Convoy | Transporting Innovation

Hi everyone. Welcome to Grey Matter, the podcast from Greylock, where we share stories from company builders and business leaders. I'm Heather Mack, head of editorial at Greylock. My guest today is Dan Lewis, who is the CEO and co founder of Convoy. The company has been driving a much needed update in the trucking industry with its platform that connects shippers, freight brokers and drivers throughout the United States. Shipping and supply chain logistics has become something that pretty much everyone thinks about now, even though most of us actually know little about how these things work, the pain points throughout the process have been exacerbated in recent years by all the things we are now familiar with. The rise of E commerce, the on demand economy that prioritizes speed, labor shortages, gas prices, geopolitical tensions, and the impact of the pandemic. The list really just goes on and on. Now, of course, everyone working in these industries have understood these pain points for decades, and the team at Convoy recognized that. So not only does Convoy help everything move along more reliably and smoothly by replacing laborious manual logistical tasks, but the platform provides the visibility to reduce wasteful driving without actual loads, resulting in less pollution. Overall, the company has been a hit with the massive trucking industry and just recently raised $260 million in Series E funding. Greylock has been partnering with Convoy since 2015, when the firm led the Series A. And general partner Reid Hoffman is on the company's board. It's been very impressive to see what Convoy has built. There's much more to discuss, so let's hear it straight from the source. Dan, welcome to Gray Matter.

Hi Heather, thanks for having me on.

First of all, congratulations on all of Convoy's hard won success. Bringing technology to an industry as fragmented and antiquated as trucking and at scale is no easy feat. So to understand where Convoy fits into everything, why don't you start us off by setting the scene for what the shipping industry looks like today and what. Why has it been offline for so long?

Yeah, so let me talk a little bit about trucking, specifically, which within the supply chain in the United States is one of the most important sectors. If you think about overall freight transportation, trucking accounts for about 80% of it in the United States. The dollar spent on transporting freight. The other 20% would be things like air freight, ocean rail and pipeline. So trucking is the vast, vast majority of. And it's the number one job in the country. More people are truck drivers than any other type of job. And that's also because it's so incredibly fragmented. So you have almost a million small trucking companies. On one side, the average one has about three trucks. And on the other side of the marketplace you have about 100,000 companies that ship truckloads of freight. And between the two There are over 15,000 freight brokers. Some of those are independent brokers that are calling both sides to try to make the deal. Some of those are asset based trucking companies that also have a brokerage on the side. Effectively the way the brokerage works is they build relationships with trucking companies and truck drivers and then they go to shippers, let's say a coffee manufacturer or a car company, and they get jobs. The coffee manufacturer might say, I need to ship £40,000 of beans from the port in Houston up to Chicago. And they're going to pay 1500 bucks for that, 2000 bucks. And the broker would take that and go call a bunch of trucks and try to find truck that's willing to do the job. And they would keep the spread. Let's say they get a truck for 800 bucks, they keep $200 on that. That's how the industry's worked. And it's been pretty offline. It's been done through phone calls, text messages, emails and some online load boards, which is kind of like the Craigslist for finding a truck driver and truck drivers for finding shippers. Historically, that's why it was really offline. The other reason is that truck drivers didn't have a platform to which anybody could connect to. There wasn't one ubiquitous digital platform in all the trucks that was open for people to go build apps on or pull data from. And until about 2014 or 2015, truck drivers didn't have smartphones in their hand. That was the year, it was 2014 when the Samsung Galaxy S3 became the first Android phone that the phone companies like AT&T, Verizon, Sprint were giving away as part of your two year upgrade, or it was less than 100 bucks. And so that was the phone most people were getting. And then all of a sudden they had lower cost iPhones. And all the phones became smartphones in 2015 that basically you could get with your upgrade. That's when all the truck drivers got smartphones like everybody else. And that led to this completely different opportunity where for the first time ever, all these drivers are now online and they have a single platform with location information two way. You know, you can send and receive pictures, you can use an app, you can share all this data, and all of a sudden you could take this offline antiquated industry that hadn't had an opportunity to do that online. And the unlock was this long tail of trucking companies and truck drivers getting on the grid. Basically getting a smartphone with an open platform. That's honestly like what allowed this to happen. If that would have happened 10 years before Convoy, I'm confident somebody would have probably built something like this. We were just there right at the perfect time and with the right energy, the right mindset, the right investors to kind of put this all together as, you know, to build a company and go after it. And so that was kind of why the industry was backwards and how we're helping bring it forward.

So there's no top line organizational structure for the entire industry. So it's really the smartphone that made it all happen.

