How Flock Freight Reached $300M Run Rate and a $1.3B Valuation in 2021 (Interview with CEO Oren Zaslansky)

Introduction and Growth Teaser

Nathan Latka

00:00Hey, folks. My guest today is Oren Zaslansky. He's the CEO and founder of flockfreight and leads strategy fundraising and executive talent recruitment. He also works closely with sales development, product roadmap, and fulfillment teams. Are building an algorithmically carpool LTL freight SaaS tool. It's a mouthful. The growth is incredible. Orin, you're ready to take us to the top?

Oren Zaslansky

00:18>> I am. Thanks for having me today.

Nathan Latka

00:20I don't wanna bury a lead here. So I had you on the show back in December. We did an interview, recorded an interview. We go deep. You teach me about shipping from LA to Chicago, trucks, terminals. I learned a bunch of stuff and you say we're doing about $75,000,000 in run rate. I wanted to feature you in an upcoming issue of the magazine. I pinged you just to confirm the numbers. You said, Nathan, we're at 300

00:41run rate now, million. What is going on? How did you get this much growth so quickly?

Product Market Fit and the First Four Years

Oren Zaslansky

00:46>> Well, I think it's fair to say we've achieved product market fit. We're almost six years old. The end of twenty twenty one will be a six year old company and the first four years were excruciating. I cringe sometimes when I meet people today and they meet us today and they think, Oh, this is easy. You guys are killing it. And the reality is like, Well, you should have met us in 2018. So, you know, four years

01:07>> of building technology, building a business, working on use cases, getting it wrong, getting it right, getting it wrong again, listening to the customer, iterating, iterating, not pivoting, but iterating. You know, a very agile environment until we really understood what they needed. And we figured that out in early twenty nineteen and that was a guarantee of a shared truckload at the point of purchase. For the first three years, were Wait, Corey,

Nathan Latka

01:31dive deep into that, dive deep what that means to people not familiar with trucking.

How LTL Freight Works and the Hub-and-Spoke Problem

Oren Zaslansky

01:35>> Yeah. So the common way of moving palletized goods, first of all, goods move on pallets in The United States. So you're a manufacturer and you've made tables, chairs, computers, food, kind of everything and anything, they're put on a pallet and they're sent across a very dense hub and spoke. Think eight drivers, eight trucks, eight terminals to go from that LA to Chicago example that we spoke about last time. And that is unfortunately a very low quality.

01:59>> It doesn't pick up on time, doesn't deliver, it gets damaged, things get lost and stolen, it's expensive and it's slow. These are not the key performance indicators you typically hope for. What we do instead is we algorithmically create carpools or what we now call shared truckloads. So a customer can come to flock and they could say, Hey, have four pallets, I have 12 pallets, I don't really wanna see my goods take forever and get lost and

02:23>> get destroyed. What is the alternative? And we would say, Well, we're gonna use our technology to create a rideshare, a truck share program for you, one truck, one driver and we'll make sure that truck is full. And so initially for the first three years of the firm, you could imagine if you're building a carpooling model, there's challenges but there's also just what we call liquidity, you need volume. Marketplace. Marketplace, got to line up time and space,

02:49>> simultaneity. So, you know, it took us three years to get it to the point where it wasn't just aspirational, we'll try to create a shared truckload. The market, our customers told us clearly, if you can guarantee it, then you've got something. If you're just gonna try, that's cool. I mean, we were building a great business. We were raising capital and bringing on customers and retaining them. But the customers told us if you could guarantee that at

03:13>> a point of purchase, that I wouldn't have to gamble on this, then you would be

The Guaranteed Shared Truckload Breakthrough

Nathan Latka

03:16Orin, doing just to clear, these truck drivers, you're trying to sign up to have liquidity to your marketplace. And they're saying, Orin, like, I'm not gonna go through the work of signing up if you can't guarantee my truck's gonna be full. This is why this is important to you, is that right?

Oren Zaslansky

03:27>> Well, there's two components to it. That's the supply side of the marketplace, yes. On the demand side of the marketplace is a manufacturer, is a shipper that says, If you can guarantee my four pallets move hub less, don't see eight trucks, eight drivers, eight terminals. If you can guarantee me that if I do business with flockfreight, they'll move on one truck, one driver and never move through a terminal. That was the big activation moment, the big

03:52>> moment. So we built that and that meant additional optimization capability, more algorithms but what it really meant was a pricing engine. A pricing engine that could sell you a portion of the truck and predict whether or not we at flock would be able to sell other portions of the truck and ultimately get that truck full. That took us all of 2019 of getting it more wrong than right and then 2020, it clicks. We go from 25,000,000

04:20>> to 100,000,000 by the end of the year. We from, we're not totally explicit about the revenue numbers, but more than 300,000,000 at this point already in October. We're many multiples of growth on an annualized basis.

