S12E1: Building Global Trade Infrastructure with Ryan Petersen, Founder and CEO of Flexport

That is like what's unique about Flexport is we're not just a tech company, we're not a service company. It's, it's both. And the tech makes our experts way, way better, especially in customs. Every past transaction, you have this library of all your products and all the compliance data that goes with all of them.

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We're kicking off season 12 by delving into the dynamic world of global logistics with Ryan Petersen, the founder and CEO of Flexport. Flexport is redefining freight forwarding by bringing much-needed transparency and technology to a space long characterized by paper, phone calls, and frustrating inefficiencies. Ryan grew up in Bethesda, Maryland, in a family where dinner table conversations were equal parts science and entrepreneurship. After stints in China where he and his brother built e-commerce and data ventures such as Import Genius, Ryan saw firsthand how broken the global shipping industry was. That frustration and a love for solving hard, unglamorous problems ultimately inspired him to found Flexport, entering into a YC batch. In this episode, Ryan opens up about leading Flexport through a $935 million Series E round that once valued the company at $8 billion, weathering a valuation reset through a tough logistics market, and ultimately recently launching a suite of new AI-powered products. In April 2025, this has never been more important amidst growing geopolitical tensions and shifting tariff policies. Ryan shares with us how Flexport is helping customers stay resilient, whether that's through better customs compliance, smarter container optimization, or simply making sense of these rapidly changing regulations. Themes in this episode include navigating the evolving landscape of tariffs and trade policy in 2025, disrupting a highly regulated industry, and of course, AI's impact on supply chain management. Let's open the door.

First of all, Ryan, thank you so much for joining us today in the room.

Yeah. My pleasure. It's a cool spot.

We love to start with the early stories of our guests before we kind of dive a bit into their founding journeys. And so we'd love to get to know you a bit more. Tell us, where did you grow up and how did that shape your view of the world?

I'm from Bethesda, Maryland, which is a suburb of Washington, D.C. That's amazing. How did that shape my— I don't know. Well, actually, both my parents were entrepreneurs, although they were kind of like government adjacent, helping comp— my dad worked for the federal government for a long time. He was at the Defense Intelligence Agency. He was an early programmer. Like in 1970 he wrote his first software analyzing Soviet defense spending stuff. So stuff you can't talk that much about. Actually, probably can. But, and then my mom is an entrepreneur, a biochemist helping companies deal with food safety regulations.

Great.

She just retired last week, actually. But she was one of the world's kind of experts to help companies deal with food safety issues. She's kind of— I call her the One of her many hats is like the Wolfman. When there's a problem in your supply chain for food, they call my mom in to figure out where did these chemicals come from, what happened. But she ran her own consulting company to help people do that. So I think I got entrepreneurship gene from both of them. My dad eventually started a software company that only had one customer, which was my mom's company. So there you go. Most of the dinnertime conversation in our house was about business and science. So that, yeah, probably got some early, definitely early influence from that, even though DC is not like an entrepreneurial town or a business town really.

You say that, but we've had so many guests on the podcast that have had like political careers and have worked in Washington. So I think there's probably like a good personality or experience thread to pull there.

Yeah, maybe like high agency politician types like striving for power, but that's not like DC normal people, like middling, lobbyist, bureaucrat type. So never met any of those people when I lived there.

Given that your parents were both entrepreneurs, when you were younger, did you think you were going to become a founder?

I don't know if I really thought much about it when I was much younger. Um, really, I would say the bigger influence on my entrepreneurial journey is my older brother. So he's like a natural-born founder when— and a really great computer programmer. When we were— he was like 14, I was 11. He had a, um, it was pre— this would have been before the web browser, several years before the web browser came out. So he built, uh, it's called like a BBS, bulletin board system. Um, actually they used to call it a MUD, multi-user door, huh, which would— now we would call like a massively multiplayer online role-playing game.

Oh, interesting.

Uh, like World of Warcraft, but no graphics, it was all text.

So you would—

there's Dungeons and Dragons, and you would like navigate this thing, and he had hundreds of thousands of users when he was 14, dialing into this system. And then he became— post-college, he was a programmer at Intel, but he on the side had this business that eventually grew into a big company. And I went to work for him when I graduated. So he was like the real entrepreneur in my life and kind of gave me the confidence to become an entrepreneur. He's still— he's a co-founder of Flexport. He does other stuff now, but he's been like, yeah, my main advisor in business world.

That's incredible when you have, you know, a family member and someone you trust so much to be able to be with you in that journey. You mentioned You mentioned graduating school. Let's talk about school for a second. You went to Berkeley, then you went to Columbia for business school, and then 5 years later you founded Flexport. Tell us a little bit about these precursor years prior to Flexport.

After Berkeley is when I joined my brother's startup and did that for several years. In fact, I moved to China working for him. We were— I was running the— I did all kinds of jobs, like built the websites and sales and service. Like, it was not— honestly, we never used the term startup. We were just trying to make money. He didn't have investors or anything like that. My brother's such a good programmer. If we were smart, smarter, maybe we'd been in the Bay Area. We weren't living here at the time. Might have been more in tune with like SaaS and what— because we had built— he largely built the system. It was pre-Shopify. We were e-commerce business, buying stuff in China, selling it on the internet in the US. China and other countries, but it was really kind of early China days, early 2000s. And we built this e-com software for— it was pre-Shopify, so checkout software, payments, no Stripe, like, no, you You're kind of like Authorize.net. I forget all the different systems, but it was in the cloud, like inventory management. We didn't know how to use NetSuite. It was '99. Salesforce was, I think, founded in '99. It was that we should have sold the software. We didn't understand that that was a possibility because it was in the cloud. Like you accessed all the software that we built that my brother really coded through the browser, like to run our whole company.

