SoftBank Group Corp.’s Vision Fund 2 is leading a $113.5 million investment round in a California-based startup seeking to change the way goods get trucked around the U.S.
Flock Freight, a company that is applying advanced algorithms to the freight business, closed on the investment last week. The deal values Flock at close to $500 million, according to a person familiar with the matter who asked not to be identified discussing private information.
The startup is seeking to rethink the widely used hub-and-spoke system in trucking, in which networks of trucks shuttle goods via intermediary locations. Hub-and-spoke trucking has become the main way to ship less than a full truckload of freight. That segment is worth more than $40 billion annually, the company said, and remains highly fragmented.
Cutting back on fuel waste and emissions has become a key corporate goal. “We are a group of missionaries, not mercenaries,” said Chief Executive Officer Oren Zaslansky, who founded Flock in 2015. Zaslansky said that if all partial truckloads in the U.S. switched to his shared-truckload system, it would save 5 billion gallons of fuel annually, as well as eliminating stops where shipments might get lost or damaged.
Figuring out how to send partial loads of freight without having them get unloaded and reloaded at various stops along the way presents complicated mathematical challenges—so complicated that Flock has turned to highly technical employees. The company’s senior engineering manager previously worked on initiatives run by DARPA, the Defense Advanced Research Projects Agency.
Flock’s technology works by finding at least two loads of freight that are coming from and going to roughly the same place at the same time, then matching them together on the same truck. It’s a feature that’s particularly helpful for shipments to smaller cities. Six months after the company first started shipping freight, it took Flock’s computers eight hours to locate its first match, by which time the shipments had already been trucked away. Now, the computing system takes just a few seconds to crunch the data and locate pairings.
Getting pricing and probability models right takes up even more computer power, and will be key to the not-yet-profitable company’s future. Every time Flock gives a customer a quote, it essentially guesses how likely it is to fill up the rest of the truck with additional freight. If it guesses wrong, it could get stuck with a whole truck for a small load. Shipments travel on trucks driven by independent contractors, as is common in the freight business.
The Vision Fund investment is led by managing partner Ervin Tu, who will take a board seat. Tu already has experience with freight via SoftBank’s stake in Full Truck Alliance, a Chinese startup.
Zaslansky said he thinks Flock can learn from Full Truck Alliance. “We’re going to take a lot of time evaluating our big brain and their big scale,” he said. The CEO also believes SoftBank’s expertise could prove particularly relevant for his hoped-for moves into Europe and Asia—and, eventually, “global world domination.” Zaslansky then joked that his outlook walks the line between “persistent optimism” and “narcissism.”
Zaslansky’s parents both worked for a household goods mover before leaving and starting their own freight forwarding companies, which largely provided services for relocating military families.
Before the current funding, Flock had raised more than $70 million. Existing investors SignalFire, GLP Capital Partners, and Alphabet Inc.’s GV will join the round, which also includes an investment from Volvo Group Venture Capital. Flock is a certified B Corporation, meaning it has defined goals of making a positive impact on society in addition to profits.
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December 01, 2020 at 01:00PM
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