Nathan Latka

04:34How are you measuring that, Oren? So when you say 300 in October, what are you taking? October revenue times 12?

How the $300M Run Rate Is Measured

Oren Zaslansky

04:40>> Yeah. So that would be, you know, if you said 25,000,000 in the month of September times 12 would be 300,000,000 run rate. We will do more than 25,000,000 in the month of October. So our run rate will be, you know, $330,000,000, $340,000,000, know, give or take

Nathan Latka

04:55in the month of October. Mean, that's what everyone listening is gonna be looking for. That 25,000,000 in October revenue, I mean, that's SaaS margins, right? I mean, you're not like having to pay truck driver, that's not like a GMV number, is it?

Revenue vs GMV and COGS Structure

Oren Zaslansky

05:05>> It's not a GMV number, it is a revenue number, although I would not describe it as SaaS margins to be fair. Have a fair bit of COGS still in this firm. So we've got an incredibly automated middle of our marketplace. The optimization engine and the pricing engine is phenomenal, unlike anything that's ever been built before. The demand side of the marketplace, the manufacturer who needs our services is largely very automated. It's never finished, but we are

05:36>> thrilled and it is easily stage appropriate. The supply side of our marketplace, we have a lot of COGS. We are still feverishly building out automated integrations with trucking companies, with carriers. So right now, we still have a fair number of humans that are involved in what we call the fulfillment. Hey, Mr. Trucker, are you available? You know, what's the price? Can we get it negotiated? We are that's the primary focus of R and D, you know,

06:02>> sort of our latest fundraising round, you know, announced about a week ago. The preponderance of

Nathan Latka

06:08Hold on, Oren. Don't bury that real quick. How much did you raise with valuation?

The $215M Raise at a $1.3B Valuation

Oren Zaslansky

06:11>> We raised $215,000,000 led by SoftBank Vision Fund two. They led our last round as well. This was a real preemption with these numbers. They came to us mid year, six months into the last round and said, giddy up, we'd like to deploy some more capital. Can you go faster? Do you have a use of proceeds? We said yes, yes and yes. And so we raised into $215,000,000 at a $1,300,000,000 valuation.

Nathan Latka

06:3813 you raised back in December, the series c, what valuation was that at?

Oren Zaslansky

06:43>> $460,000,000, $470,000,000.

Nathan Latka

06:45Well, okay. Mean, incredible. So SoftBank likes marking up its own portfolio is the lesson there, and you're driving incredible growth. That that's what I should take. Well well,

Round Construction and New Investors

Oren Zaslansky

06:52>> to to be fair, the latter, yes. The former, no, they they they don't like marketing themselves up. I'm not gonna speak to it but you got a smart audience that that that can be problematic. We brought in other pretty significant investors into the round. I'd say most notably, we brought in Susquehanna. SIG is a major private equity, growth equity fund at $15,000,000,000 to $20,000,000,000. So they're participating in this round. We brought in a firm from New York called

07:16>> Eden Capital coming into this round. We also had pro rata, in some cases, think super pro rata from insiders. So SoftBank was about half of the check-in this round. You know, we had another 100,000,000 come in on top of what SoftBank wrote. SoftBank wanted to write a much larger check initially up to 300,000,000. And from a round construction standpoint, we manage that number down, I guess it would say, so that our other insiders could also continue

07:45>> to buy up and we could bring in new capital. Everybody loves to see some new faces around the table.

Nathan Latka

07:50Was $215,000,000 the actual size of the round or did you raise a bunch more that went into secondary?

Oren Zaslansky

07:57>> No. It was $215,000,000 was the size of the Was

Nathan Latka

08:01it did all that go right to the balance sheet or did you provide liquidity to to some early folks?

Oren Zaslansky

08:05>> A little bit of liquidity to early folks, but only team members, not investors. No investors want it out. I can certainly say that.

Nathan Latka

08:12I can, I believe that? And when you say a little to team members, under 50,000,000 of the $215,000,000?

Oren Zaslansky

08:17>> Yes.

