The future of Local trucking is Tech based

Local trucking, i.e. the transportation of goods with a truck that is transported within 150 miles of a metropolitan area is a $40-50 billion dollar market in the U.S. alone.

The supply side of the market is to a large degree comprised of amazingly hard-working small business owners with 1-10 trucks. The total number of registered local trucking companies is around 220,000 whereas about 380,000 drivers are employed in the industry, leaving the average at 1.7 drivers/company.  Demand side is also highly fragmented with manufacturing (30-40%), retail (25-35%), and agriculture (10-15%) as the largest sectors. Creating an efficient marketing and sales function for these small fleets in this environment is a huge challenge and traditional methods consist of direct sales, brokers, load boards and long-standing relationships.

It is a market with significant information asymmetry. Looking at it from an optimization standpoint, the problem has for a long time had way too little data to create anything near an optimal solution.

Local trucking redefined

Local trucking powered by Cargomatic 

The latest addition to our investment portfolio, Cargomatic, , is about to change that and bring a new level of efficiency to local trucking. Inspired by the Uberification movement where supply and demand are connected in real-time, they have created a fantastic product that we believe will have a profound positive impact on local trucking.

The concept is easy to grasp: by connecting trucks/drivers utilizing a smartphone, Cargomatic is able to match trucks with free capacity with shippers in real-time. However, getting such a platform to be attractive to both truckers and shippers demands very deep understanding of the needs of both sides, and a product that is advanced on the backend and very simple to use on the front-end. The process of transporting goods demands a high amount of administration before and after a transaction; Cargomatic reduces that process significantly and digitalizes all of it.

Talking with Cargomatic co-founders Jonathan Kessler and Brett Parker, it becomes clear that they are on a mission to create a tech-based solution that really makes life easier for hard-working local truckers. We believe this vision is the right one on which to build a hugely successful company and something that also resonates with the core values of Volvo. There have historically been a lot of solutions that mainly create price transparency without additional value added, creating a race to zero margin and an unsustainable business.

Talking to truckers on the platform, we heard superlatives about the service. For several truckers the Cargomatic platform is the difference between barely making it and being able to expand. Getting a high fill rate for the trucks is always top of the agenda; however the time to chase loads is highly limited. Cargomatic provides them with loads in their proximity/route, while also helping them manage administration and guarantee quick payment.

On the other side of equation, shippers today have the choice between well-known transport companies with a guaranteed high-service level for a premium price, or a smaller fleet/owner-operator that may or may not provide an acceptable service level. Cargomatic aims to deliver a high service level with the price tag of a smaller fleet. We believe they are on that route through the use of tech, ratings, and analytics.

This, together with fantastic traction in their first market, the $4-5 billion dollar local trucking market in Los Angeles, makes us thrilled to welcome Cargomatic to the Volvo Group Venture Capital portfolio.

Jonas Landstrom
@JonasLandstrom

Advertisements

About Jonas Landström

After 5 years as an entrepreneur in a biotech start-up, I joined the dark side at Volvo Group Venture Capital. As a VC I am fortunate to look into many companies and get heavily involved in a few. I am genuinely interested in the mechanisms of efficient entrepreneurship including the engagement by VCs. I am hooked on the ideas presented by Steven Blank and Eric Ries around Customer development and lean principles.
This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s