It's pre-AWS too. There's not even—

Right. Yeah, it was hosted on our little machine. Yeah, if we'd have been smarter, we'd have just sold SaaS. Instead, we sold motorcycles made in China that weren't that great. Well, we were the first dealer in the United States for Geely. Geely is the Chinese car company that bought Volvo. Now it's like one of the top 2 or 3 Chinese car companies. But at that time, we were selling their 50cc 2-stroke motorcycles. So that was the first business. And then I moved to China really to have some adventure. I was I'm pretty— I'm okay at languages. I'm not— I don't have any natural gift for it, but I enjoy learning. Like, yeah, I get like a smile on my face when I try to speak another language. So decided to try to go learn Chinese. Uh, so I moved to China, lived in China for a few years running the supply chain, like sourcing the goods, buying stuff, uh, negotiating everything, plus doing everything, you know, still maintaining the websites and building stuff and doing marketing and everything else for that company. Um, while I was in China, we discovered that the shipping manifests for ocean freight. This is called the bill of lading in industry terminology.

Yes, I've heard of that.

This is a public record in the United States, and nobody had done a really good job digitizing those, making them searchable. So they're public but like not accessible. So we built— we figured out how to get our hands on them, uh, through some creative government relations, the Freedom of Information Act, and, uh, and then built like a web, uh, data ingestion system to build a search engine around this data and sell subscriptions to that. So that's a company that we founded called importgenius.com. We still own that business, my brother and I and our third partner, Michael Kanko. So, and Import Genius is now like the leading search engine for ocean freight, shipping, shipping manifest is a niche business. But if you want to look up, people use it for a number of things. You can look it up, um, look up any company and find out where they're buying their stuff. Uh, cause it shows you that all the involved parties, um, Show you what they bought, how many units, how many containers, um, of volume. So it's a, uh, yeah, nice business that we built. It's a data as a service. So we eventually, um, actually ended up shutting down all the importing businesses. Mm-hmm. 'Cause much better to sell data than, than better margins. Yeah. That's, that's a great business. It had, um, so I did that, um, for, I was the CEO of that company for 5 or 6 years. Got it to, it's a great business, it's quite profitable, it's a great product, people love it, but it's not like the biggest— it's a niche business, let's say. Not everybody needs subscriptions to ocean freight shipping data. And you don't— yeah, it was hard. Like, I tried so many things to make it grow faster or retain clients higher. And at some point, like, I was running out of energy to keep making the Yeah, put more into it. And so that's where I started coming back to the idea of like shipping stuff with our importing business was way too hard and there's no tech. And the companies that provide these services were— I just, I don't like when people treat me like an idiot and I felt like they were constantly treating me like an idiot. I don't mind if someone's really smart treats me like an idiot. It's like when people I don't think are very smart treat me like an idiot, like, ugh. So I was getting a lot of that from the industry. And, and then at the same time, there's no tech. And when we had built the importing business, the trading company, we, we had built a lot of automation for outbound trucking. Like, mm-hmm. Because they were shipping motorcycles. And so my brother built this system where you could get a quote from a trucking company and then generate the bill of lading or the, um, delivery order. So for a trucker to come and pick up your stuff. Yeah. Get quotes, book it without all in our software. We didn't have to log into their system. And again, this is like in the early 2000s. So the trucking companies were reasonably okay at tech. Like there was a web portal you could log into and then—

Advanced.

Yeah, it was okay. When we went to the inbound side, we tried to wire up similar stuff for customs and freight inbound, ocean freight, and just like nothing. There was no system at all. And you'd call them and they were rude to you. And so that was like, those are the, that was the original dawn of the idea.

So you had a lot of pain points and you're doing business in China in the early 2000s. Before we go a little bit more into Flexport, what was that like?

Amazing. I still go, I still go to China a lot. I love China. I do. I speak Chinese and I have a lot of fun. Chinese people are amazing. Chinese food is the best in the world. I rank like the global cuisines.

Yep.

Yeah, I would put number one is Sichuan. Number 2 is Shanghainese. Number 3 is Cantonese. And then you get to like Italian is number 4.

What's your ranking, Claud?

Honestly, I'm aligned with that ranking. I'm half Chinese. As a funny aside, we were thinking about, because some family in China was like, your podcast will have a lot of pull with the Chinese market. And so we were thinking about translating the podcast into Chinese. We could have done this podcast in Mandarin.

I would have had to sit that one out, but I—

AI could translate pretty well. That is true. That would have been a lot easier. So that time I remember telling people when I was living there, it was 2005, 2006, so 20 years ago. And I would remember telling people like, this must have been what my great-grandfather felt like when he came to America. Like, land of opportunity. You could kind of feel like anything's possible. And as a white guy living in China, you're sort of— Chinese culture has this concept of like, I don't know what they call it, I can't remember, but a guest sort of revered. Like if you're a guest in someone's house, they like really take care of you and go above and beyond. And like as a foreigner, and I'm obviously a foreigner when I'm there, people would just like treat me like insanely well. They still do. It's— I love it. And then I was quite a novelty, especially because I moved the second year I lived there. I moved to a relatively remote part of China called Yunnan Province. And there, there just weren't a lot of foreigners at all.

Yeah.

And people would— they just hadn't seen foreigners before. So like ask me for my autograph all the time.

Wow.

One woman just gave me a baby one day.

Why not?

But it turned out I was freaking out. I'm like, no, she just wanted a picture of her baby with a white guy. Like, so, you know, I kind of liked it. I still love going there, um, and it's been just amazing. I've been going there all the time for 20 years and seeing that, um, you know, Geely now makes these insanely good cars, like way better than anything. Yeah, the BYD cars, well, different, they're a competitor, but yeah, I mean, I don't know how to compare. Um, Geely has a brand called Zeekr, which is like their Porsche or whatever. They're, um, and then BYD, that is good. We're gonna live in a crazy world where America is not going to get these cars.

Yeah.

And you're going to go to third world, developing world countries and see cars that are like way better than our billionaires are driving.

Yeah.

I was in the Caribbean in December in St. Martin, and there were all these swanky cars and I was like, what is this brand? Like, this is the nicest car I've been in. And it was just like a taxi in the Caribbean.

So I was in Saudi Arabia in December and there was BYDs everywhere. Every Uber I took was a BYD and it was really, really interesting.

Yeah, the latest one. I mean, it's every 6 months where I go back there. Few times a year, and there's just like progress. Like, even I haven't been since December, so 3 months. I'm going back next month. But they have this car, it's a BYD, it's a minivan. We don't have it in the US, obviously, but it's— you ever seen the Toyota Alphard? Yeah, it's like that, but like way better. Uh, and the Toyota Alphard, I always thought was the best car in the world because the captain seats in the back, they'd go full lay flat.

