Trucking is currently the most popular mode of transporting freight in the US, accounting for around $12.5 billion of the $17 billion freight market, according to the Bureau of Transportation Statistics. But with thousands of small and single-vehicle operators and legacy (often paper-based) systems underpinning communications, it’s also one of the most inefficient.
Now, there are signs that this is changing. A startup out of Phoenix, Arizona called Emerge, which has built a platform for shippers and brokers to find and allocate truck freight more effectively across the long tail of available truck-based carriers (a little like a Flexport but for trucks), is announcing a round of $20 million, funding it will use to continue building out its technology, as well as to keep expanding business.
The Series A — led by NewRoad Capital Partners, with previous investors Greycroft and 9Yards Capital also participating — comes on the heels of some already-strong traction for Emerge. Since being founded in 2018 by brothers Andrew and Michael Leto, the company has processed more than $1 billion in freight with 1,500% year-over-year growth between 2018 and 2019. Emerge has now raised just over $40 million and we understand that its valuation is currently at over $100 million.
Some of its traction so far is down to the founders. Both are vets of the trucking industry whose previous company, a multimodal shipment visibility/supply chain solutions platform called 10-4, sold to Trimble in a $400 million deal. And some of that is down to the gap in the market that Emerge is filling.
“Gap” is actually the operative word here. How shipments are booked on trucks today is quite inefficient, with orders often leaving empty spaces on truck beds that could be filled with goods going in the same direction; and in about 20% of all journeys carrying no load at all.
Part of the reason for this is the antiquated way that shippers book space on trucks, and part of the reason is because there is just simply too much fragmentation in the system, with 80% of all shipments today contract-based and the remaining 20% operating as a “spot market” and booked on the fly, and neither of them particularly efficient when it comes to truck occupancy. (Most of the latter spot market is booked through spreadsheets and email, Michael Leto, the CEO, said in an interview.)
Emerge’s solution is something of a stick-and-carrot approach that reminds me a little also of how advertising exchanges work.
A shipper that wants to use the Emerge platform essentially activates/lists its entire inventory of truck providers on the platform to get started. That list and inventory, in turn, become part of a bigger database of other providers: and again, this is a long-tail approach, with typically the trucking companies on the platform having no more than 200 trucks (and often less) in their fleets.
Then, when a shipper goes to Emerge to book a shipment, options are provided that might include previous truckers, but might also include others. The idea is that this provides a more efficient picture, and that in turn gets passed on as cost savings to the customers, who can typically reduce shipping costs by as much as 20% using the platform.
If the cost savings and expanded choice are the carrots, the stick comes in the form of the requirement to upload truck data and share it with other shippers: you can’t use the system without doing it.
“But it’s a network effect,” Leto explained when I asked if Emerge ever saw resistance to the model. “We allow these companies to share capacity to drive efficiencies, and to drive and lower costs with less deadhead miles. There are a lot of benefits to capacity sharing.” It doesn’t seem to have deterred too many in any case. There are currently some 30,000 carrier profiles the platform, and 12,000 transportation entities — including carriers, brokers, or other shippers — transacted in Q4 alone, speaking to activity on the platform being strong.
Emerge is not the only company that has identified the opportunity in providing a better and more updated platform to communicate and book space in the fragmented truck market. Sennder out of Berlin — which last year raised a sizeable round of funding — has also built a platform to centralise communications around booking shipments. It, however, seems to have less of an emphasis on encouraging shippers to take the lead in expanding that network effect that Leto describes.
Others that are tackling the wider shipping and logistics market and trying to improve how it runs include Sendy out of Kenya, which recently also announced a $20 million raise; Flexport, which now has a $3.2 billion valuation; Zencargo, which has also raised $20 million; and FreightHub ($30 million); Bringg ($25 million); and NEXT ($97 million).
But within that, Emerge’s performance so far, coupled with the Leto brothers’ history as founders, are giving the startup some extra mileage as we enter the next phase of what trucking might hold, which could include a critical mass of autonomous and electric vehicles on pre-defined routes.
“Uniquely, Emerge combines an exciting new technology designed to serve existing, unmet market need with experienced industry operators and entrepreneurs,” said Tracy Black of NewRoad in a statement. “Andrew and Michael are building the most innovative marketplace we’ve seen in the freight and digital marketplace industry — bringing contracts and carriers together to create new capacity. We are excited to be leading their Series A and I am thrilled to join the board to support their growth.”