#41 - Revolutionizing Warehousing: Meet the Start-Up Changing the Game

The company we meet today helps you understand how to make your warehousing infrastructure more flexible. Yep, not fixed.

Right. Super strategic, right? So I think I love the highlight of when a company is launching new products or they're innovating.

Circa a couple of years ago, we'd been on a journey to create a new position for Flex. They're the relatively early innings of educating the market. Flexible warehousing infrastructure, in contrast to fixed warehousing infrastructure, it is still part of your infrastructure. Our technology platform is plugged in.

Hi, good morning, good afternoon, good evening. Welcome back to this episode of The Tech Optimist Meet the Startup. Today we meet Flex. Our guide or our host for today is gonna be Laura Rippy, managing partner and board member at Alumni Ventures. And then our guest entrepreneur today is gonna be Carl Sebrecht, CEO and co-founder of Flex. And then you'll also hear my voice here and there. My name is Sam Herrick and I will be your guide and tech note writer for this episode. Let's do it. In a world captivated by criticism, it's easy to overlook the groundbreaking technologies shaping our future. Let's shine a light on innovators who are propelling us forward. As the most active venture capital firm in the US, we have an exceptional view of tech's real-world impact. Join us as we explore, celebrate, and contribute to the stories of those creating tomorrow. Welcome to The Tech Optimist. As a reminder, the Tech Optimist podcast is for informational purposes only. It is not personalized advice, and it is not an offer to buy or sell securities. For additional important details, please see the text description accompanying this episode.

Hi, everyone. It's Laura Rippy. I am managing partner at Alumni Ventures and thrilled to bring Karl Siebrecht and the story of Flex here to all of you at AV in our Tech Optimist podcast. We've been investors in Flex for 3 and a half years, which is amazing. So, what I wanted to start off with, Karl, is if you can kind of help us visualize a little bit more about what Flex does and Then we'll get into your personal story as well. But just to kind of kick things off for everyone, tell us a little bit about the Flex platform.

Very happy to do that. And it's good to see you again, Laura, and great to be here. So Flex, I'll try to use as little jargon as possible. So Flex is in the warehousing business. We provide warehousing services, kind of boring, I know it sounds like, We provide warehousing services to very large enterprise companies. What's unique about our business is we provide flexibility in warehousing. If you zoom out for half a second and think about logistics networks and supply chains, goods move from a point of origin, whether that's in the Far East or, you know, in a factory in Mississippi, they move from a point of origin to a point of destination. Across a network, they flow from origin to destination. Logistics is all the investment, all the activity, all the business that happens to make that go from point of origin to point of destination. There are 2 rigid points in supply chains. One is manufacturing. Rigid meaning there's a plant somewhere, and there's concrete, and there's steel, and there's assets. And there are warehouses that have concrete and steel and assets inside. And those are the fixed points in the flow of goods. And in many cases, those become bottlenecks because as the world changes around a company or around a new business line in the company, those are the spots that are hardest to react. Or if you can predict that change, they're the toughest spots to move around. The physical, physical assets. So what Flex does, and this is how we came up with the name 13 years ago, Flex provides flexibility in warehousing. Specifically, we provide what we call flexible warehousing infrastructure in direct opposition to typically the way warehouses work in the world is it's fixed infrastructure. So that's what we do. You might imagine that if you're a big company like a Nike or a Lowe's or a Starbucks, There are parts of your business that are maybe predictable, relatively stable, and then there are other parts where you're innovating, you're growing, you're changing. And it is in those parts of your business where the application of flexibility and warehousing makes tons of sense and unlocks tons of value. So we're in the warehousing business, but we come at it with a unique capability.

Right. Super strategic, right? So I think I love the highlight of when a company is launching new products or they're innovating, They need a partner that has flexibility, and you are from the ground up that flexible platform for the warehousing piece. So, love that. I mean, that's partly why you've had some pretty long customer relationships, I know. And I imagine those sort of strategic partnerships are core to what you built. So, that's terrific. I guess we should—

Exactly right.

Yeah. So, let's start back a little bit. This is not your first rodeo, my friend. You are a serial founder, serial successful CEO, part of why we love backing you, and I know we originally started our conversation because of the alumni connection, you know, from the Dartmouth Focus Fund and your degree from Tuck really fits in with what we do at Alumni Ventures, but a big piece is backing amazing CEOs. So maybe if you could share a little bit about your personal journey here as CEO and what you bring to the table and how that Kind of informs what you do.