We're touching on a lot of different themes that we cover on the podcast, as well as international expansion, and of course Claudia's origin. And you're kind of getting a bit of the nerds in us. I started my career in supply chain at Gap Inc. Oh, okay, cool. Claudia is the mobility expert, having started her career at Uber.

Yeah.

So we love the discussion of where and how and why goods get from point A to point B to point C. I got it. Which clearly has been a passion of yours for some time. And you touched on how really this unlock in the ocean freight lack of inbound receive was one of those early moments where maybe Flexport's starting to brew. Can you walk us through how you went from some of these inefficiencies you observed to really what became the first product of Flexport.

You know, it's interesting because I came at it purely from the customer side. I never worked in logistics before, so I knew what I wanted the customer experience to be, but I didn't understand how the world works.

Sure.

And that probably slowed us down, took longer to get started, but now has made us like— I think we've cultivated that culture of learning and like, we're good. We don't know all the answers and we're going to humbly accept that, but not be satisfied with the way it is. Right. And just like, keep asking why on everything. Um, so yeah, the first product was— we started as a customs brokerage, and that's still, I think, the crown jewels of Flexport, clearing customs. For customs is your hub of data and therefore databases and technology, but it requires a lot of expertise. Um, and that is like what's unique about Flexport is we're not just a tech company, we're not a service company, it's, it's both under one roof. And the tech makes our experts way, way better, especially in customs, because you're tracking everything, every past transaction. You have this library of all your products and all the compliance data that goes with all of them. So if you want to clear this product in any country, like what documents are required, what duty is going to be charged, how does that change when the duties change? For example, every— probably while we're on the air right now, you will be able to query that, quickly update the database, notify the people like the customers are finding out in minutes instead of never from the competition. Mm-hmm. So there's a huge amount that you can do with data. That space. So we started as a customs broker. That was the first product, clear customs on your behalf. Business dogma is like, be really good at one thing and have a core competency, and then you can move into adjacent markets.

Sure.

I ignore that business dogma completely and instead went with the other one, which is, uh, do whatever your customer asks you to do, which is also business dogma. Like, customers—

Yeah, both can be ways to build a great business.

They may come at with one another. So we found out pretty early we wanted to just do customs. I, I, there's still an alternative history where that's all we did and we just were more disciplined and said no to customers and just said, nope, we just do customs. In the very beginning, we were working with a lot of like early Kickstarter brands and early like Flexport. I went, we went through Y Combinator in 2013. So in that era, there was a lot of cool hardware startups and new, new age. DSC and— Yeah, I remember some of them. Pebble and Osmo and Ring.com, Ring the doorbells, like some of our early customers. So those companies gave us the feedback like, we don't want to separate customs from the freight.

Hmm.

We— and so we're not going to work with you because we, you know, we would love to— if you had a freight service, if you could ship the ocean freight or the air freight, then we would buy from you.

Yeah.

and we just kept hearing that over and over again. And finally, at some point, we're like, let's just do the freight.

Yeah.

And, uh, and that set us off for like now the decade of like trying to figure out how the whole world of freight works and make sure we can be the best at that.

Quick founder question. I think the hardest thing for me as a founder selling B2B was to learn how to say no. I was very much the person of, oh, that sounds like a big problem. Let me solve it for you. And then you end up potentially bloating a product or not being super focused. Maybe that leads to a bigger business, but maybe it also leads to a big distraction.

Yeah.

What's your advice to founders on figuring out when and where to say no to customers?

Well, a professional salesperson, they, they want to— their job, they— what they're trying to do is get to no as fast as they can. Oddly enough, so that they cannot waste time with people who are going to say no and then go to the people who are going to say yes.

Right.

That's not the world. It is very dangerous for a founder, for an early stage company that doesn't necessarily, that's trying to discover product market fit and build the feedback loop with the market because the answer might be no with your current capabilities, but you need to build those capabilities. You need to find out like, so with a founder that's doing their own sales, it's gotta be like, you're trying to get to yes if, and then those if statements are like, 99% of the time you're not capable of doing, right? And you know that. And you're— they're saying, yeah, I'll buy from you if, you know, you can do this. If in that case you can ship the air freight for us. And that— and you— that 1 to 5% when the answer turns out to be actually we can do that or we'll do it, that's driving your product roadmap. But then it's just like super high judgment is the only answer. So you don't say yes to stuff that's going to send you down the rabbit hole. Like say yes to stuff you can actually do like quickly and be comfortable with the yes I got a yes if, and then put it on your backlog and go, okay, someday we can come back to this company when we can do that. But it's the— Flexport was very much like, say yes, figure it out. Demand-led. We're unapologetically demand-led, sales-led, go get the customer. And tech is always playing catch-up, as it should be. Like, if you had all the tech, like, you probably built too much stuff before the customer wanted it. So.

Well, you clearly did get the customers. We're talking here today, and you heard that kind of combination of customs and freight. So what, who was the first person to say yes to trusting you with both and how did that process go?

I don't know if I have permission, which brand. It's always like, okay, yeah, under legal terms of U.S. customs, you're not allowed to talk about your customers unless they have explicitly said yes.

Oh, that's good to know.

Yeah. The very first one, I'm not sure I could talk about it, but it was a, one of the very early ones was a watchmaker. And they, in that case, they were not only pushing us to do the freight, but they wanted, in this spirit of getting a yes if, we went to their office and whiteboarded, had a supply chain of Magic whiteboard marker and said, you can draw your ideal command center, your single pane of glass to control your global logistics. What do you want it to look like? And he just brainstormed with one of our designers and product UX guys, and they came up with this thing, and then we went and built it over the course of a month and a half or something. And we came back 6 weeks later with like, nice demo, beautiful product. He's like, wow, that's amazing. Like, yeah, that's his— you guys turned— I remember his line, you turned me into a computer programmer. Amazing. And then he said, okay, if you can get to this price, on the ocean freight, I'll move some containers with you, like several hundred containers, which for us, that was a big deal at the time. Now that's like kind of a small customer, but that price was half of what we were buying freight for at the time. So then you're like, okay, now I gotta figure out how do I get freight cheaper and I have a customer if I can. That's a little different about our market and our business was usually if you're trying to, we're not like a marketplace really. It's a service that we deliver. In a pure marketplace, you would need the buyer and seller to line up at a single moment in time and like consummate that transaction. But for us, I had several months. We had several months to go find an ocean freight provider that could like put down to get some business from us and support us. And, you know, the price probably moved a little bit, but the guy was still committed to working with us if we could get the— hit his target. Yeah. So eventually we did. And they're like, then it's more volume gets you lower prices, lower prices gets you more volume and spin the flywheel for the last 10 years. And so we're now the third largest American company in the ocean freight industry.

