Flock Freightrevenue, valuation & funding

Introduction hello everyone my guest today is oren zizlansky he has logistics and innovation running through his veins he followed his parents footsteps who created their own freight forwarder after years with foreman's van line he founded his own 100 truck fleet at age 20 providing white glove freight service through the u.s and canada next came sole source oran's first brokerage which services major clients like whole foods and opened his eyes to the unnecessary complications and inefficiencies of lfl shipping aren't you ready to take us to the top i am thanks for having me so you through all this experience you've now built flock freight let's start with a tease there and then get more of your history what's flock freight doing today we do uh we create what we call share truck loads or algorithmic carpooling so it's a little complicated thing to think of but if you have four pallets of commercially manufactured goods and you're in la and you want to ship them out to chicago you would otherwise move them through the ltl industry less than truckload industry or hub and spoke model so just think terminal terminal terminal ups without the aircraft what we do is we come in and we use some really sophisticated algorithms to match your palletized freight with our other customers palletize freight and instead create a carpool or a shared truckload so we just book a big truck out of the full truckload industry have them make multiple pickups picking up our various customers loads and shipments and have them drive direct to destination the reason the customer cares is that by making a hubless offering no terminals no warehouses it picks up on time delivers on time it's faster there's zero damage no loss no theft it's just a much much higher quality offering um and it's a much greener offering about a 40 reduction in greenhouse gas as the only certified b corp in the freight industry uh because our model effectively um you know negates or disintermediates the use of terminals it's we like to say algorithms instead of warehouses it was 2002 or 2003 i forget which but i was rereading bezos annual letters and i remember one of the key metrics they tried to drive down and 0203 was number of contacts and it's exactly this thing that you're talking about so real quick before we get your back straight can you help me try to understand the economics this has sort of formed a lot of people if i want to ship two full trucks from la to chicago and let's say they're adidas shoes what am i likely going to pay for that so the way to think about it i'm going to give you some really simple kind of silly math but this is just i've used this in fundraising and again it's a reflection of very sophisticated audiences but taking a lot of industry experience and kind of putting it to layman's terms so imagine you could typically fit 26 pallets in a big truck a full truckload carrier truck the big ones you see on the freeways if you could fit 26 in there we'll just imagine that trucking company is going to charge you 26 to go from chicago to los angeles we can infer that that's a dollar per pallet right 26 dollars to fit 26 pallets now to be fair that trucking company is not charging you a dollar per pallet they're charging you 26 whether you put one pallet on board or 26 pallets on board you're going to pay 26 bucks you're a smart guy you want to get the truck full you want to get your lowest possible unit economics you put 26 pallets on board you have in your head a dollar a pallet conversely now you're a small shipper or you have a small order it could be a big shipper but you have a small order you just have one pallet to ship that's it it doesn't make sense to buy the whole truck for 26 dollars right so instead you go to the ltl industry these hub and spoke operators the ups fedex without the truck without the um aircraft they charge you two dollars to move that one pallet that's what we do that's what our financial model is is that instead of charging two dollars and paying almost two dollars we can charge two dollars and pay one dollar because we're buying it's like we're syndicating that entire truck we're taking all the risk and telling the customer don't worry about it i'll find the other 25 pallets to go with your your one pallet it'll never move through a terminal it'll never be unloaded uh bigger faster stronger you know on-time pickup delivery no loss no theft no damage faster transit times that's financially what we're doing interesting super interesting and and again before we go back to your the younger orrin um in 2020 with the pandemic happening like what's the big usage metric you track is it's not a number of pounds it's probably two minute is the number of truckloads or like what's the thing you track mainly yeah it's it's what we call a freight bill that would be like a standard unit of measurement in this industry a freight bill would be not a pallet but it would be a shipment so a shipment might be two pallets it might be 15 pallets but we would call that one freight bill and we've seen our so how many shipments we move um on an annual basis we had 400 percent growth um in the year of 2020. that's incredible are you sharing with the actual nominee it's gonna be in the millions right tens of millions um in terms of shipments or in terms of revenue that