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Convoy’s Collapse and the Industry Aftershock

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After eight years of venture capitalist funding and industry disruption, Convoy Inc. announced it would be closing its core business operations and laying off the majority of its employees without notice or severance pay. On October 19th, CEO Dan Lewis sent out a memo to employees notifying them of the shutdown, canceling all loads effective immediately. 

After a tumultuous year and failing to secure a buyer over the last few months, the digital freight brokerage company closed its doors, creating a noticeable shift in the industry.

Piecing Together Convoy’s Collapse

From an outsider’s perspective, Convoy seemed like a sure thing, which is why this shutdown came as such a surprise—especially to the 500 employees who were laid off without notice in the process. How could a company valued at $3.8 billion close its doors so quickly? And why couldn’t they keep up despite millions of dollars of investor funding?

Freight recession

The first obstacle for Convoy was the freight recession. As the pandemic trucking boom started to settle down in 2021 and 2022, Convoy began laying off employees, and this year proved to be just as challenging. In February 2023, the company closed its Atlanta office; by August, they were hoping to sell. 

The current soft market and inflation have resulted in an oversaturation of trucking companies, decreased demand for brokers, and lower rates per load—all of which put unmanageable pressure on Convoy to keep up.

Poor quality of loads

Another issue that contributed to Convoy’s collapse was their quality of loads. Liz Ward, former director of business development at Convoy from 2016 to 2018, addressed the issues head-on at the Future of Freight Festival this week and admitted that the company often took on freight that wasn’t attractive to drivers in an effort to buy out market share and grow faster. “There’s a reason why it was being rejected by all sorts of carriers,” said Ward.

Some even argued that Convoy’s business model prioritized fast procurement and delivery of product over safety. In one instance, a Connecticut woman, Samantha Figueroa, was struck and killed by a driver transporting a load brokered by Convoy in 2021. After Convoy’s shutdown, a lawsuit emerged on Figueroa’s behalf, suing the company for letting a driver with multiple violations and license suspensions secure a load through their software.  

Ignoring the human element of brokering

Along with a recession and a business model prioritizing fast growth, Convoy’s hyperfocus on technology may have been another contributing factor to its demise. Approaching the trucking industry from a tech perspective, and ruling out the input of experienced brokers who are trained in handling freight, left Convoy with a hollow vision of growth and industry disruption, rather than genuine improvement for the people behind every load.

Investor shift

Lewis cited a “contraction in the capital market” as the other main contributing factor to his company’s collapse. As venture capitalists began to see a significant gap between Convoy’s $3.8 billion valuation and their net revenues of around $136 million, the numbers weren’t adding up fast enough. 

Plus, with a recent, large amount of debt owed to JP Morgan and Hercules Capital, lenders were not motivated to bolster the company up any further to facilitate a sale of the company. In short, overvaluation and borrowed funds couldn’t make up for the company’s equity or revenue. Investors felt pressured to pull the plug. 

Convoy’s Loss is Flexpor’s Gain

A few weeks after Convoy’s shutdown, Flexport, another logistics startup, bought out the remainder of the company’s assets and plans to restore operations. After laying off about 20 percent of its own workforce, Flexport is making moves to stay profitable as a supply chain automation logistics company with this acquisition. It also plans to offer freight forwarding options with FTL, LTL, cartage, drayage, and eventually intermodal. These spot freight options continue to be a staple in the trucking industry, allowing drivers to find loads quickly.

Because Convoy worked with a purported 80,000 carriers and 400,000 truck drivers, Flexport hopes to inherit that business by becoming a “one-stop shop software” for logistics. Whether or not the Silicon Valley company will be able to keep up with the current freight recession remains to be seen. 

Implications for the Trucking Industry

Although Convoy failed, the company’s impact on the logistics industry is still felt. This week at Future of Freight Festival, Craig Fuller addressed the rumblings still heard in the industry from the abrupt closure and the legacy Convoy had left behind. “Many people in this room would not be afraid if it hadn’t been for what Convoy triggered, which was investment-class venture capital pouring into the space,” Fuller said. He also noted that Convoy sparked competition and innovation among its competitors. 

“Incumbents were forced to respond,” Fuller continued. “J.B. Hunt … was certainly a company that built arguably the most successful digital platform, and it was in large part a response to some of the competitive interest that the startups were getting.” 

Still, hundreds of thousands of truck drivers dealing with the Convoy shutdown are now seeking out reliable logistics partners and will have to adjust during this period of uncertainty.

Finding a Convoy Alternative

As a result of Covoy’s sudden departure from the freight world, many carriers are left trying to find reliable supplemental solutions. Leveraging load boards, such as Truckstop, allows for easy and quick load and rate comparison, to keep business moving. 

The shuttering of Convoy also magnified the need for many to consider diversifying their options to expand the availability of loads and expand their network of contacts to minimize reliance on one source, which proved to be an unexpected point of vulnerability. 

While this news continues to have a ripple effect throughout the industry, carriers and brokers continue to feel the fragility of the freight market. The projections of a steadier 2024 market remain to be seen, and everyone is trying to be cautiously optimistic about what lies ahead. 

With a huge network of vetted shippers and brokers, Truckstop offers carriers and owner-operators a dependable tool for load comparison, real-time updates, and book-it-now options. 

Request a free demo of Truckstop’s load board, and see how this trusted tool can help supplement your business with spot loads, factoring, and the best-paying rates around.

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