Wow. Wow.

And we're going to be number one soon. I'm not proud to be number three. We're going to be number one. But we're also the only one founded after the web browser was invented in the top 100 in the world by volume. So we feel that on the tech side, there's no one close to us. I would argue— I do argue every day that— but I am also paranoid, by the way, that someone else is going to be out here going, well, we're the only international ocean freight provider founded after ChatGPT was invented.

Like, yeah. So, well, I mean, you're digital native, we can say that. And we are going to talk about some of the amazing AI functionality that you recently announced, but I don't want to jump the gun there. Um, just going back to this scaling phase, right? You know, you've gotten the momentum, you've gotten the customers, you're meeting a need for them. And how did you think about scaling this team? Because you alluded to earlier, but you and your brother's dynamic was so unique from day one, and you knew from your previous businesses that technology was gonna be an important underpinning to building this company, but it's a physical assets business. I mean, you're helping move product across the global supply chain. So when did you know to hire global supply chain experts versus hiring the best engineers?

We needed them both from day one. I mean, I think Flexport's, I don't wanna say her age, but she was, let's just say she retired a couple years ago and was like, retired, retired. Uh, not, not 'cause she's that rich. I mean, she made good money, but our first employees like, uh, been in the industry for 30 years, um, and I think employee 5, he, he's open about his age. I think he's in his mid-70s, right? So we've always had these kind of grizzled, uh, old guys and mix that with young tech talent. And I think, uh, and be very global from day one. I mean, a lot of startups, you know, you, you get to focus on your core competency, which might be a core market, right? And just, you don't open office number 2 for many years, but we opened in China and in Amsterdam and Europe in year 1 or year 2. Like, we had to go global from day 1. Yeah, it was always a both. You need both kinds of talent. That was what made us unique. Like, I think in this industry was we could hire the tech talent, but we would get tech people who were humble enough to learn from the logistics pros who've been around and get those people in a room together and solve problems and then be able to navigate that with like You know, I used to have— I used to drink alcohol and like go drink whiskey in bars in Hong Kong until 4 AM negotiating air freight deals. Yeah. You know, it would— you had to go like be able to move around all these different cultures to succeed.

No, I mean, you're in a lot of different rooms. We love the visual of being in the room where it happens. And, you know, you made it happen, which is what helped get Flexport into, into the global trade market. To do that, though, You also mentioned Y Combinator. So you were part of the 2013 batch.

2014.

Yeah, 2014. Funding is an important partner that you bring alongside.

You know, who was the first person to investing in the Flexport vision?

Me and my brother, of course, early money and then quite a bit actually. And then the first after that was, was YC, was YC, Paul Graham and the YC partners.

It had to have been early days of YC.

No, no, I think YC founded in 2005.

So really?

Yeah. We've been around a long time.

Yeah, I feel like I thought that was like—

now it's earlier.

I mean, back then, yeah, you're right, you're right.

There were only 50 or 60 companies in our batch, and now they do like 1,000 a year. So it was definitely different.

Um, yeah, yeah, no, it definitely was.

But we were the— we were the last batch that, uh, Paul Graham was still running the program.

That's special.

And he announced— it was really special because he announced it mid-batch, so we didn't take it for granted. Yeah, you were like, oh, I got like I get to hang out with Paul and no one else will ever again. Like, I mean, he's still involved, but not every single day like he was then.

Well, and for our listeners who are, you know, either coming out of a batch experience or have taken some pre-seed capital but haven't really gone to scale, like, how did you guys think about finding the right long-term partners and investors kind of post that YC experience?

Investors, they are very mimetic creatures. They, they want to copy other people. They don't really think for themselves.

You can't offend him.

Sadly.

Please.

I don't care. This is a fact, by the way. All humans are like this. So, but, but it's very good to recognize like how investors, venture investors work. It's a lot of it's hype driven. A lot of it is what did other people say? And venture, unlike the public stock market investing, has it— the scoreboard is super amorphous. Like you don't know if someone is good or not at venture for a decade. And even then it might have been luck, right? Good or bad. And it pays really well. Some of these people making millions and millions of dollars a year, and they don't have a boss really. They can hang out, you know, my investors are usually in France or skiing. So you're like, okay, pretty good job, pays well.

Yeah, all things considered.

Like all the things you would want. Yeah. I'm not saying it's easy, but it's really hard to do well. But you don't want to get fired from that job once you get it. And so the only way to get fired, since again, you don't know for 10 years if the person's gonna get it or not, you're not gonna get fired. How could you know if the person's good? The only way to get fired is everyone in your team agrees that this person's bad. Yeah. You might not be bad, but if everyone thinks you're bad, you're out. You're bad. You're at risk. Okay. So if that's your environment, you have to be memetic. You have to be referencing everything you do with other people, checking like, hey, what do you think of this deal I'm looking at?

Right.

You know, because you would think like if you got a deal, you'd be like, don't tell anyone I got this awesome company. I don't want anyone to sneak in and take it. But like, actually, that's what you should do. Yeah, that's what Founders Fund does because they have managed, thanks to Peter's culture that he set, not to be part of the memetic herd cycle as much as they can. They have some vaccines against it. So if you're reference checking everything, then this— founders need to know this because they can use it. It can work against you for sure. It's regression to the mean. Investors are going to talk themselves out of good deals. You're like, "Oh, I was going to pay this, but all these other guys are like, 'No, I don't think that's a good company.'" So you get regression to the mean, or it could be regression to the mean, the hype cycle.

"Oh yeah.