No connection. If you add up the number of trucks. So just take the number of trucks the top 20 trucking companies own. You know, I actually did this. I put it in a spreadsheet and added them all up. Then I divided by the total number of trucks, and they have about 12% of the trucks, which means 88% of the trucks belong to medium and long tail trucking companies. The vast majority of the big semis you see rolling down the highway actually belong to mom and pop, you know, two, three, four truck trucking companies, not the really large trucking companies. Wow.

And I'm going to hear about how you figured all this out and did all this research. But first, how exactly does Convoy work beyond just the fact that everyone has a smartphone? How does everyone stay connected? What are all the systems at play there?

So our customers are large shippers in the United States. So think like Home Depot, Procter and Gamble, et cetera. They hire Convoy to move their freight. Some of them are moving 1 or 2 million truckloads of freight a year across the country. So we take that, we get that freight from them, right? And it's going to say, hey, I need you to pick it up here and drop it off here. And then we call and we set the appointment times. We have to figure out technology to kind of get smart about the right appointment times, because that can really impact the cost of the job. If you have a bad appointment time, the driver's sitting around waiting for a long time. That's not helpful. So we build technology to think about how to get the right appointment time, how to ingest these loads from our customers quickly and efficiently so they can get into our marketplace. We have a technology system and algorithm that prices these based on an incredible number of factors in the Market, because there's no set pricing in trucking. Pricing is discovered every day based on supply and demand and all the different variables. And if an individual truck has to drive 100 miles to do a pickup versus 10, they're going to price differently. So every truck has its own price in its mind. Every truck driver. So we built a bunch of tech that actually does that as well. Then it comes to convoy. We offer the price to the shipper. They accepted that price that we've come up with. Comes to convoy. We get the appointment times all set up, we put it into our app, and we offer it out to our truck drivers. And sometimes it's a single job, but ideally, we're able to find two jobs in our network that are round trips for each other, one going north, one coming south. Or we're able to find three jobs, like a triangle or an extension or reload. And so we look for opportunities like that. And then we look at the network and we say, where do we have density? And we try to ensure that we can find trucks that are close by, because the truck that's nearby is not only going to cost less money, it's going to burn less fuel and have fewer empty miles, which are pretty environmentally damaging from like a total greenhouse gas emissions perspective in the United States. And so those are some of the systems we built. And then the drivers are using a convoy app, the dispatcher is using a convoy app to like, identify all the jobs and then. And then dispatch them out to the individual drivers of the company, the shippers, using different portals and API integrations into their transportation management systems. And so we built a bunch of software to kind of connect all these pieces. But a lot of the guts of it are, how do you actually build the right machine learning models to predict what the price should be in a very complicated economy? And how do you build the right algorithms that understand the nuances? Which equipment types required, what's the location, how long is the appointment going to take to happen, and try to figure out which jobs would go together in that system. How do you bundle them? Because that's where you create massive efficiencies and reduce a lot of waste. There's a lot of hard, complicated science behind the company as well.

Yeah, how do you do that? I mean, all these issues with the industry are pretty glaring once you hear about them. But once you looked into it and decided you wanted to start a company, how did you cobble together a plan for how you and your co founders personally were the people to fix it?