number you just gave me freight bills uh no it's not millions yet it is um that's a fair question it's tens and tens of thousands you know i don't know if we're at quite a hundred thousand yet but but we're getting very close that's got it so somewhere between 10k and 100k and that's just again number of freight bills as small as two pallets as large as 24. almost a full truck where we can still optimize and we can take that very big shipment and find a couple pallets a small shipment and put them together and ride share create a shared truck and can you put a face on this i mean is this the etsy ecommerce seller that needs to move like three like what is the face of the person that actually you know yeah we launched the business in the smb so small medium businesses that were small they had small quantities and they did not ship very often it's a great um playing ground to invent if not it's a little messy now we're playing much more in the middle market with enterprise customers so you know it could actually be a very big customer we'll use like um you know an almond manufacturer um is one of our biggest customers where you know a full truckload of almonds could be 40 000 pounds that's a lot of almonds to go into a box you know or to go into a 7-eleven so even though they're a 10 billion a year massive enterprise shipper they would have a need to only ship four pallets on you know out of their facility going to um a distribution distribution point now they may ship a full truckload of almonds into a costco or to an amazon fulfillment center but then they may turn around and ship a single pallet to 7-eleven so it's all b2b or what we call in the industry kind of dock to dock so what we don't yet do is residential we've done in the past but it's not who we are it's not who we believe we should be for quite some time instead we're going from a manufacturer that has made something or is a distributor of something and going to the receiver or their customer a very common pattern would be people who make stuff and it's going to an amazon fulfillment center or they make things that's going to a mall or some type of distribution center so i would not quite say etsy i would say more like a 25 million dollar minimum side manufacturer that's their revenue not their spend on freight but that's how big a firm they are up to you know several billion dollars a year again you know the abm beds of the world and in 2020 how many unique shippers shipped at Currently serving 2000 customers least one thing with you one freight bill like 2 000. oh wow okay and i just am really uneducated in the space i mean what percent is that of the total brands shipping something it's it's it's bips okay the beauty of this industry right so yeah we'll just say u.s freight is believed to be like a trillion dollars across all the varying ways that you might move things and look we're not a tiny company anymore we've had explosive growth we plan on growing a ton more but the reality is that you know it's it's basis points so yep um how do you guarantee that you have the truck inventory if i believe ltl's paying the same as you are but you're just doing it more efficiently like how do you make sure you have enough trucks if there's a christmas blip or something yeah that that's not just the billion dollar question that these days the 10 billion dollar question yeah trillion dollar question uh it is really hard so one of the hardest things but i would say the most fun and most interesting things that we do is we work in probabilities so we have a lot of applied data science and machine learning environments here where we are constantly ingesting as much data as we can uh from third-party data lakes so data sources where you can build a an integration with and you bring in the like what's the spot market doing what what's tender rejection meaning freight that's not getting picked up for you know if there's freight not getting picked up you can infer there's probably not a truck in that market to pick up that freight yep um furthermore we shape that with our own internal analytics our our own team of people talking to the world and then lastly working in probabilities what's your belief that that truck's going to be available and not only available in a binary non-binary way it's yes it's available no it's not but also if it's available what it's going to cost you know it's a spot market so it may be a low price today it may be a high price tomorrow and then to really blow this thing up wait sorry i don't understand that what what could what varies in price the dollar per 26 pallets could go up or down yeah the cost of contracting that entire truck he may charge you a thousand today at maybe 900 tomorrow could be 1200 the day after that especially around the holiday time so the context of your question given holiday you're right right demand is surging right now supply is kind of fixed right this is not a gig economy the way we see with like uber and lyft in rideshare or doordash or instacart those are good economies whereby uh in theory supply conflicts with demand um in our space you're a commercial truck driver driving a hundred thousand dollar tractor trailer full-time your drug and alcohol tested you know this is what you do it's not a side hustle like you were either a truck driver or you're not a truck driver so supply is