Oh, that thing is amazing. Yeah. Did you hear about it? Oh my God. You see the revenue graph? Did you— Oh, the founder, do you see how smart he was?" Whatever. And so it can go and sort of get this U-shaped curve, like either you're screwed or they're going to love you. YC companies need to know that. YC, like, the top 10 companies— now it's probably much more because the batch is bigger and the talent's probably getting better and better. But in my era, I felt like the top 10 companies were just going to absolutely crush it. And everyone's going to want to pile into those. But if you were like a median company, nobody loved you at all.

They weren't knocking.

So I thought it was very important to be like top, top, top of the batch.

Yeah.

Got to be one of the best. Absolutely. In fact, my friend— it wasn't me. I didn't have this line. But my friend who did YC— During our batch, somebody leaked the— the— what? During YC, the founders all vote on— they used to. I think they shut this down because of our batch. The founders would vote who's the best company, like mid-batch. They would vote who—

is it a popularity contest?

Basically, yeah. And the founders would all vote on it, and then someone leaked that list to TechCrunch.

Oh, damn.

And so the natural suspects are whoever's on the list, for sure, because that's who would want to leak. And my friend's company, I think, was the number— he was number 2 on list. I don't remember if we were even on there. I can't remember, maybe not. But his company was number 2, and the YC partners called him in, were like, did you leak this? And he goes, I would never leak anything unless I was number 1. Which I like. Yeah, I mean, kind of unique.

Relatable.

So I do think that there's an element from a founder to understand that dynamic, that what's driving it from the venture capitalist side. Like, they are Through no fault of their own, chasing momentum and hype. And of course they're super smart. Some of the smartest people I've ever met work in venture and they're good people. I'm not trying to insult the entire class of people, but it is human nature to be memetic. As a founder, you need to know, okay, how do I play that to my advantage? You, which means you can't let the, in a, in a more efficient market or a market where these are all independent outcomes.

Uh-huh.

Meaning each investor you talked to was thinking purely for themself. Then the more investors you talk to, the more likely you are to find the person who's going to have the high price. But in fact, the opposite is true because they were all— they're all talking to each other. Not necessarily in an evil kind of collusion way, although there's a little bit of collusion that's kind of sketchy that's happening there. Uh, but they're just talking to each other to avoid everybody thinking that they're dumb with their deals. And the associates are talking to each other, you know, if it's not the partners.

Yeah.

So the more people you talk to, the lower your price is going to be, the more they're going to talk each other out of deals. And, and then also the longer your thing runs on, it's a bit like a real estate house that's been on Zillow for like 2 years. It looks amazing, but clearly something's wrong with it. It must be off. Yeah. So you can't like take too long. You can't talk to too many people. You need to make sure everybody you talk to is just super amped. So if they do talk to someone else, They're going to say amazing things. So don't talk to people who are in the wrong niche. Like, don't waste time with a growth investor. You're not going to change their investing patterns. If they've never funded something like this, they're not going to fund you now. And, and don't share metrics with random people. Or, you know, investors have unlimited time. That's all they do. And you do not. As a founder, you just focus on your business. So don't let people talk you into fundraising when you're not fundraising. I've ever— it's so easy to make that mistake. Oh, this person, is exciting.

I'm just nodding my head because everything you're saying resonates so deeply with my lived experience.

Yeah, you gotta, um, all this I learned the hard way, by the way, so.

Hard knocks, yeah.

Well, I was lucky, my brother went through Y Combinator one batch before me for a different company that he started. Uh, one year before me.

He was the Canary.

Yeah, so he like helped to learn. His, his, he didn't have as much success going through YC and fundraise. He, he actually built a big business and raised a decent amount of capital, but not quite as, uh, successful on the a lot of metrics as Flexport. But he kind of taught me a lot. He went through some of it. Yeah, he did for sure.

So we've chatted a bit about fundraising. Let's talk a little bit about scaling, building a business, the tech. I think what's interesting with the market that you're building in is a lot of governments are involved. It's highly regulated. There's policy decisions. Sometimes that can either help or hurt when you're going after a venture outcome. How did Flexport figure out these dynamics early on?

On the regulatory side, we are not a test case. So there's a lot of startups that are effectively like legal test case, like crypto. Should you be able to bank yourself? I don't know. Is this a, is this a security, a commodity, or, you know, do I need to have SEC registration? Or Airbnb? Should I, can I run an unlicensed hotel from my living room? —just to say, you know, it's a test case and their business doesn't work unless they push that test and figure it out and work with the— Ours is like, we are super, super regulated and all, and we are willing and able to follow all of those laws. And I don't need to challenge any of them. Like, they exist for good reasons and I might disagree, but I'm like willing to follow all of them. So we have— we sat compliance— a lot of what we do is compliance as a service. We're helping you comply with customs regs. And just make that top of the list of priorities for our company always. Um, so that, that like, in fact, one of the things we have to overcome from a brand perspective, being a Silicon Valley startup is that like, we're not here to break things and challenge things and test, you know, loopholes or whatever. Like, it's just going to be like a by-the-book customs broker. Um, and ultimately we're regulated by— there's 43 government agencies in the United States alone, maybe more now. I don't know what's new. Uh, I remember this stat though, 43 government agencies that, that take an interest in imported products that might regulate your product depending on what it is. Wow. And that's just in the United States of America. So times 200 countries, there's a lot of potential regulations that we have to be aware of. And it's hard. I'm not saying we're perfect compliance track record at all, but like none of the failings have been one of integrity or values or someone trying to take a shortcut. It's always been like, oh, we didn't have the right process down. We didn't understand that rule.

Like Or it changed and we were updating it.

And it was changing constantly.

Right. Before we dive a little bit more into today's regulatory environment and then just everything that's happening in AI, I'd love to just talk a bit about the tech differentiation Flexport had earlier on. You're the biggest mover, newest company in the space, digitally native. What were some key tech bets early on that really shaped the path for Flexport?

So the early tech bets that we made were all around the user experience and about giving you visual representation of your freight as it's moving, line item level visibility of what items are on each container, and then predictive transit times. When are these going to arrive? That was like kind of the early— with notifications if it was late. Yeah, that was the very simple.

So novel. Can you like, can you believe stuff that you would expect?