So prior to building Convoy. I was at Amazon and I was with my co founder, Grant was working on my team there at Amazon. I'd actually had this really incredible opportunity where when I got there, they had said, hey, you know, this. This whole idea of using the community and other shoppers and kind of data that we have and potentially some, you know, discovery experience with machine learning. How do we come up with interesting ideas to help people shop and be more successful at buying things and be happier with their experience on Amazon? And so I went and wrote six different papers. They have this classic, you know, the famous six pager. I wrote six, six pagers in a couple of months and pitched them. And I ended up. That was my first assignment and I pitched it to a leadership group and got funding for three of them. So I had a really fun time kind of building these three new organizations and three new products within that company. And I kind of had that mindset. When I was starting Convoy, I was like, okay, I'm going to do that. That same period of research that I did when I joined Amazon to figure out what to go do, I applied to just approaching a new startup. And I had several different categories of customer that I thought I could solve. I was like, I want to understand this customer more. I want to understand what problems they have. I was looking at some mobile retail shopping experiences. I was even looking at some, at that point, different things around how to do data and image management. And I was looking at trucking. There's a bunch of different businesses we're thinking about, but the transportation logistics one seemed the most complicated and interesting. And I got out in the field and just started talking to people. I went to a bunch of truck stops and I went to a bunch of warehouses and talked to a bunch of shippers. I've kind of joked about some of the stories before. I remember the first time I ever went to a truck stop. I pulled up in like a Mazda 3. Like, you know, I had a clipboard, I had some gift, like Starbucks gift cards around my neck and, like, probably looked like, I don't know, like a traveling dork. Yeah, yeah. And I walked into the truck stop and there was like an area where everybody was having lunch. Everybody was, you know, by themselves at their own table, all the drivers. And I looked over and everybody kind of just looked at me at the same time. And I was like, yeah, this isn't going to work. So I went back and sat in my car and thought about it and I was like, how do I do this? And then I kind of was able to get out. And I started finding people that were like, filling out their logbooks or walking between the gas and their truck or the store in their truck and like intercepting them on the wal walk and just like talking to them. So maybe being annoying, but, you know, but getting it done and that kind of broke the seal a little bit. And then I was able to keep doing that. Similarly, on the. On the shipper side, I drove to this electronics, like, distributor in Seattle. And I got out and I walked in and I was like, kind of lost in the space. I didn't know who to talk to. And like, kind of the vibe was wrong. And the couple guys in there looked at me and I just was like, this isn't going to. I was like, do you guys have a bathroom I can use? I went use the bathroom and then left. And that was my first time. And then I drove around Seattle trying to find an open dock with somebody like sitting on their dock that I could just walk up and talk to. Somebody actually working outside the store. Casala Furniture, I'm pretty sure was the first one I ever talked to. So I drove up to their dock and started talking to a guy that was sitting on the dock about how they worked with trucks. But anyway, I was just kind of hacking it. That's how I started learning about this stuff and calling a lot of people that I knew from the industry from when I did management consulting and transportation. Some of my family hosted a lot of eastern European and Ukrainian refugees back in the late 80s, early 90s, and some of them became truck drivers. So they were on the Rolodex. So I was fortunate to have some people to call, But I just worked through it that way. That was how I knew that my instinct was go talk to a lot of people, learn what their problems are. And I asked all of them, what sucks about your job? What do you not like about this? What you wish was different? And the themes start to come. You talk to 5, 10, 20 people, all of a sudden you're hearing these themes. And it was really clear to me that heavy trucking, you know, truckload, was a major challenge. It was offline. It was wild west. You know, there was a lot of love, hate relationship between the participants. And, you know, it was offline. So we thought there was a chance to that could be an area we can make a big difference.

Wow, that sounds so awkward for a while. It sounds like more painful than trying to figure out how to design, like machine learning models.

I got better. I got better at It. I got better at being awkward in it. I got better at transforming the awkwardness into a comfortable conversation. And by the time I was hitting my swing, like two weeks into this, I was just walking into all sorts of places and talking to people. And like, you know, I was fine, but I knew the vocabulary. I actually used to go outline at night because I had done work in supply chain and warehouses and some straight truck work back a long time ago, but I'd never been in the heavy trucking industry and I didn't know all the terminology. Not only did I not know the terminology, I didn't know how people used it in a sentence. So I'd be online reading, like, the words that I should understand, reading articles. I was like, how am I going to figure out how to do this? I talked to some truck drivers, but you don't always get it all. So I started watching hours of YouTube videos of truck drivers recording themselves. And there was a ton of content where it would be like truck drivers recording her himself, educating other truck drivers, here's how to do it. Here's how the newbies should do it. Or just sitting there talking while they were driving about their business and what was going on that day. And that was such a great shortcut because when you hear people talking about it in context, all of a sudden the vocabulary makes sense to you and you know how to use the different words. You don't sound like a total outsider. That was my hack.

Yeah, brilliant. Speaking of outsiders, most of us are. Even though it's a very common job, most of us have no exposure to actual truckers of the trucking industry, namely investors. What were your early conversations with investors like? And when did they have their okay, I get it. Moment?

You're right. It was even less so than now because in the last five to six years, there's been a lot of investment in supply chain companies, but back then there wasn't. And I did an analysis of how many Companies were on AngelList listed as going after an industry and then how big that industry was. And most of the industries that I was looking at were hundreds of billions or trillion dollars and had thousands of companies going after them. And trucking was $800 billion at the time and 20 companies going after it. And so I use that as actually a starting point with some investors saying, look, there's not a lot of people in the space right now that we're going to talk about. And I would ask them. It's actually really important. First question, I would say, on a scale from 0 to 10. How much do you know about the trucking industry? And I asked every investor that in my seed and series A rounds because it starts the conversation in a space where we can, we're just being open that we don't know this yet. So it's not like I'm trying to dance around how much does this person know or not and trying to think about. But we say it up front, we kind of joke about, okay, makes sense, you don't know about it. Almost nobody was above it, too handful. And so then you can jump in and say, okay, respectfully, like, okay, here's a quick one on one, here's how it works. And as soon as people started to understand how large it was and how fragmented it was and the logic for why it was still offline and nobody had done this, which is really clear, that's when people got really excited. That's when they could see that, you know, clearly there was room for improvement and how far that goes, how big that is. Exactly, all that stuff. People might have different opinions about that, but nobody thought, you know, we couldn't do this better. Like, doesn't seem like there's a problem here. And I think also my style of just getting out there and getting all these quotes and examples from real trucking companies, the truck drivers, the shippers, made it a very data rich kind of C level discussion. And so now they're like, okay, it's a big industry, it's fragmented, it's offline for obvious reasons. And everybody is saying that these are the things that bother them. And it was clear there was a problem to solve. And no good business has ever started when there's no problem to solve. Like you can't. A good idea doesn't work unless people have that as a pain point. Right. Or it's not, it's not going to be a business. So this was built on fundamental discussions with potential customers about what they did not like. And investors, I think really respected that. And I got that feedback and talking.

