- Truck-brokerage startups have raised more than $ 1 billion in venture capital in the past decade.
- The startups promise greater visibility to the retailers and manufacturers they match with truckers.
- Some truckers say they’re drowning in dozens of online platforms they need to run their businesses.
Julio Torres and Ian Weiland are young, ambitious entrepreneurs in Southern California – but they’re not adding to Los Angeles’ growing tech scene. They run a trucking business called Junction Collaborative Transports 45 minutes south of that city in Long Beach. Torres made major investments in the business around 2019, buying equipment and space to provide the kind of consistent service that top-flight retail businesses will pay extra for.
Trucking has always drawn entrepreneur types because a company can start with just one truck – or even none if it plans to hire independent truckers to haul loads for it, like Junction does. But about a decade ago, tech-minded entrepreneurs started joining the industry, equipped with the kind of venture-capital funding humble trucking operations don’t attract.
Businesses like Convoy, Uber Freight, Cargomatic, Next Trucking, Loadsmart, and Transfix – all founded between 2013 and 2015 – claim to make it easier and more efficient to acquire trucking services. They’re the middlemen between companies that need cargo moved and the truckers who move it. Most have had a booming couple years, with more freight to move than capacity to move it.
Founded in 2014, Junction is about the same age as those startups, and on paper, it would seem to be a prime candidate to partner with the dozens of technology startups raising billions in venture capital. But despite nearly daily outreach from startups, Weiland told Insider that Junction worked with only one regularly.
And the reasons behind Junction’s choosiness could spell trouble for an entire class of startups heading into the stage of the venture cycle when it’s time to show results.
Weiland told Insider Junction tried working with several startups over the years. The result was a common problem in the tech world: app fatigue.
Trucking firms are overrun with digital platforms to manage and update, Weiland said. All these startups say they benefit all parties in a trucking transaction by moving the deal off email and onto a proprietary platform with various bells and whistles, most of them designed to benefit the cargo owner.
“Most of the solutions are created top to bottom,” Alexandra Griffon, the founder of supply-chain tech startup BlueCargo, said. She said her customers felt brokers were “forcing people at every level to inputting that data in a very manual way.”
Pressure from startups has lifted the bar for tech in trucking, and legacy players have taken the cue. Over the course of five or so years, many, if not most, of Junction’s clients have launched their own platforms, with which the trucking firm has to interact – in addition to the systems it uses to run its operation.
On a given day, Junction staff deals with six or seven platforms to log container moves and another dozen required by terminal operators to get containers out of ports. Back-office staffers are constantly wading through a massive list of accounts, passwords, appointments, and confirmations. In the case of one middleman that hired Junction, every time a driver picks up a container, Junction has to use four platforms to log the move.
“It throws a wrench into what would be your internal process,” Weiland said.
For him, the problem comes down to volume. Since everyone has a platform, Junction works with brokers that offer more loads. That’s how most “tech brokers” fell out of the rotation, he said.
It all got worse during the frantic fourth quarter of 2021, when labor rates were peaking along with container volume. The back-office labor to maintain all the records and keep transactions flowing cut into already slim profit margins.
This heavy admin burden is not what most trucking tech firms are aiming for, but it’s the result of targeting a fragmented, relatively low-tech industry. The ideal scenario is a direct integration between the startup and the trucking company’s operations software. But for many trucking companies, that’s still Microsoft Excel – so that integration isn’t really possible.
“I don’t think that it’s the technology companies that are creating the issue,” Weston LaBar, the head of strategy for Cargomatic, told Insider. “It’s the traditional companies that are averse to having deep integrations with dealer partners in the supply chain.”
Before joining Cargomatic, LaBar spent nearly seven years as the CEO of the Harbor Trucking Association, which represents trucking companies like Junction. He heard the struggles of trucking companies contending with technology then, but he also heard calls from cargo-owners for more information. That demand for visibility, he said, adds back-office work, whether a tech company is involved or not.
“I think the real question is, are trucking companies truly evaluating which technology is giving them the best advantage to be able to reduce the amount of touch points they need to have? Or are they taking a much more antiquated approach?” LaBar said. “It’s the whole work smarter, not harder, paradigm.”
Not all trucking firms are averse to the tech-peddling startups. Jorge Mora, who runs the fast-growing trucking firm Southern Cos., Works with about 10 digital-brokerage platforms. With 26 years in the trucking industry, he sees the tech influx as something to dip a toe in, without making any big bets.
“It’s funny. All of a sudden, the tech industry woke up to the fact that there’s what in their minds is a very inefficient system – that all it needs is technology to fix it all,” Mora told Insider. “It’s not that cut and dry, unfortunately.”
Both Junction and Southern Cos. are midsize operations in the trucking world: Junction is aiming for $ 80 million in revenue this year, while Southern plans for $ 40 million. Both have had massive growth in the past two years and have ambitious plans to ride the wave of supply-chain chaos as far as they can.
Mora isn’t investing a lot of time or money with the tech brokers – about 5% of his overall business comes in this way – for similar reasons of admin overload.
“I think they’re getting a lot of kickback from trucking companies because it is a lot of work to go into the portals and update them all the time,” he said. “There’s definitely a sense of frustration.”
Working with these platforms is worth it to Mora, he said, because some of them are using their venture dollars to pay a higher rate and it’s better to be friends in case one becomes a big winner, he said.
“They have money, so they’re going to pay their bills,” Mora said. “Their margins are not initially that important. They’re looking to get market share.”
A ceiling on growth?
The cost of doing business with trucking apps is more pronounced in the short-haul trucking that Junction and Southern Cos. both do. Shorter trips with rates in the hundreds of dollars lose their profit to admin costs faster than long-haul loads that bring in thousands.
But those companies are feeling it, too, according to Tommy Barnes, a freight-tech-startup advisor and the chief revenue officer of the transportation-software startup MyCarrier.
“The economies of scale are a little bit different, but there’s still a heavy amount of admin,” he said.
And the drivers who are required to use several different apps to log their own movements are feeling it more.
“I feel bad for a lot of the drivers in the space,” Barnes said. “Most folks that are building these apps have not walked or driven a mile in their shoes. The app is an annoyance.”
Industry leaders see a few solutions. The first is creating more passive opportunities to exchange data. Trucks are equipped with telematics that could do a lot of this work, according to Barnes. But it would require massive industry coordination and a healthy dose of tech adoption from carriers.
Shoaib Makani, the CEO of Motive, which makes telematics and fleet-management tools, said digital-brokerage startups were ripe for aggregation or even consolidation, like airlines have seen with Expedia and Kayak.
But perhaps a more attainable tactic in the near term is for tech companies to put more energy into making it easier for trucking firms to work with them. LaBar said meeting trucking companies where they are had been a successful strategy at Cargomatic.
“We have companies that we make all their appointments for them,” he said.
If tech companies don’t make that kind of effort, the result could be more carriers, like Weiland and Torres, simply refusing.
“If they need you to cover the load, and I’ve got truck power, but I’m not going to run the system, they will get the load and they will figure it out on their end,” Weiland said.
As technology infiltrates more aspects of the industry, the proliferation of platforms will get worse, Barnes said. And if the trucking industry is heading toward the exit ramp of a two-year boomit’s time to shift the solutions into a higher gear.