizing relief shipments to Ukrainian refugee sites across Europe, noting that over the past decades an estimated 60% of all relief delivered in response to humanitarian crises have been wasted. due to a lack of logistical coordination.

Flexport’s work to improve the way goods move around the world is part of a wave of technologies tackling supply chain issues. In fact, there are more logistics-focused companies on this year’s Disruptor 50 list than any year in the past decade. Two more are in the top ten this year – Lineage Logistics at No. 3 and Convoy at No. 6. And there are other key disruptors including Flock Freight and CloudTrucks, which specialize in trucking operations.

Then there are start-ups that approach logistics from other angles. Gopuff, which wants to quickly deliver food and necessities, is on the list for the third year in a row. Zipline, which rose to prominence using drones to deliver essential medical products, now also delivers for Walmart. Jüsto, a Mexican grocery delivery company; Airspace, which uses artificial intelligence to manage the shipment of urgent cargo, such as human organs for transplants; and Exotec, a French robotics company that uses AI to manage high-density inventory storage in warehouses.

“I love the idea of ​​solving problems, especially ones that have such implications for society,” George said. “It’s a huge, huge space with very, very little technology in place, and the opportunity that you have if you’re customer-focused and if you can make big decisions, you can actually create products that people love…it’s striking.”

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