How Freightos Grew GMV from $20M to Nearly $30M Through COVID and Forecast Well Over $200M for 2021 (Interview with Founder Zvi Schreiber)

Introduction and What Freightos Does

Nathan Latka

00:00Hello, everyone. My guest today is Zvi Schreiber. He's the Founder and CEO of Freightos. Freightos is the digital platform of the booking platform for the $500,000,000,000 international freight industry. The company connects airlines, ocean liners, freight forwarders, manufacturers, and retailers to make international shipping digital and smooth. Previously, he was the CEO of Lightech acquired by GE and Founder and CEO of Unicorn acquired by IBM and other tech startups. He's spoken widely and written many articles, including

00:27many patents. He's a PhD in computer science and is the author of Fizz, which tells the history of physics as a novel soon to be published money going out of style and the soon to be published money going out of style. Zvi, you're ready to take the top?

Zvi Schreiber

00:39>> Let's go.

Nathan Latka

00:40Patents, books, freight, logistics, you do everything.

Zvi Schreiber

00:45>> Yeah. Like I always say, just cut, you know, just have a problem sitting still, so so I do stuff. Yeah.

Real-Life Example: How an Importer Uses Freightos

Nathan Latka

00:52Yeah. Well, hey. This is great. Listen. Quick quick update for folks that may have missed our first interview, is back, I think, in 2018. Help people understand. Can you give a real life example? You know, there is a there's an ecommerce brand in New York that sources a thousand shoes per month from China. Where do you fit into their ecosystem?

Zvi Schreiber

01:11>> Yeah. So so we're a platform that connects all the players in international freight. So and there's two main layers actually. So if you're an importer, you're importing some stuff from China, then you need to arrange shipping. And typically you'd source that from a freight forwarder. Freight forwarders like a travel agent for cargo, right?

01:30>> But in the past and even today, most times that would be done offline, you'd phone them up, email them, you'd get an answer after two days. So we provide a modern website where you can get prices from multiple freight forwarders instantly, choose and book online. So it's bringing in passenger travel, we've had this for twenty five years, but we're bringing the same convenience, the same digitalization to shipping to allow the importers and the exporters to transparently

WebCargo: The Airline Connectivity Layer

Zvi Schreiber

01:58>> choose and book freight forwarding. Now, there's another layer. Once you book with a freight forwarder, they need to book with the airline, with the ocean liner, as well as customs brokerage and trucking and trains and all of that. But the main leg would be either ocean or air for international. And so we also provide we have the second part of our company is called WebCargo and that will connect

Nathan Latka

02:22WebCargo. WebCargo.

Zvi Schreiber

02:26>> It's a company we acquired five years ago now. It's an important part of our business and that will connect the freight forwarders to the airlines and the ocean liners. And in particular where we're seeing a lot of growth is connecting the freight forwarders to the airlines. Believe it or not, until a couple of years ago that didn't happen. Cargo was always booked on airlines manually till very recently, but we've been able to digitalize that. And that

02:51>> is growing super fast. It's grown like a thousand percent in the last year, so it's been a very, very exciting ride.

Nathan Latka

02:56WebCargo. Okay. Great. And when what year did you make that acquisition in?

Zvi Schreiber

02:59>> 2016. 2016. Coming up to five years. Yeah. It was a great company based in Barcelona, Spain founded out of founded by two guys, Manuel and Enrique out of their college dorm about twelve years ago. They'd built it up purely organically to the point where they had about a thousand freight forwarders using their software now since we merged it. So at least 2,000. And, you know, with our backing, we've been able to transition that from being just

03:25>> a software business to being a real transactional platform which is growing very, very fast. So that's been a fun ride.

COVID Impact: Volume Drop and Team Reduction

Nathan Latka

03:31So we can't obviously skip over the last year and a half. COVID was sort of an interesting thing. When it first hit, what was going to your head? What was happening inside of Freightos?

Zvi Schreiber

03:41>> Well, it was yeah. It was quite a roller coaster. As it's hard to remember now, but in April, you know, this March, April of last year, suddenly it became clear that COVID was a big deal and things happened very quickly. China shut its borders after Chinese New Year, the factories didn't come back. There was nothing shipping out of China and China was half of our business, you know. And then the airlines worldwide got grounded so there

04:04>> was virtually no air cargo. All of that happened very quickly. It was a scary time. We actually went through the sad process of downsizing our team a bit because we didn't know what was going to happen.