Valuation Multiple and Long-Term Vision

Nathan Latka

08:18Okay, very cool. Let me ask you a different question. Anyone doing the calculations in their heads, they're thinking $300,000,000 run rate, 1,300,000,000 valuation, that's a very low multiple for others that are at this revenue stage. Would you just say that's because of your cost structure and the COGS associated with the business model?

Oren Zaslansky

08:33>> Yeah, it's largely an issue of COGS. We have to balance that all the time where every founder does, right? As you think about, we call it the balance between fear and greed. And the keyword there is balance. There are times where you don't want to raise because you're very greedy and there's times where you'll take every dollar thrown at you because you're fearful. As a founder, I've been in both of those situations and there's no shame.

08:56>> You've got to capitalize your business and make payroll. I think the key lies in the balance. Flock is going to be something gigantic. We believe we can build a $50,000,000,000 to $100,000,000,000 revenue firm. I think it's fair though to put us more in an Amazon type quadrant than a Google type quadrant from a cost structure. We are always gonna have some cogs in this firm. And so from a multiple standpoint, they are lower than they are in

09:22>> a true SaaS firm. I I think that's fair. The flip side is we're in a US $1,000,000,000,000 space and we're gonna build a multiple many billions in revenue in the next three or four years. So I think the the ultimately, the exit value of this business will be in the many, many, many billions going into the public markets. Will stay

Nathan Latka

09:42private or do you go public market Q2, Q3 next year?

Oren Zaslansky

09:45>> No, no, no. We want to stay private for at least a few more years. I'd say, let's say three years. This is a bit of a educated guess.

Nathan Latka

09:53Yep. Interesting. To me a little bit more about what metrics are important for you internally that might not be obvious to me, right? How do you measure marketplace liquidity, for example?

Automation Metrics and Supply-Side Bottleneck

Oren Zaslansky

10:02>> Well, the key, I think, metrics for us at this point are we're constraining our growth. We could go faster. We need more automation on the supply side, more integration on the supply side. So we're measuring the total number of transactions that move through automation, you know, single digits going to double digits and scaling. Basically what percentage of this business in '22 and '23 can we fully automate what we call quote to cash? So from a customer

10:28>> who's just beginning their journey with us all the way through to collecting capital.

Nathan Latka

10:33Now Oren, that number, sorry, don't mean to cut you off, but you told me last time in 2019, you had 10,000 freight bills go through the platform. In 2020, you said it was between 10,000 and a 100,000 for 400% growth. Is that what you mean when you say number of like quotes going through?

Oren Zaslansky

10:46>> No, I mean, we moved last month now already like 16,000 freight bills in the month. So, you know, that's the growth. When I mean automation, right now on the demand side of the marketplace, it's automated. Customers order via integration or self serve online. Now we have humans here to support that but it's as automated as we kind of feel it should be. Within the middle of the firm, the technology, the hard, hard tech of optimization, the

11:10>> algorithms, the pricing probability work that we do, that is also automated. But when we get to the supply side, hey, truck driver, will you move this freight and if so, at what cost? How much available space do you have on board? It's only about 10% of the transactions on that end are really totally automated at this point. We wanna take that number up. It's not gonna be a 100% but to 80 or 90. We want to

11:34>> do that in the next twelve to eighteen months.

Nathan Latka

11:36Are any startups that have already figured that out that you'd go buy?

Oren Zaslansky

11:40>> Maybe. We're taking a cold hard look at it. There are a few that make that claim. Unclear it's real. The US truckload industry is enormously fragmented, which in the long run is great news. Marketplaces thrive in fragmentation, you know, little players have a chance to participate day one. The challenge though is there's no like clear aggregated point of volume where you could just go plug into a startup either as a partner or to acquire. You know,

12:07>> obviously we've got a pretty big balance sheet. We also have enormous capital partners, you know, who would love we had a board meeting two days ago and they're asking me, hey, you know, any acquisition targets? We got our checkbook out. You know, we we feel pretty great about you. And the answer is, you know, we're looking at it. We're looking at it, you know. But it's unclear that that acquisitions are always the panacea that that many

12:26>> believe. I mean, the the the data on acquisitions is pretty pretty gruesome, know, 75 to 80% of acquisitions destroy value. Flock is not being built to say, yay, we're a billion dollar company, do some secondaries and that's that. You know, flock is being built to be a hardened scalable platform that goes into the public markets and endures for decades and fundamentally changes the way freight moves in this country initially and then ultimately globally. So it's not

12:52>> to say we're adverse to some easier, fast wins. I mean, are nice to have, but it's not what we're focused on. We're focused on long term value.