About having this big fragmented, antiquated industry and a lot of what you offer is saving money, not wasting things, but in terms of how it translates into actual metrics that investors would want to get behind and what's going to be a profitable company. What do you talk about there? And maybe you can illustrate that through some of the metrics that the company has in terms of like waste reduction, cost savings for your customers, better data points for the actual truckers about what they need.

It's a great framing. So the way the Economics worked when we started. Now it's a little bit different now, but just the kind of, it's still the high level way the economics work. In brokerage, the average price for a job is about $1,000 for it to hire a semi truck to go into a job, obviously it's a certain number of miles and depends on that dollar per mile today. But let's say it's a 500 mile job. Thousand bucks. The broker gets $1,000 from their customer and then they call around and get a truck. And on average they get a truck for about $800. So their average spread is $200 or 20% of that transaction. So you can imagine 20% goes to the, to the broker, 80% goes to the trucking company. And of that 20%, only about a quarter of it. So about 5% total would drop to their bottom line. So there's a lot of, there's 15% of that or of that total of that 20% they're keeping is going to pay for all their operational costs, their sales team, their team that deals all the truck drivers and all that stuff. And so, you know, our opportunity was to reduce the need for a bunch of energy to go into the operations of running that brokerage and then also to make the trucks more efficient. So they were running fewer empty miles, spending less time waiting around at a facility. So they'd be able to, you know, on average get a job done with less miles driven and with less time, which means they could then charge less for their time and their services and it would bring down the cost of the truck as well. So overall, we looked at it from how do we reduce the cost for that trucking company to provide that service from $800, let's say down to $700. And how do we reduce that $200 spread the broker was needing to take to run their business? By cutting out the cost to actually do that and get that, let's say it goes down to 100, for example, and that would then reduce the cost of running trucking operations in the country. And then convoy can keep part of that as a benefit of creating that value. We can also give some of that back to the shippers and carriers in the system. But our goal was to actually be deflationary to some extent and reduce the cost of running this business overall. And that's where all the efficiency comes in. And that's why it's also so directly correlated to sustainability efforts where 35% of the time a truck run down the highway is empty. More than 50% of a driver's time, especially for local and regional runs, is spent sitting at a facility or not, you know, not productively driving. So driving empty or sitting at a.

Facility and they can't really do anything in the meantime either. So they're just waiting.

Yeah, they're waiting to unload or waiting to load or waiting in the staging area for their appointment or they miss their points, they got to wait for one later because they're trying to get back in the queue or they've run out of hours of service. That's another issue. And there's all these old things that play into. So the hours of service thing is the truck drivers can run for about 11 hours or 11 hours on average. They could be driving for 11 hours on duty for a total of 14, then they have to go off duty for 10. And so there's actually a limited number of hours they can run per day. So that combined with all these different waiting around issues and appointment times, everything creates a lot of kind of wasted time and energy. So the opportunity in a business like that to start is to reduce waste. And if you reduce the waste and you reduce the empty miles, you reduce the wait time and you better orchestrate that system. So the appointment times are optimal, the round trips, the backhauls, the reloads, you know, there's comp. Combined jobs together, you can make a really big difference. And that's what convoy set out to do. And we knew that at the same time, because we were bringing this online, we could also do things like give our customers, the shipper, real time visibility into where the truck is, give them great insights and reports on how their facilities are performing versus their neighbors facilities or their competitors facilities as a competitor, I mean other warehouses in their neighborhood that compete for trucks and you know, that's sort of these, just these basic benefits that these folks could get on top of us. Reducing the waste and lowering the cost structure of the industry. And so, you know, I think that's what people get excited about it. It's a win, win, win. And it's an efficiency play. And you know, it's fixing something that's operating less efficiently than it could be.