Nathan Latka

04:16Having said that How

04:18many employees were you and then how many did you have to let go unfortunately?

Zvi Schreiber

04:22>> We went down at the time from about

04:28>> roughly 240 to 200.

Nathan Latka

04:30Okay.

Zvi Schreiber

04:31>> So it wasn't a huge portion of the team, it's always very sad when you have to do that. We lost some good people. But we've actually now bigger than 240 and in fact in a couple of cases the same people came back and worked with us again which is great. So that was the flip side. By the time August came around last year, retail people started shopping just as much as before, in fact more than

04:53>> before, albeit more e commerce and less, you know, high street obviously, less, you know, malls. But so that's good for us. E commerce is a good sector for us. So suddenly shipping volumes were actually up and breaking records and that's continued till today. I mean shipping is breaking new records of volumes and prices as we speak. We track that. We also provide the data feed for daily shipping prices. It's called the FBX index. And that's being

05:23>> quoted a lot in the press at the moment because those prices are up 200 and depending on the routes, 250% or more year on year. So funnily enough, as as things recovered, this has actually been a great time for shipping and a great time for our business.

Shipping Prices Surge and the FBX Index

Nathan Latka

05:40Help me understand this real quick. So on fbx.freightos.com right now, it says current FBX $5,926, up 9%. What's that mean?

Zvi Schreiber

05:49>> So that is the if you're looking at the headline, I'm just pulling it up as well. If you're looking at the headline figure, yeah, that is the average price across all trade lanes. The average price for shipping a 40 foot container on any long haul. It could be China to America, China to Europe, Transatlantic and then we break it down by trade lanes. But that's just the average price

06:16>> worldwide for shipping a 40 foot container, which is the most common size. To give you an idea, a year ago that was a 300.

Nathan Latka

06:24Yep.

Zvi Schreiber

06:25>> So that's like tripled, more than tripled.

Nathan Latka

06:29I'm trying to go back to pre COVID. The first thing to back in your chart is June 2019, which is 1,317, which I guess that was pre COVID, right, I guess?

Zvi Schreiber

06:38>> That was yeah. It wasn't Yeah. Exactly.

Nathan Latka

06:41So so even COVID didn't really make a blip in these prices when I look at the 2020 time period on here. They sort of fluctuate between 1400 and sort of 2200. What's driven the massive increase in in the in the cost of this, you know, really in the last six months, January 2020 Well, one to

Zvi Schreiber

06:57>> first of all to be fair that that's more than a blip, you know going up from 1,400 to 2,200 is in itself a very nice increase.

Nathan Latka

07:04Okay. Almost fifty percent.

Zvi Schreiber

07:06>> So COVID, you know the second half of last year did have a positive impact. It did drive prices up. But as you say, not nearly as dramatically as we've had in the last half year.

07:17>> It's interesting, there's been a combination of factors. First of all, retail remains strong. Even as people spend less money on restaurants and services, they're spending more money on goods. So retail remains strong. And then you've had these various events. You had the Suez Canal blockage that created a lot of stress on the system which was already at full capacity. Just in the last couple of weeks, you've had a major COVID outbreak at the Yantian Port

07:43>> in South China. 25% of the goods that ship from China to The US ship out of Yantian and that port is down its capacity is down 70% because there was an outbreak of COVID and and staff got sent home. And and there's a lot of ripple effects because the whole the ships were full anyway. And then you get the Suez Canal blockage, you get Yantian outbreak. And then there's ripple effects because there are something like 70

08:09>> ships roughly anchored outside Yantian waiting to come into port. That means that you've got tens of thousands of containers which are out of circulation. So now there's a shortage of physical containers, metal boxes. So the whole system is very full and then when you have more disruptions,

08:32>> they just can't recover and the prices skyrocket. As you're seeing, fbx.freightos.com is really where the industry tracks all of that price because we have more data than anyone else about what's happening in the pricing. This will impact, just to be clear to your listeners, this is a big increase, big enough that it will impact the price of goods you know, on the shelf this summer.