You know, you would think like there'd be this kind of— when you ship something with FedEx, there's a little— yeah, a little tracker. But in ocean freight, that, that didn't exist, largely doesn't exist outside of Flexport. This stuff was largely— we, we created that. Um, and the reason it doesn't exist is because an ocean freight container on that journey that it's making from somewhere in the world, you know, to, to wherever else, actually is getting handled by at least— I should say at least— typical container will be handled by 15 companies end to end. Wow. When you count it all, including the data, like customs broker and the port, ocean carrier, obviously the trucks on both sides, there's warehouses, the companies that are importing and export, there's a bank, there's an insurance company. So, and those are all different IT fragmented IT systems at its core. Yeah. But we started for better or worse on the UX side of things and then we would manually transpose things and then we've been working and we've done a great job, especially the last 5 years. Of building the workflow systems for our team and then the integration layers to connect all these things so that we don't have to manually transpose data, right, across things. And I often joke freight forwarding, which is our industry, we often— I call it freight email forwarding. We're just passing data by PDF attachments and stuff. So yeah, we started at the UX and then probably too late. I mean, only 5— in 2018 is when we got serious. So that's like 7 years ago. 2018 is when we got really serious about building workflow ops tech to be efficient. Mm-hmm. Uh, in hindsight, maybe we should have started that in like 2015, but we were learning as we went and like figuring out what does the system need to look like, uh, to even learning what all the work was. You know, you do it, you would do it manually, learn it, distill it, simplify it, break it down into simple components and then turn that into software. That's been like the algorithm that we used to achieve automation.

I mean, your data moat has got to be insane at this point. And the differentiation that you're going to be able to build with what you've learned with patients.

Now that the data that we have, we're as one of the largest freight providers in the world, gives us huge advantages in, in AI, in training models, fine-tuning models. Well, it gives you the ability to look at from an AI application, where do we want to focus a problem? Because there's so many on that end-to-end journey of like a container from the order being placed out to the factory We— the way that Flexport system works is you place orders to your factories through our systems and purchase orders. Factories receive those, they go make the goods, they place a booking for when it's ready to get picked up. They place the booking and we dispatch a truck. But then we're taking those orders and we know the geometry of all the products, their dimensions. We're doing that geometry to figure out the optimal container load plan to maximize the number of items. Shove it in there. If it doesn't fill up the container, we will find one of your other factories and bring bring that in and consolidate across factories. Incredible. So you're— what we, we typically, once that— when people adopt that algorithm, reduce the number of containers by 10%. Wow. That people ship, which is a really big deal for the world.

Oh, it's your bottom line directly then?

Yeah, totally. And people are arguing about 5% of freight, they'll kill you for that. But I'm like, well, how about we just— yeah, let's just do this. Yes. Um, and algorithms are basically free. And then, um, from there, software that places the booking So now you can use Flexport's tech, Flexport's contract, I should say, or you can use our tech and we'll place the booking with a different provider if you want to buy. Big companies will buy their freight directly from the ship owners, from the ship operators, the carriers, like getting closer to the steel, cutting costs. But we can allocate that and we manage it. Oh, wow. Then you clear customs inside and export customs in one country and import in the other, dispatch a truck. Delivered to a warehouse and then onto a consumer store. So that's the end-to-end journey. Yeah. We can now look at that anywhere in that flow and go, where's— where can AI, generative AI, machine learning, or any other model play a role? Where can it cut costs, improve quality? And it turns out many, many stages. But on each one of those, like, most, most of them are not like company worthy. So startups that are trying to make it company worthy and say, hey, I'm going to build a whole company that does this, automate appointments at the terminal or I love good companies. They might, they might succeed, but our view is we just cherry-pick what's the best use case and then just do it. And then we have distribution so that the next day thousands of companies are using it. Whereas a pure AI company has to go beg for the data to train your model, has to pick some small niche TAM market, and then doesn't, again, beg for customers to sign an enterprise contract to pay for it. So we have we feel like we're really uniquely positioned, not because we have like the best AI talent in the world. Hopefully we get, you know, more of those. But are you hiring? Yeah, of course we are. But, but, but just the nature of our business, we think is like one of the best. We're going to be definitely a winner from the AI.

It sounds like it. And we want to cover some of the more macro impacts to your business right now. But maybe let's talk a bit more about AI just because we're on the topic.

Well, you recently announced launching over 20 sort of like new AI products. Um, would love to dive a bit deeper in how AI is really shaping sort of the roadmap for Flexport and what your favorite release has been.

We kind of started bundling— Brian Chesky taught me this— uh, it started bundling our tech launches so that you do every 6 months like a big release, bundle it up in a release. Um, I was always against that because I was like, shouldn't we just constantly ship? Yeah, agile, or yeah, sort of anti-agile. But the reality is, yeah, we're shipping all the time, and then some of it is like stuff that was already in beta, already live in some cases, and rolling it up into more of marketing type announcement. Totally. But also a lot of it we finished the night before the announcement. Like, you know, college student doing their homework. Like, people were really worked really, really hard to get the, hit the deadline on time. So, um, that was kind of a false dichotomy. So I really like that for B2B especially, where people just don't like pay that much attention to something that you launched. Like, we're constantly launching stuff and no one's writing about that, and they'll write about something juicy but not like an article about actual tech progress. The probably the most interesting piece of AI, a piece of tech that we launched. Well, there's two big ones from an AI standpoint. It was just natural language querying. So you can just ask question of your supply chain and generate reports, get data. We were already the best, I think, in generating reports for people. Our competition mostly will generate a report for you across their disparate systems. Have a human merge it in an Excel file and mail it to you once a week with your report. And we have for a long, long time since the beginning basically made it possible to have a nice analytics dashboard and download it yourself. But this makes it like so anyone can do that. Tend to be our users, they'll have like one power user, usually a young person who's like more computer savvy, who's like the reporting person on their team. But now we're kind of made it so anyone, if you can ask a question, you can generate SQL. The system generates SQL for you and then, um, cool. Yeah. So that's probably the most powerful thing and it'll, it keeps getting smarter, uh, and more accurate, better, and, and we keep feeding it more data of like more of your data, more. We have a lot of different products. They're not all in the first launch. Mm-hmm. A lot of the other AI use cases are just automating work. Like of, of the price of shipping a container across the world, about 10% of what customers are paying this is industry-wide, not just a Flexport stat. About 10% of your payment is actually going to pay for the coordination labor inside these freight forwarders. And not blue-collar people driving trucks or whatever, just like people doing the freight email forwarding, pushing paper and making phone calls and stuff. In 2024, we automated 30% of that work, a lot of it with AI, where it's stuff that was very difficult because it's, it's quite unstructured in some cases, or phone calls. We're making like 5,000 phone calls a day with voice agents calling, um, different, and we'll, we'll probably ramp that to, um, tens of thousands of phone calls a day, hundreds of thousands, perhaps we'll see what, what's needed. Chasing documents, chasing data, checking, chasing statuses where there's no interface. Right. And like a lot of the industry has been human to human, not machine to machine. Yeah. And we're like, well, but I was trying to make every machine talk to every machine. Now I'm like, my machines can just talk to the humans. Yeah. Uh, so. We don't yet make this software— the AI voice agents talk to our customers. I'm super skeptical. Not because I don't believe, but like the bar is so high for me. I want humans to talk to our customers.