changing don't get me wrong but it's relatively static demand is porpoising like crazy whether it's covet or holiday time so that's where the data and the analytics and and the data science and trying to predict what the future is going to look like all the way through to in our case not just can we get a truck or not and not just how much is that truck going to cost but what is the probability that we'll have many different customers freight bills or shipments that are going to tetris fit together into that truck at what variant costs i mean that's honestly i think the number one reason why uh softbank made the investment as they did is they looked at the hard science the hard uh the algorithms the mathematicians the data scientists that we employ to not just predict a future of is there a truck or not but to slice those trucks into little bits and pieces and then try to determine are you can you see the future and in our case with all the data that we're building and every shipment we move becomes a data point what's total team size orange today and how many of them are data scientists or engineers uh we're about 130 w-2s you know basically here in san diego we do have a few people scattered throughout the us particularly over covet you know we've been pretty agnostic to that we just want great talent and then engineering mathematicians which we'll call part of the optimization group data scientists analysts analytics uh that represents about half the payroll oh wow okay so call it 765 people there do you have any quota carrying sales reps oh yeah yeah yeah how many she's 30 35 and you know and they're selling to like the head of shipping in these massive billion dollar brands yes and uh they're selling to a manager of shipping at a 50 million dollar manufacturer that you know you and i may have never heard of and they make you know tables they make chairs and they you know have a need for our services as well and with all these operations sort of coming together i mean do you know i mean it's obviously i mean it's definitely maybe the millions tens of millions how many individual pallets you shipped in 2020 do you know that number um if i were to make a guess i'd say if we're getting close to 100 000 shipments per year you know you could say that times maybe five so maybe a half million pallets oh this is back of the napkin right yeah yeah no no i'm in the ballpark yeah no no i mean that's what i wanted i mean i would be shocked if you knew the exact number down to the actual palette and that's obviously changing by the day um Raised talk to me about softbank they just wrote a check what was the size of the check and how much have you raised a date total uh softbank's investments 100 million dollars we also brought volvo in which is a really exciting strategic for us both for a commercial partnership they spend a lot of money on moving freight and they do it some optimally and they want to partner with us but also to work with their innovation labs on really defining what the future of transportation will look like autonomous driving vehicles as an oem they make these trucks or they're working on that technology how a marketplace partnership like us could work with a volvo over the long term you know we think of volvo here in north america as these like lovely swedish cars and they are but but um not a lot of people know they're like the second or third largest truck manufacturer i say truck i mean like tractor trailer you know freight truck in the world i think them and daimler are you know the biggest in the world so in the us they own the brand mac truck which more people are probably familiar with um and then we have participation from all of our insiders google ventures signal fire and gop um at that point you know we set out to raise honestly 30 to 50 million bucks we ended up raising 115 so it was a bit of like no more capital can come in work with your insiders to you know prevent too much money from coming in um and that puts the total raise at a 180 185 million something like that and in that soft thing deal i mean were you able to stay you know let them put in more cash but still stay under and sell less than 10 of the business in other words i'm really really asking is north of a billion dollar evaluation south of a billion dollar evaluation got to be flirting with it oren uh it's south of a billion dollars yeah everyone's trying to get us on this one i know look um it's a couple ways of thinking about it one is you know it is freight we have a lot to prove it's a huge space um we're going after something much more complicated than has ever been pursued before and that's the true invention of a new mode of shipping freight there's the less than truckload mode pallets through terminals there's the full truckload mode fill the truck up at a single manufacturer send a truck down the road those are the incumbent modes we're this space in between and encompassing both which is shared truck load that's a mode that we've invented so it's obviously a lot riskier number one number two is you know you don't hear a lot of founders say this you got to be careful with valuations that becomes a market clearing price that you got to get over the next time and nobody wants to get over it by you know one or two percent right we want to be like doubling you know tripling quadrupling on these