Nathan Latka

08:55I was gonna say, is this a leading indicator of of what we're gonna see with inflation and price increases and decrease in purchasing power? I mean, you argue this is a leading indicator of that?

Zvi Schreiber

09:02>> Yes. It is. Yeah. This is definitely a factor of inflation. Normally, you know, on average shipping is about 5% of the price of imported goods. When you buy a product in the shop, most of them are imported and on average shipping is about 5%. Now of course if you buy a really big cheap toy shipping would be a much bigger proportion. If you buy an iPhone or some jewelry which is small and valuable, then the shipping

09:27>> is a smaller proportion. So it does depend on the product. But if we take an average, it's about 5%. And therefore, if shipping goes up 20%, it doesn't make a big difference. But when shipping goes up 200% or more, then that's 10% on the price of the good.

Nathan Latka

09:40Yep.

Zvi Schreiber

09:41>> Now the retailer may may eat some of that. They may absorb some of that. But, yeah, you're gonna see a significant impact on prices. And likewise, this may not last. There may be a couple more ships coming to use and maybe the prices crash and then that can make prices cheaper. So it could be that some of the inflation we're seeing right now in The US may be transitory related shipping costs, will eventually come back down.

How Higher Prices Affect Freightos Revenue

Nathan Latka

10:07And, Zvi, how does all impact Freightos as a business? Your ability to grow your revenue when when you go from 1,500 FBX up to what it you know, almost 6,000 now today over over the course of twelve months. Do you guys make more money on that? How do you price?

Zvi Schreiber

10:19>> We do actually. Yeah. Because, you know, our revenue is a percentage of the of the transactions that we bring in. So when when the prices are higher, then we're making more revenue. Having said that, I don't like growing that way because Yeah. The problem with that is it can go both ways. Right? So so you get all excited, your revenue's gone up and up and up, then suddenly the prices crash back down. So I don't like

10:42>> growing that way. I much prefer the growth that comes from doing more transactions, which we're seeing as well. The other thing that helps us is the volatility. You know, when things are stable, then a lot of importers get lazy, they do a long term contract, they use the same freight forwarder and the same route. And when things are volatile and prices are changing and the Suez Canal is blocked or the Trump tariffs or things are changing

11:09>> a lot, that's good for us because then people need quick data.

Gross Booking Volume: 2019, 2020, and 2021 Outlook

Nathan Latka

11:13That makes a lot of sense. If we take that total transaction volume number in 2019 pre COVID, what did you guys do through your platform?

Zvi Schreiber

11:24>> We were the total value of our transactions

11:29>> I don't remember the exact number in 2019. Oh, yes. I do. It was about low let's say, I won't give an exact number. Well, low 20 a little over 20,000,000.

Nathan Latka

11:4020,000,000.

Zvi Schreiber

11:41>> And this year, it should be well over 200,000,000.

Nathan Latka

11:43That's okay. And what was it during COVID?

Zvi Schreiber

11:46>> COVID, it was up a bit. It was sort of close closer to thirty million.

Nathan Latka

11:50Okay. Wow. Okay. So seer I mean, serious gains between Yeah. Yeah. 2020 and 2021. It's affected, you know, in terms of reopening, but also prices are increasing drastically. So

Zvi Schreiber

11:59>> Yeah. But but also, to be fair, also because there's a real change in the airlines becoming digital. We were getting very little transactions with the airlines directly. Going into a year ago, only had like three airline groups who were able to connect to us digitally. And so at the same time as prices going up, like you said, volatility going up, there's also been a a revolution which we call digital air cargo. That's been a big part

12:24>> of our growth as well.

SaaS Product and Freight Forwarder Customers

Nathan Latka

12:25I see. And is this your number this is your only revenue stream as a percent of sales through your platform or are there other ways you monetize?

Zvi Schreiber

12:32>> So that is the main revenue stream, but we also provide software as a service tools, SaaS tools, to help the freight forwarders. We have 2,002 freight forwarders around the world who are using our software to help manage their their buy rates and their sell rates.

12:48>> And we also make a very small amount of revenue from the data itself. You just you took a look, Nathan, at the FBX website. So a lot of that we give away for free, but some people do pay us for more detailed data as well.