Yeah, yeah.

Someday, probably. But you mentioned like human to human.

Obviously logistics is a very sort of like— it's a big workforce, right? There's a lot of unions, there's a lot of moving parts and boxes need to be packed onto, you know, boats.

Right.

What is your view on just sort of like AI in the workforce, especially in logistics? I know a lot of folks at ports have been maybe resistant to automation in the past. How do you see that part of the industry evolving?

I mean, unions do a great job of representing the interests of their union, and that is what they should keep doing. Like, you know, everyone is supposed to do their— represent themselves out there, and they're right to be fearful of their— of those particular jobs, like loading container ships. I mean, we know this from the dawn of the container itself. Like if you look at— well, we have a bunch of these photographs in our office. I bought them from a photographer who was in the ports before the containers. And, you know, it's like bundles of cargo wrapped in rope and hanging on, swinging on a little hook and swinging onto the— definitely a lot more labor intensive than a container. So we know that tech will eliminate jobs, um, in the space. Now, by the way, the companies that adopt that tech hire more people than ever. Yeah. And grow like crazy. The industry may have less people, but the given— the winners will have a lot more people. And we also know, like, look, the job of companies is not to employ people. Right. The job of companies is to deliver awesome services to customers. Right. And whoever does that at the lowest cost, which typically means employing the fewest people, will get the customer. And then we all benefit because these people are competing to lower costs and improve improve quality. And as a society, we get better off that way. Like, that's how the system works. You know, the argument that we shouldn't adopt tech because of jobs, like, well, we should all just like do— we should plant our food with like a stick. Yeah, exactly. You know, like just dig a hole with a stick. So I'm not, I'm not at all— I don't— but I do sympathize with the union because their job is to represent their, their employees and like, good, keep fighting for yourself. But as a society, it's not, it's not good that we— they, they did pass the contract. They can't automate any of the US ports for the next 6 years, at least on— wow, that's like, to me, a disaster for all the rest of us that use those ports for our livelihood and the stuff that we buy. Everything costs more as a result. I assume it'll— you know, I don't know how to think about power dynamics and political power and the union negotiation and whether— we'll see in 6 years whether that's possible to renegotiate. But—

and the market forces will weigh in, right? If that's inefficient, I think we tend to believe that will be fixed. Progress is not guaranteed.

Uh, civilization does not only advance. If you look at the history, uh, there The Dark Ages did happen for 1,000 years. That is true.

That is true. Well, I don't know how to go from that to what I want to talk about next, but I do want to bring up some of the shifts that we're seeing in the US tariff market right now. It's a good transition. You know, as I'm sure we're all aware, there's been recent executive orders that have imposed or threatened to impose tariffs on all sorts of goods, raw materials, steel and aluminum to, you know, imports such as Chinese imports and more. you know, just for our listeners, how are you thinking about this? It's really, really harmful.

We had to take our customers' lens first off. The tariffs are really harmful for their business, and therefore we are anti-tariff, like, unapologetically. It's bad for our customers. Yeah, therefore we're anti. And it will probably cause some companies to fail that can't move their supply chains, that customers don't want their products if they cost more. The US as a country is less dependent on trade than, than any other country in the world, really. Certainly any other developed country. We're self-sufficient as a country, thankfully. I mean, we produce all of our own energy, all of our own food, most natural resources. Like, most stuff is made in America, actually. People don't think that because we're used to buying— this is made in America— we're used to buying, you know, random consumer products that are not made in America. But as a whole, most of the stuff is. Only about 10% of US GDP is trade. Uh, that's imports and exports. So it's a lot less, uh, than other countries. So I don't really have a— but I'm very anti-tariff. There might be a world where, like, look, yes, we should make— where there is a world we should make more stuff in America, it would be better. But as long as the dollar is as strong as it is, and therefore other countries' stuff is so cheap, like, tariffs are not really going to solve that. The actual play to solve that would be devalue the dollar. But no, I don't think that is going to— it sounds terrible. Like no president is going to propose that, but it might maybe like subtly that might be the path. So our view is like, okay, really bad for our customers. What do you do about it? I think it might, might hurt us. Like if companies fail, obviously that hurts us. They might owe us money. It might literally, you know, might really cost us money. I don't have that big of an ego that like, oh, I should go yell at the president and tell him to stop doing that. Like nobody cares what I think. Well, some people care, but we care. Yeah, but no one in the White House cares what I think I should say. And whatever, they got their own agenda. They should— they hopefully know what they're doing. We'll see. The one thing that we can do, and I think we do a really good job of it, we try really hard, is to help people figure out what is happening as with as much accuracy as possible. Yeah. And quickly as possible and help them to make good decisions. So these brands are really flailing about figuring out What is the new tariff rate? Where should I move my supply chain? Should I— for example, if your duty rate used to be 0% and now it's 20%, or in some cases we've seen it go to 50% or higher, you now care a lot more about your valuation of the goods. And your valuation is not just what you paid for them. There are all kinds of rules about goods, because if you design those goods in America and you put a lot of CapEx into the factory, import something in another country, you— there's formulas for how you can deduct these things from the value. And then that value, when it was times 0%, you never bothered. Yeah, but if it's times 50%, you're like, oh, I better get smart about that. If you import something and then it becomes a component in a manufacturing process and you later export that good, you're owed a refund on the import duty. Or if you just import and then export It doesn't have to be the same product, but a product with the same HS code, the same classification, you're owed a refund. Every year, $6 billion goes unclaimed in refunds from the US government on these duty drawbacks, it's called. So we have all these services where we can help people, even like when they roll out a new tariff, which again is every few weeks right now, we in one minute can run SQL queries and figure out who's affected by this and tell them and get it into the hands of account managers and start calling, you know, within an hour we're dialing out and letting people know, hey, this is happened. This is what you would have cost you last year. Um, by the way, we're not— we don't help people find new factories. Uh, Import Genius does that actually, but Flexport does not. Um, but you know, how— as you do that, we'll set you up and make sure that your logistics run smoothly. Yeah. As you move to a different manufacturing country, for example, amidst many uncertainties. So yeah, and like You know, when I used to go camping with my dad, he would say, you don't have to outrun the bear, you just have to outrun those campers at the next site over. A classic line. With the tariffs, I feel that way. It's like, I can't really change. I don't believe we can change the landscape. No one's listening in D.C. about that. But I can help you. I can outrun the competitors and make sure we're better at responding to this than anyone else.