Yep. So, I didn't grow up thinking I would be a tech entrepreneur. I studied economics, studied Russian, was Navy ROTC, so spent 4 years in the Navy, which was an amazing experience, and then went to business school, as you said, went to Tuck. Go Tuck! And after that, worked at Bain& Company in Boston, where you are right now, for a few years. And then, a very, very close friend of mine Started a business out here in Seattle. It was one of the very first advertising technology companies. He started it in '97 when there was almost no monetization happening on the internet. In fact, there really wasn't that much activity on the internet. It was kind of an interesting sort of debate whether this would ever amount to anything or not. But for those who felt like this was actually going to grow and the trend lines of actually, uh, you know, audience minutes spent would continue to go up in the right, it would stand to reason that the world would have to figure out a way to monetize, uh, all the content that was being created and putting online. And some people would bet that that was advertising. Of course, now I've long ago lost track of how many tens and tens and tens of billions of dollars are spent in advertising. I think Amazon just recently announced they alone are on a $54 billion trajectory for this calendar year. So, it's crazy, but that's not what we're here to talk about. I joined this very early company in ad tech just because it sounded cool. It was an amazing team. A very close friend of mine had started it, as I said. And that ended up being a 10-year journey where we had high highs and low lows. We almost didn't survive, but we barely did. It's kind of one of those stories. And it was amazing. And through that 10-year period, which culminated in a sale to Microsoft, where I spent a couple of years, there was no going back. There was absolutely no going back. So, I've worked at a handful of startups, started one a few years later. And then came to the idea of Flex. I spent some time in another ad tech company. Anyway, after we sold that second business, I was on the beach kind of catching my breath and then started thinking about how am I going to try to recreate that magic, either starting a company myself or joining another small company. And we can get to the Flex founding story here, but— You know, the, uh, the foreshadowing is I was talking to a guy at a housewarming party who said, I've got an idea for you. You know, which typically you might say like, oh boy, here we go. Uh, but this, this idea turned out to be, um, the founding idea behind Flex.

Awesome. Yeah. Wasn't it something like Airbnb for warehouse space or something in the very early? And now you guys have evolved since that, so that it's much more Yeah.

All right, I know we're all dying to hear this story. We're gonna hear it really quick, but one second, we gotta do a sponsor spotlight really quick, and then we'll get right back into the answer and we'll hear that story. It's a really funny one, so you're not going to want to miss it. Hold on one second.

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That's right. It captures the early essence. So, so I'll do this quickly. The, in the ad tech business, the business model that we built was a marketplace model. There was a supply side of a network or a marketplace, which were publishers, websites that had content looking to monetize it. And there was a buy side of a network, which were advertisers. Hey, I would like to find eyeballs to market my product. And we built a tech platform that allowed buying and selling to happen in a consistent and very scalable way for both sides. That was the essence of the business we built. And again, after 10 years, that business model and a lot of the dynamics behind it were etched into my brain. And so, when this idea for warehousing came along, where the insight was, hey, when I lease a warehouse, I have to do it typically for multiple years. And when there is uncertainty in my business, I end up either long or short. space. And according to this, this guy who became— who brought the idea and then became our first customer, he said, look, everybody operates in this way. Everyone's just sort of making bets. And they're either long or short. And man, it could be really valuable if you could create a market out of this. Someone's got too much space, you could make it available to somebody who needs more. And that was the founding insight. We don't provide space, we actually provide the services. So kind of like You think of an Uber, they don't provide you cars to drive around. They actually provide the service. I will take you from point A to point B. And that's kind of in essence what we do. We provide big businesses like Nike with warehousing services to fuel things like shoe launches, the shoe drops. I could go on, but that's the essence of our building and how it connects to the founding story. So, it was a bit serendipitous, firstly, that I ran into a guy who had this idea. Secondly, that I had worked for, at this point, going on 14 years in a marketplace type of model and heard about this idea and was able to apply some past learnings to believe that I think this should be

So as we know by now, whenever I am researching each of these companies, I do a deep dive on their website. I do a deep dive in their webinars if they have any, in their blog if they have any, on their social medias, on their YouTube channel. And Flexx has some really awesome, you know, videos from companies that they directly work with, um, on their YouTube channel. And I'm going to show you a couple of those. And so I'm going to share a few of those now. They're each about 3 minutes long. Um, I think it's really cool to hear the insights from, like, directly from Flex's clients. Um, as mentioned earlier, Carl told us how the system works and how, you know, his business works, but I think it's really insightful to hear from the actual people that it's serving. And also definitely recommend a slew on their website because they have a lot of Really good information on their logistics, and you know, as a company, how they work and their branding is just overall really nice. So definitely recommend a little gander over there.

Hundreds of thousands of products launch every year, accounting for roughly 26% of annual revenue. Executing product launches flawlessly is critical. Ensuring that you're hitting street dates is something that can earn. For a

successful product launch, you know, the warehouse is important, the, the location of the warehouse is important, as well as making sure that you have the labor to support the product launch.