In the past seven years as the company's been built up. What were some major initiatives or strategies that, that you tried and maybe some pivots from that didn't work or that you learned from that you didn't expect to learn something and it really informed a new product. And you know, kind of at the same time, like what are the Major challenges that the industry as a whole has been facing. While, while the company's been growing.

One of the biggest challenges we've faced is changing the way that our customers think about how they want to run their procurement processes and actually buy trucking services. And the one that I would say we were most worried about not working was getting all the truck drivers to use an app. That was one of the biggest questions. Can you get mom and pop trucking companies and their drivers to use an app on their phone that you're asking them to use? And every single time. That took about five years to get the point where we were near 100%. But that was the real question at the beginning. Actually we thought we were.

What was the first year like of how. Like the percentage of how many people.

25%. Yeah. And then it went up to about 98% about four years later. And the biggest gains on that were just obviously improving the way the app worked. But just, we just started requiring it after about a year as well. That obviously still didn't get it close to 100% at first because there was so much early resistance to why would I use this? What's the value? So we actually had to think, we didn't want to come at it with a. The perspective of you just have to use this. They had other options. There are other brokers. So it was, you have to use this and it's going to give you a bunch of benefits. If you use the app for every step of the job, instead of getting paid in 30 or 60 days, we'll pay you in two days and we're not going to charge you for that service. Most drivers Pay, let's say 3, 4% of their invoice to a factoring company to pay them quickly. So they kind of get a payday loan effectively against their. We did things like that. We did deals, they could get better deals on tires and on equipment. And we said, we're going to give you access to the highest quality freight. We're going to give you these preloaded trailers you can just roll in and pick up and leave. And so we gave them access to this kind of drop and hook type freight. They weren't used to getting access to is this long tail carrier, these mom and pop carriers. So that made a big difference and it allowed us to, to really differentiate with them. But the biggest challenge is in this industry, one of the things that's so unique about trucking is the contracts that you sign. Any sort of contract that's created through an RFP process or that's maybe a year long contract where we would say to our customer, you know, we're going to take 10 loads a week from, for you over the next year from point A to point B for 1,000 bucks each. And then we do that for 90 lanes or 100 lanes. They don't actually have to give us that freight and we don't actually have to take that freight. And so we set a volume expectation and we set a price, but the world then changes a bunch after that and they might not actually have all that freight. They might not sell as much as they thought, or they might sell more than they thought, or a store might close and another store might open, they might get another account or new plant opens, whatever, and they're, they're trying to change the volumes they were going to ship. And then the way the freight industry works, trucking companies and brokers, if the rates were to go up really high, let's say the rates doubled over that year, which happened during COVID now they're underwater. They're servicing a load on freight that they can't service at that rate during some of these extreme situations. And so they might start taking less of it. Instead of taking 100%, they start taking 60, 70% and taking less of what they committed to do. And so that's just an interesting dynamic. So when you're trying to do a contract, you're trying to figure out what should my price be? You have to not only think, what do I think the market's going to look like over the next year and how much can I service this for? You have to think, what are my competitors doing? Are they planning to just lowball it and win the freight? And then if the market doesn't come down, they'll just stop servicing it later or they'll try to renegotiate it with the customer. So there's a lot of this kind of like psychology around it. So we have tried to remove that. We want it to be a system where this is not a gotcha game, it's a long term relationship. And we're not trying to pull one over on you every time. We're going to show you our margins, we'll show you our economics. We'll commit to taking all the freight and we'll lower the prices if they come down, but we're also going to adjust the prices up if the market's going up in these areas. And we create like some restrictions. But that's, we're working on that. And that's Actually had a lot of receptivity over the last couple years. I think people kind of threw in the towel because for a long time you're sitting across from your customer having this conversation and everybody in the industry talks about this and knows this, and you're wondering exactly how much of that freight they're really going to give you, and they're wondering how much you're going to ultimately do, you know, and it's not because people have bad intentions, because that's. The industry's just designed this way and we're really trying to fix that. And that's been one of the things that's hardest because it's not just a technology problem, it's a psychology problem and it's a relationship problem. And that customer has to think differently about it and think longer term about their partnership with you and the total cost of working with you versus this maybe one year RFP rat race every year of trying to bid and compete and then see it fall apart six months later, which is how the industry has been operating recently.

Wow. Yeah. The human behavior component sounds very tricky. Dialing into that a little bit more. Let's talk about the drivers. What is this experience for them?

