Can On-Demand Trucking Service Convoy ‘Uberize’ Local Trucking?
Some clever startups are now in the business of disrupting the local trucking industry. In an article written by Nick Wingfield last week, Convoy, a fast-growing trucking-software startup founded last year by former Amazon employees, sees itself as an Uber for local trucking. Its goal is to provide local truckers with a more efficient way to connect with clients who needed hauling.
Convoy developed a website and a smartphone app into which clients can enter information about what they need shipped. Truckers, using the Convoy app’s Uber-like interface, can then choose to accept the job. Clients can even see the truck on a map as it travels to its destination. In a recent statement, Convoy CEO, Dan Lewis said that truckers are charged a fee that is less than 25% of the value of a job that brokers typically receive. Plus, the company’s network includes thousands of active truckers and it is reported to be consistently increasing revenue.
There is plenty of financial backing for this company as well. Recently, the company has announced that it has raised $16M of venture capital. Top Amazon executive, Jeff Wilke, and Instagram’s chief executive, Kevin Systrom, for example, are among the new investors. This does show a confidence in the business model’s potential.
According to other sources, Convoy is consistently working on expanding its coverage area throughout the year. In an article published by The Seattle Times*, Convoy has grown to 31 employees and is preparing to move into a bigger space spanning 6,000 square feet in the Belltown building where it set up its headquarters. The company raised the second round of capital because of high demand from the trucking industry and fast growth.
Mr. Rothman of Greylock believes that Convoy has a unique chance of transforming a large, old industry “that hasn’t really changed much since it started.” However, Convoy’s biggest challenge at this time is how to get buyers and sellers of services to use their system early on, when there is not much volume in the marketplace.
Is Convoy on the right track to capitalize on a fragmented industry that has capacity utilization issues? Will they be able to scale the market and get enough volume to truly disrupt the marketplace?
There are over a 3.5 million truckers in the U.S. alone** and it is estimated that over 70% of all deliveries are made using trucks. There is certainly a huge opportunity here with an industry size that many estimate to be $80 billion or higher.