Ideally, a company should be able to launch their product without impacting any of their standard operating procedures at their warehouses and within their supply chain on a day-to-day basis. This video game company came to us because they were looking at a very large warehouse expansion. very complex operational challenge where they were going to need to stand up multiple warehouses in a short amount of time just to be able to hit a street date that they had already promised to their customers.

The current 3PL could not execute on the amount of orders in the short period of time that it was expecting to reach the street. What makes Iron Mountain such a great partner for this program is first and foremost our Mountaineers, our people that come to work here every single day. The second thing I would say is, is really our real estate footprint. The most important thing for our customers besides the first 2 that I mentioned is really our security and how secure our facilities are. All of our buildings have cameras, there's CCTV, car-keyed access, so it, it really enhances our value proposition compared to other providers that are in any type of business because of what our buildings are.

This video game brand was doing a 2-phase launch. They were doing a pre-order phase with 100,000 units and a live order phase with half a million units. Our dynamic ship-on dates allow us to ensure that we are not shipping anything out prior or past when it would need to go out in order to get right on a doorstep the day that we want it.

There's, there's really tight timeframes in terms of when the inventory gets here. We go from making boxes to packing them to labeling them to getting them on the truck. So what really helps us with the Flex system is the custom batch waving. Especially with the multi-line items, different SKUs, and also the QR code. So if we have a certain order that has a large amount, we can just scan one QR code instead of scanning the same SKU number over and over again. Flex system, it's extremely easy to use. As soon as people come in, we can show them how to do it and they're using it that same day.

This is our 6th product launch with this brand. With each launch, they increase the number of units that they want us to handle and they keep coming back.

So with these different launches that this brand has, it has these spikes in, in what they're doing, so it won't disrupt their current provider for handling their everyday customers. Where on these launches that spike up and down, Flex and Iron Mountain can handle pretty much on demand.

By choosing Flex and Iron Mountain to supplement their supply chain, this brand has been able to execute their product launches to fulfill the dreams of their most passionate fans.

Such a perfect fit you are. So, experience as a CEO, experience in building that marketplace, understanding of the logistics, the brainpower between all your degrees and Bain background and experience in the Navy. So, amazing. So amazing. We're really appreciative of all that you bring here. So, your company is a little later stage than some of the other ones in the Alumni Ventures portfolio, right? We do a lot of seed and A, you know, your company is further along. What wisdom do you have for founders that are earlier in their building so they know they can get as far along as Flex has built in the journey? Any insights there?

I'll tell you, I have one that is sort of very business-related, and 2, which is more just sort of human-related. The first one is I'm a huge advocate for focusing and refocusing and refocusing attention on identifying your target customer segment. It's sort of like marketing or business 101, but I can't emphasize how important that is, particularly in a startup where there's a lot of uncertainty. You're kind of inherently making bets because you don't have enough data early on to make hardcore quantitative decisions on every dimension of the company. So, you've got to pick some bets. And customer segment is, I would say, first and foremost because your customer segment will determine the feature set you build. It will determine, of course, your go-to-market, it will be one of the fundamental tenets that will help you make follow-on decisions again in an environment often where you just don't have as much data as you would like. So, customer segment, you know, in a moment of uncertainty, come back to that question. Who is my customer segment? Do I still have conviction that that's the right one? And do I have a compelling, unique value prop for that segment? The other one is I don't know, it's very— I feel like it's pretty tired or overused, but I'm a big believer in the importance of just perseverance. Like, it's a long journey if you want to build a company. You know, one of my favorite books of all times, business books of all times, is Ben Horowitz's The Hard Thing About Hard Things. And it's just this amazing novel about just really how hard it is. And you have to really embrace that. And be fueled by that, in my view. Because again, right when things are going great, it can be the case that you get thrown a curveball that's a bit rough or very rough. And if the journey in anticipation that it will have a lot of curveballs isn't a big part of the joy, Then, man, there's a lot of other great jobs out there. There's a lot of other ways to spend your time professionally if that's not really what fuels you.

Right, right. It helps fuel the company too, right? It creates the moats. If you're tackling the hardest things, if you have the grit to power your team through those tough things, that creates the moats for your company. There are a lot of benefits there. So, I know you're in Seattle. You and I share Seattle as well. where I live now, but certainly fangirl here. So, what do you think the current climate is in Seattle for startups? How would you categorize it?