Nathan Latka

13:00Mhmm. How do you have that long term focus on? I mean, many startup founders, when they hit a 1,300,000,000 valuation, take secondary off the table. It's the first financial windfall for them that's important for them. And then they go take a next big swing. Did you already have an exit before this? So like this is your big swing?

Oren Zaslansky

13:14>> I haven't had exits, but I have founded two previous traditional freight companies and I've made a very nice living for So $10.15 I'm okay. I don't know that I wanna disclose my salary here, but I will tell you, I am far from being the highest paid person at flock. I've got a relatively modest salary and that's okay. I'm playing for the equity and I think and I'm playing for significance and I'm playing for purpose. Know, we're

B Corp Mission and Purpose

Oren Zaslansky

13:40>> the only certified B Corp in freight. We have an opportunity to make a 40% reduction in greenhouse gas if we're successful at scale. That's important to me. I want to relentlessly remove waste and inefficiency from The US transportation system.

13:58>> So I figure everything worth doing is hard so let's take hard off the table, it's not that interesting. I wanna do something that's purposeful and something significant and I think I'll be financially rewarded along the way. So the secondaries are great, give a lot of comfort. There was some wealth distributed last week and I couldn't be more proud to have been a part of that, seeing people on my team the first, the OGs as we call

14:22>> ourselves.

Nathan Latka

14:23The twenty sixteen OGs, you know?

Oren Zaslansky

14:25>> The twenty sixteen OGs having an opportunity to bring some comfort to their families is significant and purposeful. At the same time, we are just getting started. We take this thing in the public markets and we keep going.

Founder Equity and Dilution Philosophy

Nathan Latka

14:38Managing dilution as you scale is a tricky thing. Most founders think about that after the fact and wish they did a bunch of stuff differently. You mentioned equity is really what you're playing for. Can I ask how much equity you've been able to hold on to up to this point?

Oren Zaslansky

14:49>> You can ask, I'm not gonna answer that question correctly.

Nathan Latka

14:52Can you give me a range?

Oren Zaslansky

14:56>> I mean, I'm gonna own a small piece of something very big. No, political It's a lot on paper. But look, let me say this that I think is helpful to your audience because understanding my wealth on paper, I don't know if it's helpful. What is helpful? This was advice I was given by my lead investor from Google Ventures who led our series A, GD, guy named Joe Krause. Joe Krause is a super successful founder, founded Xcite

15:22>> back in the nineties.

Nathan Latka

15:24A personal Series search

Oren Zaslansky

15:26>> A.

Nathan Latka

15:26Oh, series A only. This was 18,000,000 in 2017. Right? Yeah. Yep. And that you were what? That was probably like what? $90,000,000 to $100,000,000 dollar valuation back then?

Oren Zaslansky

15:35>> No, half that.

Nathan Latka

15:36That was Oh, wow.

Oren Zaslansky

15:38>> 57 or 8. Was actually Pre money?

Nathan Latka

15:41About

Oren Zaslansky

15:42>> post. Pre was like 41, 42, you know, something along those lines.

Nathan Latka

15:46Okay, back And to your Google

Oren Zaslansky

15:49>> what he taught me was, look, you're gonna be taking on a lot of dilution along the way and I get it as a former founder now turned investor, it's gonna make you crazy but let me convince you otherwise. You have a certain number of shares and that number of shares doesn't change unless you sell them. And if you sell them, then you have sold them. But until you sell them, that numerator so to speak does not

16:13>> change. The denominator of the firm is changing, right? You're issuing new shares every time you raise money. But you have a certain number of shares. Your job is to take it from a tenth of a penny, you know, when you found and you do your hopefully 83 b founders out there, do your 83 b. USPS is real, at least for now, may go But you want that, you really want that. And your job is taking from

16:35>> a tenth of a penny to a penny, to a dollar, to $10, to $50, to a $100, to hundreds of dollars if you can. So I've hung on to that, you know, my percentage of ownership has gone down. But what is hopefully helpful to some of your viewers and your listeners is I don't think about it anymore, I really don't. Because I need capital. I need capital to build this business. We are not a traditional high