Like, we have about 80,000 registered trucking companies using Convoy that are ready for us to dispatch freight to. And that group has about 400,000 trucks in their network. What's been interesting is we have built a really easy to use app experience and we've done a bunch of things around it to make them want to use it and to get paid quickly on these things. Because what ends up happening is unless the owner of the truck is the driver, which happens with a lot of the smaller owner operators. But if you get into 3, 4, 5 trucks, there's also usually a dispatcher who hires drivers and then they're assigning the jobs to those drivers. So our ability to influence their behavior is very different. If it's the owner, they care about the economics of their business and things like getting paid quickly from Convoy and other benefits really help them. If it's one of their drivers, we need to think about how do we make that driver's experience great. They're living on the road, you know, maybe for a job or they're the one doing this. So we've built both features that make it really attractive to the small business owner that's running that small company to want to run on convoy. And those have a lot to do with the economics, usually. And then we built a lot of features to make it easier for the driver to get through their jobs and have like a little bit better quality of life on the road that's due with convenience and access. Can we be really thoughtful about the appointment time so this driver can get home at the right time or we're not wasting their time providing customer service. They can call if something goes wrong. You know, it's not just an app. They can actually call and get help because they're on the road trying to figure out why is this gate locked or when is Bob coming back from his lunch break at this dock that I've been waiting at for two hours. And these are the real problems that happen where you don't really have an answer in the technology yet. And so we think about all that and then we reward our drivers. If the drivers are operating really well, we'll bias for them in the system and they'll be more likely to win freight. If they're great performers and we care a lot about are they going to show up on time, are they going to be reliable? And we track all their statistics and all their data and we give them reports and if they're not complying, we actually put them on a pause and we talk to them about it and we ask them to show us how they're going to recover and we try to build a little community around it. My co founder spent now a bunch of his time focusing on this community, shifted his role to be entirely focused on that. He actually went to the Mid America Trucking show a couple weeks ago and he rode on several trucks all the way out there just to spend time with truck drivers, seeing what's happening on the road. I actually took my entire leadership team to a truck stop yesterday and we went on trucking. We went on rides as truck drivers because some of them hadn't been in, you know, semi trucks before and, and spent an hour talking to the driver, each one, each one and came back with a long list of ideas. And so it's interesting when you're creating a business that you don't personally use, you know, versus a lot of consumer businesses or even enterprise SaaS products where you could understand how you'd use this. You don't drive trucks, you don't ship truckloads of freight, so it's hard to know. And so therefore you have to get really experiential and like get people out there talking to these, to our customers and drivers to learn about it.

I'm glad you brought that up. I'm very curious about that. When hiring people, it's been difficult in the tech industry for years with the talent crunch. But how did you recruit some of your early employees? Especially as you said, most people aren't familiar with this.

A lot of time on LinkedIn and calling people hit up my entire network. And I spent hours Every night on LinkedIn learning how to send the perfect message that would get picked up by somebody. And that's actually really critical, like knowing how to message on a service like that. I got really good at that. It's funny, I've had a chance sometimes to go to UW and teach some of these classes about recruiting and I've talked a lot about the actual details of how you get someone excited about your business. So I became an expert in that. I spent a bunch of energy on it. And I think the storyline that people were attracted to once you're talking to them is a lot of folks working in technology only work in kind of digital. They don't work with anything that's actually physical. And there's something that's really rewarding about working on a digital solution or a technology solution for a very physical industry where you can actually go talk to this driver, you can see the truck, you're moving a physical good. You can understand the utility and why what you're doing, doing matters. You can see why it's important to the world. And I think a lot of people were appreciate, appreciated that who had come from a place where they felt like it was very ephemeral. So that was one thing people really liked. Another was I was extremely deliberate about who to hire. And I basically said I need these four experiences. I need someone who understands how to go sell, I need someone to run a sales effort. I need someone who understands how to manage a supplier base in a marketplace. So I needed the demand side and the supply side and I needed somebody who understood trucking and I needed somebody who understood marketplaces. And I actually took an 8 by 11 piece of paper, drew a 2 by 2 on it and wrote those four things in the ends of the quadrants. And every time I would meet somebody I would write their name on there where they fit into that map. And I was not going to slow down until I had hired for all the things I needed. I remember in that very early days just I am going to bring in this team right now. And I think we got it done a couple months. But it involved love letters to people over LinkedIn, it involved lots of coffees and networking and yeah, one of our earliest employees who's still here was one of those four. I Definitely wrote him a couple love letters to get him to finally talk to us, but was very glad that I did.

Very cool. And so you kind of started this whole trend with the trucking freight companies. Now there's several other startups doing the same thing. Why do people see it's a good time to get involved? Is it because the market is so big, there's room for everybody and it's so complex that there's plenty of problems to work on?