It's, I think, coming back, but I think similar to many other places, and you spend a lot more time in this ecosystem, early-stage startup land, than I do these days. You know, people are still a little gun-shy, I think. You know, obviously, there's massive amounts of activity in the AI world. But that also comes with just a lot of— it's hard to— it's hard, I think, to sort of figure out where's the value. I was reading something the other day where an investor made the comment, when you're looking at these startups, you need to sort of evaluate, are they the disruptor or the disruptee? Mm-hmm. You know, and if there's, you know, I I don't know how you do that. I know there's a lot of really smart people who spend a lot of time in it. And, you know, so there's activity around that here in Seattle, as there is everywhere. But I feel like there's still, you know, just kind of some caution and some, you know, a lot of tentative behavior and thinking.

All right. One more ad. Hang tight.

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Fair, fair. We're all kind of finding our way here, and obviously AI is particularly strong in Seattle and, you know, Madrona and other places. lead, but it is a market where you have to have your eyes wide open and definitely choose well. Okay, so this is my favorite part, which is your ask to the Alumni Ventures community. So how can we be helpful? You need help with hiring? Is it that center of the bullseye introductions? What— how can the community help you, Carl, and Flex?

Yeah, if I can wave my magic wand and recruit the alumni ventures investor base for the cause. It is— we are 11 years into this journey with Flex, which is, which is just hard for me to believe. 11 years. We started it actually in my basement, not my garage, but my basement. 3 of us around a coffee table, one of those with the folding legs. That's where we started. And in that journey, we have been beating a drum around educating the market, the world, to the degree we can, around the value of flexibility in warehousing. And the first chapter, if you will, of our business, we isolated for our target customer segment, again, eating our own dog food there. But we targeted a position and we called— we created a new category. And we called it on-demand warehousing. And that was a very purposeful, lots of iteration, lots of, you know, market testing on that to try and bring to life what's different about what Flex does. On-demand warehousing. This is when there were on-demand taxis, there were on-demand all kinds of things. And we plugged into that. And it actually worked really, really well after a few years of beating the drum. Gartner, you know, Gartner has a big supply chain practice. They started talking about this new category, on-demand warehousing. And guess what? There's a company in Seattle called Flex, and they're the leaders. And that's great. Now, there's also a problem with that is that we painted ourselves into a bit of a corner. If I had to do it all over again, I would do it all over again, just to be clear. But we painted ourselves in a corner because for on-demand warehousing connotes to many people, frankly, most, is that, oh, this is a surge capacity. I've got my actual capacity, you know, my fixed capacity, if you will, my leases, my warehouses I lease. And then if things don't go to plan, or there's some kind of disruption, or a seasonal peak, oh, I'll look to this other thing and just use it for surge on demand. We are the first call that most of these big customers make when they need that. The problem is we offer a significantly broader set of applications that are much more strategic, multi-year solutions for the customer, which also looks like much better recurring revenue for the business. Mm-hmm. So, circa a couple of years ago, we'd been on a journey to create a new position For Flex, and we are still in what I would consider the relatively early innings of educating the market. Flexible warehousing infrastructure, in contrast to fixed warehousing infrastructure, it is still part of your infrastructure. Our technology platform is plugged in to your ERP system. Mm-hmm. We are plugged into your planning process. So on a quarterly, annual, multi-year basis, our customers are considering where are the best places to deploy flexible infrastructure in my supply chain and where are the best places to have fixed. So that's a journey we're on. So I know this is a long answer to get to the ask, but the ask is to help us with that education. Mm-hmm. What is flexible warehousing infrastructure? Hey, it's actually possible to have flexibility in warehouses. And what is the value of that? One of the chief supply chain officers, and I'll keep this anonymous, of one of our best customers, who is— their company has been using us for years. As I was actually bouncing this position, this new category, flexible warehousing infrastructure, off of him a while back, and we talked about the contrast, and he says, okay, so if I could get flexible warehousing infrastructure, why would I ever want fixed? Why would I ever anchor myself? And I said, thank you very much. You know, can you please tell all your friends? So, uh, to the audience here, to the investor community, tell all your friends, uh, there's this company called Flex. And if you could get, if you could get flexible warehousing infrastructure, flexible infrastructure, why would you ever want fixed?

Yeah. Yeah.

Bingo.

Love that. And it just speaks to the strategic nature and, and the depth of those partnerships you've had for so many years. I mean, I have to believe that that is the kind of strategic relationship that folks have. when it's flexible warehousing infrastructure. Those are the long-term, really sticky, high-quality relationships that you guys represent and that we consider to invest with you. Okay. Well, I love it, Karl. This has been a treat. We'll talk again soon. And thanks for taking the time to share the Flexport story. Yeah,

my pleasure, Laura. It's great to see you. And thanks for the invite to be here.

Take care. Thanks.

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