uh share prices round over round and as you start talking about billions which is certainly the ether you know that we're we're playing around in you also have to start thinking about what exits look like you know in my case i want to go into the public markets i mean i want to do an ipo and do the road show the whole thing um that's you know ring the bell in the nasdaq i mean it's just something really excited about doing um and so you want to make sure that you're going to create you know real long-term shareholder value as well that is a creative to your insiders as well as to that next set of investors is charging these 2000 customers two dollars per pallet and then you buying the pallet for a dollar region and optimizing your only revenue stream or there are other ways you make money no that's it that's what we do okay i'm doing i'm missing something like very Monthly recurring revenue obvious here so i'm just going to ask it directly if you're shipping 500 000 pallets per year charging two that puts you like a million in revenue per year there's no way you're doing a million in revenue per year we're doing many many yeah more than that so the two dollar versus one dollar is just meant to be a simple metaphor to whereby to understand this god we you know you can imagine though if i if i uh buy if i sell it two dollars and i buy it one dollar buy low sell high yeah like the real estate guys tell us then we have um for freight like 50 margin potential um in an industry that supports like 10 to 12. so we have many times a higher margin potential than anybody ever in freight before because of this financial arbitrage that's unlocked we we have not publicly disclosed as of yet revenue but i can tell you we are orders many orders of magnitude um higher than that yeah you had a couple million bucks i'm going i'm missing something very obvious here and it's the obvious thing you gave a metaphor you know renting out a whole shipment a truck it cost way more than 26 bucks for for the truck yeah i apologize in real dollars it'd be like three thousand dollars four thousand dollars to run that lane and if it's four grand i could charge eight grand you know it was the two to one that i was hoping to highlight yeah yeah okay got it but but generally like a truck like that la to chicago it's like four grand something like that in today's market yeah yeah yeah okay interesting um vault i wanna talk volvo real quick because this is gonna go back to your roots in terms of you maybe buying your first truck running those first routes back when you were younger at some point it makes sense for you to start if you're not already holding cars maybe autonomous trucks on your balance sheet uh maybe from volvo by the way you know what is the tipping point where that starts to make sense it's a good question look i've told people whether it's media or colleagues or people on the team i don't personally think we're going to see another parcel carrier parcel would be like fedex ups start ground up like ever i think what we'll see is is amazon come in and build the largest parcel carry in the world sort of from the side door or top down depending on how you want to think about the metaphor you know we're seeing amazon become the world's most vertically integrated firm which is not to say they don't use a tremendous amount of contract support top to bottom they do um but they're operating their own aircraft they're operating their own trucks their own warehouses i mean at some point it's interesting amazon tech company tech company they absolutely are a tech company the data insights they have i mean they know what you and i are gonna eat three days from now i mean they do uh it's the world's largest machine learning environment as best i could tell that being said um they're a logistics company and they're going to be one of the largest logistics companies if not the largest in the world no matter what how do i think about that i want to stay tech as long as we can um i i don't see a world in which we start operating warehouses and terminals that would be antithetical to our very model we are the contactless yeah we don't want to touch the stuff um i could imagine a future state um whether it's a partner like a volvo or in some other way shape or form where with autonomous driving vehicles we want to be pretty closely snugged in we love av autonomous vehicles like we oh my is this an enabler for us in a very big way that being said um with all due respect to our capital partner and all those fine folks out there working on it um it's not going to happen in this decade in a meaningful way we'll see the middle mile which is you know like running down the freeway um we'll see robots now that being said they'll be humans who are being paid to still be on board those trucks for many many years but to get to a future state where what we call the first mile and last mile that's backing out of a dock now picture your neighborhood or commercial district and ultimately getting onto the freeway and then the last mile is that process in reverse you know getting off a highway exit navigating through urban rural environments backing into i mean you can picture what this would look like um i think that is a long way out that being said when not if yeah looking at a regulatory problem as well interesting yeah interesting quickly