That's definitely part of it. The trucking market is incredibly large, over a trillion dollars in the US Now. And then there's the broader supply chain, right? All the different components of both sourcing materials and transporting materials around the world is massive. So I think that's definitely part of it. The other is that when entrepreneurs or aspiring entrepreneurs see major firms, whether it's Reid Hoffman and Greylock or others investing in a space, they take notice. And I think that back in 2015, we're getting started. There were a couple deals in this space. And I remember actually this conversation that I had with Reed. He was like, look, after we invest, and when I do this deal, there will be more people noticing your space, so get ready. There's going to be people popping up. And it's completely true. So I think part of it's that, you know, it's the discovery of the space because most people weren't thinking about this. And so in the tech community, they're discovering they're spending time with other people in the tech community or their families. Many of them aren't driving trucks. And so the way they discovered it was because the venture community and the tech industry started doing it and talking about it, and all of a sudden people see it. And that's where the first wave came from. The second wave, which has been more recent, has come because just the general awareness of the criticality, the importance of our supply chain for everyone in the country has become much more discussed and much more public. And people are much more aware of it in the last few years than ever before, I think. And so that has just led to a lot of people saying, hey, I want to go help solve this. It's fun. Also, like, important. They know they're doing important work. They know that people are going to care about it. It's going to matter in the world. I think that's very attractive as well. And it's much more obvious to people that supply chain is in that category, even though it always has been. It just wasn't as obvious to people.

Right. And you're getting a ton of recognition from the media too. Wall Street Journal, Reuters, Forbes, Fintrope. Everyone is noticing what you're doing. So maybe walk us through some of the big milestones that the company achieved that's really been making people pay attention.

Yeah. So the first really breakthrough milestone we had was getting a system where all of the truck drivers, like 100% of the drivers running on our platform effectively were using the app. Like that was breakthrough. Nobody else has actually gotten that level yet. And when you do that, you stop running two parallel efforts. You're all in one version, your offline version. Now you can just do one and you can innovate so much faster because everything is built on this platform where you know it's there, you know you're gonna have the connectivity, so it just unlocks you. So that was a big milestone, both from a momentum perspective as well as just achieving something really remarkable. And anybody in the industry, especially industry related press, recognized that and was kind of blown away by that. Now, a couple of things that I think have been a lot more interesting recently. One of them is that we've been able to build a really unique trucking company base. All these mom and pop trucking companies and owner operators using Convoy is unique. Most brokers work with a lot of medium and large trucking companies. We work with exclusively small trucking companies and owner operators. The reason we did that is because those are the trucking companies that will use an app on their phone and ask their drivers to put an app on their phone. Most of the medium and large ones won't. And because we're so focused on having that breakthrough of entirely having one system. And when we say it's tech, it's actually tech that's unique about ours as well. Now it means that other brokers can use the Convoy network. So we opened it up last year and now we have several dozen other brokers putting their business and their loads into the Convoy app and the Convoy marketplace in order to get access to this unique capacity that we have that's online. That was a pretty big breakthrough and that's sort of been a really big milestone for us. Another one was one of the ways that trucking works is you have a bunch of trailers sitting at a yard outside of big warehouse and then you preload those trailers called drop and hook. You drop the trailers and then you come and grab them and leave. Most small trucking companies can't get access to that freight because the only ones that were able to do it before were the big trucking companies that bought their own trailers and would leave them in these yards and sign up for these one or multi year contracts to this drop in a freight convoy completely democratized that. We built a program called Convoy Go. We created the concept of a universal trailer pool, which means we got thousands of trailers. And we said, anybody can use them. They're not just we don't, you know. And as a broker, it was very unusual to buy or lease your own trailers. But we actually started to acquire our own trailer pool. And then we said, okay, any carrier in our system can come and pick up these trailers that are preloaded and move them. So all of a sudden these small trucking companies and owner operators were able to get access to preloaded trailers that are highly efficient. Instead of driving in and waiting an hour or two to get unloaded or loaded, you just pick it up and go. I was never available to them before. And so that kind of thing really changed. And now we have one of the most flexible trailer pool systems in the country. And we have a very unique capability there where we combine lots of jobs together. We let these small trucking companies use our trailer, even keep it for a few days if they want to reposition it for us back where it needs to go and they can use it. We've done a lot of things that make it just a more effective system. That was something that nobody had done before is building a system like this. For each of these, we've had several other companies that have copied it afterwards. So greatest form of flattery we've had that happen for each of these things that I just described.

