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Trucking Tech: The Next Unicorn Marketplace?

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An overview of recent startup investing in the trucking industry and how the industry will continue to evolve.

Published in: Technology

Trucking Tech: The Next Unicorn Marketplace?

  1. 1. Trucking Tech: The Next Unicorn Marketplace? Rick Zullo w/ support from Erick Goihman
  2. 2. Transportation and logistics is a large market that has yet to adopt technology on a large scale 2 Over $25B is lost every year due to improper routing and resource utlitization $1.2T $651B $53B Transportation Spend Broker Revenue US Trucking Market Low Tech Adoption • Industry is dominated by traditional, players that have been slow to adopt • Matching between shippers and carriers is done on phone or email New Reporting Requirements • Increased DOT reporting and capital requirements have pressured many brokers and truckers Increasing Competition • Large number of drivers retiring, increasing competition for labor Resource Utilization • Trucks go empty for 500+ miles /mo • Opaque market; brokers charge arbitrage fee of 10-30%
  3. 3. Shipper Focus Trucker Focus Trucker tech can be broken into several distinct sub-sectors with significant tech developments 3 These technology categories are largely being driven by mobile adoption of truckers Automatic Load Boards Applications where brokers post available loads for truckers, along with basic characteristics. Uber for Trucks Two-side marketplaces that provide shippers with on-demand access to truckers, removing brokers from the equation. This sector includes B2B marketplaces for both local and interstate trucking, as well ocean freight. Payment / Compliance Applications that facilitate payments or automate compliance with DOT regulations for shippers. Tracking / Visibility Applications that provide shippers with container (box) visibility across the supply chain. Fleet Management Application to help trucking companies manage their fleets, optimize their routes, and track their drivers.
  4. 4. Shipper Focus Trucker Focus Trucker Tech has attracted significant interest from venture capital investors 4 In the last year, VCs have invested ~$71M in Trucker Tech Automatic Load Boards Uber for Trucks Payment / Compliance Tracking / Visibility Fleet Management Newton Insight Sources: CrunchBase
  5. 5. Nearly $450M has poured into tech-enabled transportation in the last 10 years 5 Uber for Trucks has attracted a significant, and growing, portion of that capital Sector Uber for Trucks The fastest growing sector, with 45% YoY funding growth, and also the youngest companies (~3.1 years old on a weighted basis) 109 Tracking / Visibility New reporting requirements are attracting capital to this space, even as IoT makes 24/7 box visibility easier 97 Payment / Compliance This sector is relatively under-funded, but a large number of recently founded startups are seeking to change that 8 Fleet Management Historically the largest sector, it is currently attracting large amounts of VC funding – but over half the sector is Telogis ($120M) 222 Automatic Load Boards There are no VC-backed ALBs, but many private and public companies have developed tools in this space NA Notes Invested ($M) Sources: CrunchBase
  6. 6. Fleet Management is the largest category, but Uber for Trucks is the fastest growing 6 Uber for Trucks has grown by ~90% since 2013 Fleet Management Tracking/Visibility Uber for Trucks Other 0 100 200 300 400 500 2004-2007 2008 2009 2010 2011 2012 2013 2014 2015 Total VC Funding by Industry Sector ($M) 3-Year Growth 66% 91% 4% 22% Sources: CrunchBase
  7. 7. Brokers maintain their success because of the fragmentation of shippers and truckers 7 Shippers Brokers Truckers Customer Power Competition Industry Profits Barriers to Entry Supplier Power Threat of Substitutes Average Average Low • High - 1.7 Million establishments in manufacturing, wholesale, and retail, • Average revenue <10MM per establishment • High - Fragmented industry (500k+) • Local Freight: 4 major players <20% • Long Distance: Top 50 <30% • Local Specialized: Top 4 <10% • Moderate - > 12996 licensed property brokers • Top 20 make up less than 4% Rev • Economics challenging for small players • High - Avg. 9.656MM per establishment, only slightly higher than broker (7.7M) • Low switching costs -> truck driver saturation, but little pricing variation • Moderate– Cost to purchase a freight-load capable truck is economically prohibitive • Private carriers will hold more power, but there are 21 carriers for every 1 broker • Moderate– information opacity (hard to uncover information) • Large shippers will have contracts • Low variation in pricing • Low - Little price variation of raw materials • Raw material index relatively stable since ‘11. • Index dropping since ’13 • High – Top 4 truck makers have ~76.3% share • Drivers option to Unionize via Teamsters (<3%) • Bound by fluctuating gas prices • Low – largely sales and technology driven from fragmented supplies that are easily and affordably acquired • Moderate– Physical goods are essential (consumer spending has risen 14% since ‘09) • Technological advancements may lead to spending on intangible goods and services. • Low – Truckers account for 68.8% of Freight Transport (Brokers choice) • Trucking brokerage load has increased 20% since 2007 • Low - Uber For Trucking has received 68.45MM in funding, but represents a very limited % of mass market freight • Technology innovations threaten small players • High – perfectly symmetric information due to transparency of web • Focus on timeliness, quality of service and price is paramount • Very high (75k new carriers /year) • Economics are determined by market rates due to intense fragmentation and competion • Low - Shippers require timeliness and reliability and value trusted brokers • Limited transparency of load availability from broker to broker Contracting frictions protects incumbers, but weaker players are ripe for disruption
  8. 8. Closing Thoughts 8 Trucking Will Change Partnering = Profit Human Touch Win the Drivers Industry dynamics demonstrate typical conditions for disruption Partnership with players in the market can expedite adoption in a market that is large enough to share Industries with low technology penetration, generally require “hand holding” to facilitate adoption Marketplaces are generally won through the supply channel, so create great products that woo drivers
  9. 9. rick@lightbank.com @Rick_Zullo

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