uh before we wrap up here you launched company what year uh commercial launch kind of official first round hire first employees january of 2016. it was a year and a half project side hustle for me prior to that how much revenue did you in year one do you remember yeah well run rate revenue in year one i think we went out at about a two million run rate and uh two and a half million run rate of revenue and we were pretty darn proud of that that's pretty you should be really proud of that um and then last growth question you mentioned freight bill growth year over year 2019 and 2020 was 400 percent is that the same that revenue growth is the same about 400 percent or lower yeah no no it scales pretty well that's correlated that's i mean i imagine you have some serious scale growing at your scale at 400 years it doesn't surprise me softbank comes and says please oren please let us put in a hundred million it it it went well anything else i haven't asked about that you're like why hasn't he asked about this it's critical to our business um no you know i'd say you know we are really proud and passionate um about being the only certified b corp and freight so you know we have an opportunity here kind of from a social entrepreneurism angle to create significant market value you know real returns for our investors and ultimately in the public markets and have a real market cap we want to build both the largest freight company in the world and the most profitable freight company in the world we want to do both of those things the scale will come before the profit but we intend to do both while we simultaneously help do our part to save the world you know we believe passionately there can be a 40 reduction in greenhouse gas through our model so much so that we're on the precipice of being able to launch actual carbon credits to our customer for buying from us because the model is so much more efficient um you're actually kind of getting the the first word on that externally that we're in the process of bringing that to market right now the outside world doesn't know it yet but we've got a certifying entity of like actual carbon credits not some wow white labeled you know off-market product but like you know tesla carbon credits so to speak uh to toyota um of bringing that to market now because the the certification entities are looking at what we're doing and saying man that is no joke that is so much more efficient and of course we believe that it's an awesome opportunity to drive additional acquisition retention but to further drive our our purpose of saying you know we think we can build a very viable asset while at the same time helping to do our part to save the world or an incredible story let's wrap up with the famous five quick answers your number one favorite business book five dysfunctions of the team number two is it's a good one yeah number two is there a ceo you're following or studying bezos constantly remember are you an acquisition talks right now with amazon no okay number three that's good straight face you like how i sneaked that in like that was pretty good right i'm under so many non-disclosures right now [Laughter] all right good number three what's your favorite online tool for building the business oof um online tool for building the business god we live on slack it's just horrifying but we couldn't live without it number four how many hours of sleep every night six it's pretty good situation married single kiddos married two kids 18 14. wow and how old are you 46. take us home what do you wish you knew when you were 20. what did i want to do when i was 20. something you wish you knew when you were 20. i wish i knew um oh man i wish i knew that i was going to make all the mistakes i've made but to not be so hard on myself for making them and to realize that their each one is a little gift that's going to ultimately make me better guys flockfreight.com think of it like pooled trucking a lot of logistics over 65 data scientists engineers on the team of 130 when 50 of your folks are made up with that kind of background you know there's some serious tech there they raised 180 million bucks today serve over 2000 customers their freight bill growth year over year has been over 400 revenue growth is also in that same categories they look to continue to scale with things like eco credits do a great part and do their job in the world but also do it profitably over time as they reach additional scale oren thank you for taking us to the top thanks for having me one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sass we call it deal or bust one founder comes on three hungry buyers they try and do a deal live and the founder shares back end dashboards their expenses their revenue arpu cac ltv you name it they share it and the buyers try and make a deal live it is fun to watch every thursday 1 pm central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 p.m central to make sure you don't miss any of that make sure you click the subscribe button below here on youtube the big red button and then click the little bell notification to make sure you get notifications when we do go live i wouldn't want you to miss breaking news in the sas world whether it's an acquisition a big fundraise a big sale a big profitability statement or 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