Nathan Latka

13:00Wanna get more into that in a in a second. But but first, so on these 2,000 freight forwarders that are using you for buy and sell side of instrumentation in the SaaS product, I think last time you came on the show, you told me that on average, they're paying, call it, like, a grand per month. So, like, $12,000 sort of ACVs. Is that sort of still in line with what you're seeing today?

Zvi Schreiber

13:19>> Let me just check.

13:26>> Yeah. No. The average your question was the average revenue per freight forwarder per month?

Nathan Latka

13:32On the SaaS product.

Zvi Schreiber

13:33>> Yeah. The SaaS product. It's less than that. It's a few I won't give an exact number but it's several hundred. Now it varies greatly because you've got some freight forwarders using the free version, not paying us anything, but driving bookings, is our main business. You've got big freight forwarders who pay many thousands of dollars, if not even tens of thousands of dollars per month. So there's a huge range.

Nathan Latka

13:59Zvi, if we take that 2,000 times a couple 100, I'll just say I'm putting words in your mouth now, but I'll say 300. Right? That's like $600,000 a month in revenue just on your SaaS product. Do you think you can grow just your SaaS product into more than a million dollars per month in the next twelve months? So more than a 10,000,000 run rate?

Zvi Schreiber

14:13>> It's growing the whole time, but the SaaS is not you know, it's really an enabler for us. We're not trying to build a big SaaS business. So yes. The answer is yes, but but also we don't particularly care in the sense that our our biggest growth by far and our future is is as a transactional business.

Funding History and Current Financial Position

Nathan Latka

14:35Yep. I I was really happy when you agreed to come on because when I was looking at your funding history, once you're on the VC track, you know this, you're on the VC track. And your last raise was back in 2018 and I'm going, man, if Zvi doesn't come out with an announcement in the next couple months, like, I hope his cash position is good. You know, I hope we got through COVID okay. It sounds like

14:50you're killing it, but how did you manage that? Many people will look at your funding history and go, something's going on here. They haven't raised recently. What's happening?

Zvi Schreiber

14:59>> Well, there's some we don't announce everything that we do, but we're well funded.

Nathan Latka

15:03So have you have you raised something over the past two years and you just didn't announce it?

Zvi Schreiber

15:07>> Well, if I chose not to announce it, I'm not gonna tell you. But Oh, hey.

Nathan Latka

15:10We'd like to we'd like to get Well,

Zvi Schreiber

15:12>> I understand. But we'll

Nathan Latka

15:13we'll Did you use could you use an alternative capital source like debt, for example, or something besides traditional equity?

Zvi Schreiber

15:19>> I'm choosing not to answer that, Nathan. We'll move we'll move we'll move We're we're we're strongly funded.

FBX as a Customer Acquisition Channel

Nathan Latka

15:27You're strongly funded. Great. And and so let me go back now as we wrap up to the the the media business. So SaaS companies say, if you can build a media brand, my gosh, that's arbitrage on cap because everyone comes to you as a source of truth. Whose idea was it to launch the FBX? What year did you launch it? And true or false, are you able to get customers cheaper than your competitors because everyone comes

15:47to you at the trusted source?

Zvi Schreiber

15:49>> So true, first of all. Yes. And believe it or not, the traffic, because of all the volatility and the prices, traffic to the FBX website has grown like 10 x or more, I think, just in in the last few weeks even. So that's a fantastic way of acquiring customers. That's very perceptive and that's correct. We first launched that under a different name before we partnered with the B, the Baltic Exchange. We launched it about four years

16:14>> ago I think. I don't remember the exact date And the traffic to that site has been growing. But now in the last week it's been such a big issue and the last few weeks you mentioned inflation. So it's been picked up in Reuters and Wall Street Journal and all the major newspapers are quoting the FBX index which is which is exciting.

Nathan Latka

16:34Interesting. Add up, obviously, you have all your revenue streams, you're bringing back some of employees you had to lay off on COVID which is great. It was a great comeback story. What do you anticipate you'll grow as a business this year in terms of, you know, percentage year over year growth?

Zvi Schreiber

16:47>> Well, in terms of if I look at the gross bookings let me just do a quick calculation so I don't get it wrong.

16:57>> Yeah. We should grow 800% in the bookings.