Very cool. All this stuff too is generating a ton of data. And that data could potentially be used to develop tools for warehouses or maybe contribute to what. What's happening with autonomous driving. Like, what are your thoughts on how Convoy is poised to be a part of some of these, like major pushes with using data?

We will have a big role to play in that because we collect so much data on every single job from the, you know, everything from how long did the driver wait at the facility, which route was optimal that they went on, how did it go? You know, we picked a route. How did it work to, did the driver like it there? How did they rate the experience? We collect data on that. We get six scores pretty much for every facility every time a driver shows up there. We have thousands first facilities now and we really can help our customers understand if they are incurring significant additional costs by running poorly managed facilities. So what we'll find is that One company will be running a facility in, let's say Los Angeles. And the drivers don't like the person that works there. They have to wait on average much longer. Jobs are often canceled out of that facility. They have really strict requirements for some arcane process and drivers don't want to go there, so they charge a lot more to go there versus the really efficient, well run one down the street gets the same drivers for 10% less. And so we see that and we have so much data on the causes, we know the correlation between all these experiences that driver has and cost. Or maybe one facility is really bad at appointment times they just leave it up to whenever you call, get your appointment versus the other ones actually trying to coordinate and orchestrate it in a way that creates efficiencies. So all these things give us information to go back and share with these warehouses for how to improve their warehouse management and warehouse operations. And that's extremely valuable and something our customers really appreciate. And I want to do so much more of that. I feel like that's we're just barely, you know, brushing the surface and when it comes to autonomous and other systems like that as we have new equipment capabilities come in. So let's say now you have an autonomous truck and it can run, maybe it needs a driver in it all the time, but it can run twice as far per day because there's not that 11 hour limit anymore. The driver drives for part of it, the truck takes over part of it. It's a tag team between the two. It's going to change the landscape of trucking, it's going to change the cost structure, it's going to change how fast things get where they need to go. There's so many things that are going to change. And I really believe that being in the seat that we're in, which is really understanding the network and the customers and what needs to happen to get freight from A2B will put us in a position where we'll be able to start bringing those capabilities into the network, bringing those trucks in, bringing that capacity in and making it effective. Imagine a mixed fleet. Imagine a world where a quarter of the trucks have one level of capability. A quarter of the trucks have the older version of the autonomous capability. The other half are still manual. And every state has slightly different rules. And it depends on what time of day it is. Maybe or something like that, a human trying to consider all those variables and figure out which truck is best for the job. Their head's going to explode. It's already hard, but now you're going to add in this whole new thing of different hours of service. And this truck can go this many hours without stopping this. We can only go this many. That's really hard to keep in your head. I don't think it's going to be possible to have the transition to autonomous without digital data led companies helping to orchestrate this. And so I think when that happens, watch out. Like there's no alternative to convoy at that point. You can't do this without a convoy because it's not that humans can really compute across those different variables these cyclically. Right.

And you've outlined this really eloquently in a post that you wrote recently and digitizing the whole industry, which is on your website and I encourage everyone to read it talking about your grand vision. Is there anything else you want to add that you really want people to take away from this conversation?

I'm glad trucking and transportation supply chain is getting a bit more attention. Truck drivers deserve a lot of credit. We have pretty convenient lives due to truck drivers. And you know, when I think about where this can all go in the long run, you know, I really think it's a win, win, win. If we can reduce waste in the system. I talked about the economics before of a job that time driven empty the time waiting around. If we can start to reduce unnecessary wasted time and energy and orchestrate this thing better using technology and visibility, it will improve the lives of truck drivers. They will be more productive, they'll be able to get home more frequently, they'll be able more choice in what they do. It'll improve the experience for our customers who are looking for this data to improve their warehouse, want higher levels of service, want flexibility. And it's going to create a great business people want to be a part of. So I'm really excited about it. I feel like the potential is massive and when that happens you feel a ton of responsibility. I feel a lot of responsibility for convoy to achieve its potential. And that's part of the game of raising a lot of money and aiming to change the world in some way. It's hard. I get nervous about it. I guess it's pretty hard. Hopefully we can figure this out. But you just keep pushing because you see this chance and that's really how I feel. It's such a cool, unique opportunity that I want to make sure we do the best we possibly can.

Yeah, just keep on trucking. I'm sure everyone says it to you.

All the time, so never you're the first one.

Well, Dan Lewis of Convoy, thank you so much for joining us today on Gray Matter. Really appreciate your time.

Thank you, Heather.

That concludes this episode of Gray Matter. If you liked what you heard and want to hear more, Please subscribe at SoundCloud, Spotify, YouTube, or wherever you get your podcasts. You can also find all content on the Gray matter website@greylog.com blog. I'm Heather Mack and thanks for listening.