As articles about tech company retrenchment have become a fixture in news cycles recently, FreightWaves Research set out to ask a simple question: What will next year look like for startups in the FreightTech space?
The answer seems to be that it depends what part of FreightTech you’re looking at.
A recent survey, which collected 184 responses between Nov. 21 and Dec. 7, asked participants a series of questions that ranged from perceived likelihood of layoffs in 2023 to market demand for the technology. It also asked about which organizational growth stage would prove most resilient in the face of adversity.
The results suggest challenges lie ahead for FreightTech companies, but probably not calamity — at least for those that are better capitalized or operating in segments with the highest demand. As for layoffs, respondents scored each segment in the neutral zone average. But several leaned more toward the negative.
Autonomous/self-driving scored lowest (2.75), meaning people think companies in that segment will be the most likely to lay off employees in the coming year. Coming in a close second (2.76) was sustainability, and tied for third were digital freight matching and visibility (2.79).
In large part, perceived market demand echoes those results. Autonomous/self-driving is the only segment that scored outside of the zone of moderate demand. Its 2.29 weighted average equates to a small amount of demand.
Interestingly, while respondents see the digital freight matching and visibility segments as being slightly vulnerable to layoffs, the two also enjoy the highest levels of demand. The latter dynamic has led to a situation in which the spaces are among the most crowded in FreightTech, with more companies vying for market share.
Jett McCandless, founder and CEO of global logistics visibility platform project44, believes a downcycle in the new year will have a herd-culling effect — one that should prove advantageous for his business. He offered an aphorism from famed investor Warren Buffett that “only when the tide goes out do you discover who’s been swimming naked.”
Last month, project44 announced a newly secured $80 million funding round that bumped its valuation to $2.7 billion.
On the same day, a panel of freight executives, investors and academics selected the company for the top spot on FreightWaves’ FreightTech 25 list, which highlights the most innovative companies in logistics. It was the second consecutive year project44 came in at No. 1.
Despite his company’s success in recent years, McCandless feels FreightTech on the whole is undervalued in the wider economy. He gave an example where project44 sent a proposal to a large shipper at a price that would have — based on the shipper’s projections — returned more than 100 times on the investment.
But his company didn’t hear a hasty yes. In the world of freight transportation, people pay more attention to elements that go wrong than those that can go right.
“What’s typical in software is you’re looking for a 10X [return on investment] or, in an extreme example, a 20X,” McCandless said. “But in logistics, they’re like, ‘Well, we’re not sure if we can do it.’ It’s like, are you people crazy?”
Even with potential undervaluation of the FreightTech space, a company like project44, which boasts years of operation, wide brand recognition and fresh capital, is not the kind that respondents view as the most vulnerable. That distinction belongs to early stage startups.
Jordan Graft heads a company called Highway that falls into that group. After several years acting as CEO of carrier payments platform TriumphPay (No. 16 on the 2023 FreightTech 25), he founded Highway earlier this year. It provides an identity platform for its users that can independently verify carriers and their equipment. In January, it will turn one year old.
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Graft attributes his work experience in capital markets as a major reason why Highway is still hiring now amid uncertainties. Prior to TriumphPay, he worked in investment banking, advising founders to think months or even years ahead to the next time markets turn.
“If it’s really hot right now, it’s a great time to raise money,” Graft said. “But you need to think through the cycle. It’s not always going to be like this.”
Applying this logic, Graft raised “more than we needed” for Highway in 2022. In the months since, funding has become more difficult to come by as investor appetite has shrunk. PitchBook’s Q3 2022 supply chain technology report noted $3.3 billion in venture capital investments for the quarter — a 67.9% decline from Q2 and a 77.2% drop year over year.
“The benefit for us is, if you’re well capitalized, you can take advantage of those opportunities by running faster when everyone else is starting to pull back,” he said. “You can’t fix it now if you’re here.”
Given all this, it should be unsurprising that respondents see FreightTech firms operating as divisions within larger corporations as likely to have the most ease weathering a storm. Amazon Freight (No. 6 on the 2023 FreightTech 25) is one example. Voters considered its solution — leveraging more than 50,000 trailers and carrier partners for full truckload transportation — disruptive enough to earn the top spot on the 2019 through 2021 FreightTech 25 lists.
Having one of the world’s largest parent companies in your corner helps, said Hannah McClellan, vice president of Amazon Freight, which operates across North America, the UK and Germany. But possibly more important is Amazon’s well-known obsession with customer satisfaction, which in the case of truckload carriage equates to a focus on high service levels and fostering deep relationships with shippers. At the time of the interview, McClellan had recently returned from Atlanta, where she’d traveled to meet in person with one of Amazon Freight’s largest shipping partners.
“It’s an industry that’s not always easy to break into,” McClellan said. “You always worry when things get tight. How sticky are the customers that I have? Having invested in that, and having a base of shippers that trust us, is something that a company like Amazon Freight has going for [it].”
Watch: Are FreightTech Companies in Trouble in 2023?
Like many freight industry insiders, McClellan sees a lot of risk on the horizon. It seems like every day there’s a new positive signal and a negative one, she said.
But really she’s looking further ahead. Amazon Freight has safety and sustainability goals it wants to meet by 2040. Customers want to know when the company will expand from truckload services and start offering LTL and intermodal as well.
“We’re a company that thinks long-term,” she said. “Are we going to study and obsess over the economy in 2023? Absolutely. Are we going to fundamentally change everything about our business because of it? Probably not.”
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