Team Size and Hiring Plans

Oren Zaslansky

16:57>> margin, you know, SaaS firm, but we're building something absolutely massive. My job complexity is that, like, we're a big business. Hundreds of millions in revenue, hundreds and hundreds of employees, you know, need to double our headcount How many now? Year. We might How much account? Almost 350, 340 employees. Okay. You know, we're gonna be seven, eight hundred by this time next year. That that's just complicated, right? From an organizational structure and leadership standpoint, that's really where

17:23>> my, you know, my time is going. But my number of shares doesn't change. But if I can take the share price to a 100, you know, if I can take it to a 150, you know, going into an IPO, you know, that is a lot of money. I mean, it's already a lot of money now. That is a lot of money. So so for the founders out there, you're gonna make yourself crazy going from a 100%

17:42>> of a pie or two co founders fiftyfifty, however you split it up. Yeah, that number goes down. And for most founders, it ends up in the single digits. I am not yet in the single digits. I will I

Nathan Latka

17:52will I was just gonna finish with the last question and say, Oren, I promise I'm moving after this but more or less than 10% but you just answer it. So more than 10% right now.

Oren Zaslansky

18:00>> I'm a I'm a double digit guy but Perfect. To be fair, I was mostly a sole founder. I have I have some co founders that are advisors, they're not operators. So they started with single digits pre dilution and I had basically the whole cap table. But number of shares by the price per share and then get it liquid, that's the job.

Nathan Latka

18:17There you guys go. Oren, last question here because you're one of the few I can ask this. You don't wanna use investors almost like employees. You wanna bring them on strategically, give them work to do, and make them hustle like hell to help build the business. How do you give work to SoftBank? How do you ask someone that big, that powerful, that, you know, impactful to do work for you?

Putting Investors to Work

Oren Zaslansky

18:33>> Good investors want to be helpful and they know they're not us. So SoftBank is famous, they're infamous, I get it. Working with Masa is a tiny piece of what we do when you're a SoftBank portfolio company, but really you live within your deal team. So within my deal team, who, you know, of course, is on my board, again, board meeting on Wednesday, I challenged my team and a couple of things. I said, number one, I know

18:56>> I understand how the private markets think. We've raised nine rounds, about half priced kind of series c through series d and also some notes in between, you know, because getting started are bridges, up bridges, down never down bridges, but kind of the good bridges and the and the hard bridges along the way. And I'd said, look, I know how the private markets think about us. I understand what the story is. I've done it nine times. I

19:17>> understand what the key metrics are in order to create shareholder value. I don't yet understand the public markets and yet this business is headed to the public markets. We're not yet ready to hire a banker. We're not yet ready to start talking to the exchanges. So it's I wouldn't quite call us pre IPO, but we're pre pre IPO. Meaning, find me people that can educate me on the story and under the key metrics to understand how

19:39>> we need to shape this firm over the next two or three years to get it ready for the public markets. You find those people, I'm too busy. Go to work. Number one. Number two is talent, talent, talent. You know, we're looking for a vice president of engineering, a VPE. You know, our our VPE was promoted into CTO. He's phenomenal. Lou Signs, the first person we hired, absolutely transformative. And now, you know, now we need to recruit

20:02>> a VPE into VPE to replace them on the day to day. Tough role to fill as you can imagine, you know, tough labor markets, you know. So I put my investors to work and I literally said this to them, I would say founders also don't be shy of putting your board to work. I know you love all your kids equally, meaning your portcos, but you love me a little more. Send me the top talent. Let me

20:23>> know if there's a company dying, we could do an acquihire. You see a lot of things I don't see. Love me just a little more than your other children and help us bring out a world class VP.

Closing and Contact Information

Nathan Latka

20:32Guys, there you have it, Orin Flockfreight. Orin, if people wanna learn more about you and the business, where can they visit?

Oren Zaslansky

20:37>> Flockfreight.com. You can drop me a note directly, Orin, O R E N, flockfreight dot com. I promise that's me that doesn't go to marketing or somebody else, and I'd love to meet folks.

Nathan Latka

20:47And the 1.3 valuation pre or post?

Oren Zaslansky

20:50>> Post.

Nathan Latka

20:51It was post. Guys, there you have it, incredible growth, 75,000,000 in terms of run rate, just, well gosh, ten months ago, now over 300,000,000 in terms of run rate, 25,000,000 a month and growing very quick. They'll double their teams over the next year, really focus on building a decades long company, eventually in the public markets, call it in two to three years. We'll see what happens next. Oren, thank you for taking us to the top.

Oren Zaslansky

21:09>> Thanks for having me on.

Nathan Latka

21:11One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. 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 1PM

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