Nathan Latka

17:00The 800% okay. 800% on bookings, which you then take a percentage of for your revenue.

Zvi Schreiber

17:05>> Yeah. Correct. Now some of our revenue is growing before I'm not gonna give you the exact growth of the revenue.

Nathan Latka

17:09Yeah.

Zvi Schreiber

17:10>> But some of the revenue is growing, you know, absolutely linearly with, you know, growing 800 you know, with that 800%. Other revenue, there's parts of the growth which we're not fully monetizing yet. So some of those bookings are growing but but we're in growth mode and some of it isn't monetized. So the the growth of the actual net revenue will not be as high as that, but it will be very high.

Nathan Latka

17:32Would you ever go out, you know, this year and and sort of use some of the money you're making from all the stores and go acquire a a, you know, a media brand? FBX has worked well for you. You could double down and go acquire something like Freightos, for example. Would you ever go do that?

Zvi Schreiber

17:44>> I doubt we'd buy no plans in buying a media brand. But because we're already, you know, we're already doing well on our own in that. But on the platform side, you know, we have made acquisitions in the past twice. So WebCargo is the biggest one. And yes, we we may well do that again. We're always keeping an eye out for good good businesses which enhance our transactional business.

Famous Five: Books, Tools, and Personal Life

Nathan Latka

18:08Alright, Zvi. Let's wrap up here with the famous five. Number one, favorite business book besides your own.

Zvi Schreiber

18:16>> Yeah. I think I told you last time. I don't think it's changed. Crossing the Chasm, an old classic. Yeah.

18:22>> It's a really good one.

Nathan Latka

18:24Geoffrey Moore. Number two, is there a CEO you're following or studying?

18:30No. Three No. That's okay. Don't have that one. Number three, favorite online tool for building Freightos?

Zvi Schreiber

18:39>> Favorite online tool.

Nathan Latka

18:41Well,

Zvi Schreiber

18:43>> got a few, but but one which I'm enjoying working with very much at the moment is Google Data Studio. We use Domo as well, but at the moment, I'm finding Google's Google Data Studio very, very powerful for creating business intelligence both both internally and for our customers.

Nathan Latka

18:57Number four, how many hours of sleep do you get every night?

Zvi Schreiber

19:01>> I sleep well. I sleep seven hours or so.

Nathan Latka

19:03That's great. And Zvi, minus your situation, married, single, kids?

Zvi Schreiber

19:07>> I am married, and I've got kids and grandkids.

Nathan Latka

19:10How many kiddos?

Zvi Schreiber

19:12>> Four kids, and my daughter and my daughter has three kids.

Nathan Latka

19:16Holy mac. Busy guy. Okay. Married. Four. Zvi, how old are you?

Zvi Schreiber

19:21>> How old am I? I'm 52.

19:23>> 52.

Nathan Latka

19:24Last question. Okay.

Zvi Schreiber

19:25>> Happy early birthday.

Nathan Latka

19:27>> Thank you.

19:27What's something you wish you knew when you were 20?

Zvi Schreiber

19:32>> Oh, I don't know. I think it was fun discovering things for myself. I wouldn't have wanted any shortcuts.

Nathan Latka

19:39Guys, there you have it. Freightos launched many years ago. They survived COVID. In 2019, they helped process over $20,000,000 of transaction volume through their platform. In 2020, they saw a slight increase of 30,000,000. Now in 2021 on track to break 200,000,000 because they're getting a lot more traction with airline groups. The world's opening back up. The FBX sort of average rate went from $1,500, you know, shipped from China to the West Coast Of The Americas up

20:02to like 6,000, which obviously helps drive Freightos revenue, but they have other revenue streams. Their SaaS tools, they've got over 2,000 freight forwarders to manage buy and sell rates. They paid several hundred dollars a month for that. And he looks to continue to scale really on the back of his media bev media and data business at fbx.freightos.com. Zvi, thanks for taking us to the top.

Zvi Schreiber

20:19>> Thanks, Nathan. It was fun.

Nathan Latka

20:22One 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

20:46central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at two 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 SaaS world, whether it's an acquisition,

21:07a big fundraise, a big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you wanna take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You wanna get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people are saying. Sign

21:28up for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode. If you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We

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