And involved in many unprecedented quote unquote times now over the lifecycle of Flexport. How have you stayed strong and kind of how have you learned to handle the uncertainty yourself as a founder?

So I hired a CEO and then came back after 6 months. and it didn't go very well. Obviously that wasn't the plan. Uh, but, um, I feel like I got a lot of confidence out of that experience, even though it was a mistake, uh, clearly. But realizing that I hired this professional CEO and was supposed to be the best and then wasn't, and I'm like, wait, I'm, I, I can do a better job. Yeah. Who, me? And we've completely transformed the company in the last 18 months to like object— by every objective metric. The company's doing way, way better. So that's given me some confidence and some, some self-belief. Um, but, uh, I think in general you want to be just pretty humble in the sense of like just constantly trying to learn. That's my only mission, honestly. That's why I love Flexport. It was the best avenue to learn about the world. Um, and so as long as we've built like a really healthy, like, we are here to learn problems are great, let's celebrate them so we can learn how to solve them, learn together. Yeah. Build like a really great learning organism. Then it doesn't sort of like, we will get through whatever happens is like yet another learning opportunity. What's that? Man's Search for Meaning. Have you ever read that book? Yeah. Great book about a Holocaust survivor. And like the, the core lesson is like, you do have a choice. Bad stuff's gonna happen to you in the world. Between the bad stuff and your reaction, you have agency to decide what does this mean And what are you going to do about it? Yeah. And as long as you remember you have that agency and you can assign the meaning that you want, then you can get through most anything that will happen. And we've been— the world has thrown all kinds of stuff at us the last decade. You mentioned COVID, that, that hit a lot of companies, but 50% of the world's air freight flies in the belly of passenger planes. We're a major air freight provider. So all the airplanes were grounded. Yeah. We couldn't fly, you know, we couldn't operate for our customers. Logistics is, yeah, super hardcore industry that then we had the ports complete stopped working. Right. It was taking 120 days to cross the Pacific. It's a 15-day journey. Something got stuck in the Nile or what?

No, no, the Suez.

The Suez. The Suez. Yeah, that was pretty much— I know, but more importantly, more recently, the terrorists in Red Sea is we haven't been able as an industry to use, as a civilization, haven't been able to use the Red Sea for ocean containers. For over a year and a half now. So we're kind of used to it at this point that we'll, whatever the world throws at us, we just figure out like, all right, who needs to know? What do we need to do? You know, try to not overreact, try to stay calm and— Yeah. Yeah, having that culture of learning as the foundation is probably the most important lesson.

Such incredible wisdom for our founder listeners. I know a lot of early-stage founders or folks that have done it for the first time think, you know, It's just about how quickly I move and how well I do it. But in the long run, it's really how you adapt and learn from the inevitable sort of like ups and downs. Yeah. Oh my God.

I mean, being a founder, you're going to have your ass kicked. Every day. And, you know, I think YC is the one, like, be a cockroach, like survive nuclear war. Cockroaches can survive a nuke. And so you must have survived a few nukes.

I'm going to be honest.

You have to be Yeah, build yourself to— in the long— you don't know when you're going to be successful or how even. But if you never die, like, you will win eventually.

Maybe there's a chance. Well, as we come up on time, we'd love to ask you the hero question of our podcast. We ask this to all of our guests and we ask that the answer is not mom. It's normally always mom. But the question is, who is a woman in your life that has had a profound impact on you and your career?

That's not fair because my mom is the best.

I mean, I want to meet your mom, to be clear. Yeah, my mom's a—

yeah, she's pretty badass. Um, well, we've had, you know, the first Flexport's first employee was a woman. Uh, yeah, let's go. So, and she was our licensed customs broker that got us into the customs business, who was retired. She's now retired. Kathy, if you're out there, I love you. Uh, and, um, yeah, but a lot of great, uh, female leaders, our head of North America for many years was, name's Caitlin. She's now a VC. Some of these people, I can't keep them because they're— everyone's trying to poach our top people. She's now a VC, but she ran sales for us for several years. Wonderful. Kind of helped us build the culture that's been so successful. Yeah.

Thanks for sharing. Well, thank you so much for being on the podcast today. This was an awesome conversation and excited to see what's next.

Thank you. Thank you so much for joining us at The Room Podcast. If you want more from The Room every week, subscribe to our newsletter at theroompodcast.com/newsletter. We'll be back next week with a new episode, an inspirational guest, Tuesday, 10:00 AM Eastern, 7:00 AM Pacific. See you in the room. Perkins Coie supports the most innovative entrepreneurs and investors in fast-moving and high-growth sectors. Addressing their myriad of legal needs. But the firm doesn't just provide end-to-end legal and business counseling to its startup clients. It also facilitates introductions to key advisors and sources of capital. Perkins Coie's interactive website, Startup Percolator, offers access to programs, resources, and rich dynamic content designed to assist entrepreneurs on their startup journey. To learn more, go to startuppercolator.com. And perkinscoie.com.

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