- Trucking brokerage startups have raised more than $1 billion in venture capital in the last decade.
- The startups promise increased visibility to the retailers and manufacturers they match with truckers.
- Some truckers say they are drowning in the dozens of online platforms they need to run their businesses.
Julio Torres and Ian Weiland are ambitious young entrepreneurs from Southern California, but they don’t add to Los Angeles’s growing tech scene. They run a trucking business called Junction Collaborative Transports 45 minutes south of that city in Long Beach. Torres made significant investments in the business around 2019, buying equipment and space to provide the kind of consistent service that top-tier retailers will pay more for.
Trucking has always attracted entrepreneurs because a business can start with just one truck, or even none at all, if it plans to hire independent truckers to haul loads, as Junction does. But about a decade ago, tech-minded entrepreneurs began joining the industry, equipped with the kind of venture capital financing that humble trucking operations don’t attract.
Companies like Convoy, Uber Freight, Cargomatic, Next Trucking, Loadsmart, and Transfix—all founded between 2013 and 2015—claim that buying trucking services is easier and more efficient. They are the intermediaries between the companies that need to move the cargo and the truckers that move it. Most have had a couple of boom years, with more cargo to move than capacity to move it.
Founded in 2014, Junction is about the same age as those startups and, on paper, seems like an ideal candidate to partner with the dozens of tech startups raising billions in venture capital. But despite the almost daily reach of startups, Weiland told Insider that Junction worked with just one on a regular basis.
And the reasons behind Junction’s choice could spell trouble for a whole class of startups heading into the stage of the venture cycle when it’s time to show results.
Weiland told Insider Junction that he tried to work with several startups over the years. The result was a common problem in the tech world: application fatigue.
Trucking companies are overloaded with digital platforms to manage and update, Weiland said. All of these startups say they benefit all parties in a trucking transaction by moving the deal from email to a proprietary platform with various bells and whistles, most of them designed to benefit the owner of the cargo.
“Most solutions are built from the top down,” said Alexandra Griffon, founder of supply chain technology startup BlueCargo. She said her clients felt brokers were “forcing people at all levels to enter that data in a very manual way.”
Pressure from startups has raised the bar for technology in trucks, and legacy players have followed suit. Over the course of roughly five years, many, if not most, of Junction’s customers have launched their own platforms, which the trucking company has to interface with, in addition to the systems it uses to run its operation.
On any given day, Junction staff man six or seven platforms to record container movements and another dozen required by terminal operators to get containers out of ports. Back-office staff are constantly reviewing a huge list of accounts, passwords, appointments, and confirmations. In the case of a broker who contracted with Junction, every time a driver picks up a container, Junction has to use four platforms to record the movement.
“It throws a wrench into what would be their 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 runners” fell out of the rotation, he said.
It all got worse during the frenetic fourth quarter of 2021, when labor rates peaked along with container volume. The administrative work to keep all the records and keep the transactions flowing cut into already slim profit margins.
This heavy administrative burden is not what most trucking technology companies are looking for, but it is the result of targeting a relatively low-tech and fragmented industry. The ideal scenario is a direct integration between startup and trucking company operations software. But for many trucking companies, that’s still Microsoft Excel, so integration isn’t really possible.
“I don’t think it’s the tech companies that are creating the problem,” Weston LaBar, chief strategy officer at Cargomatic, told Insider. “It’s the traditional companies that are reluctant to have deep integrations with distribution partners in the supply chain.”
Before joining Cargomatic, LaBar spent nearly seven years as executive director of the Harbor Trucking Association, which represents trucking companies like Junction. He heard the struggles of trucking companies struggling with technology at the time, but he also heard calls from cargo owners for more information. That demand for visibility, he said, adds administrative work, whether or not a technology company is involved.
“I think the real question is whether transportation companies are really evaluating what technology gives them the best advantage so they can reduce the number of touchpoints they need to have. Or are they taking a much older approach?” La Bar said. “It’s the whole paradigm of working smarter, not harder.”
Not all trucking companies are averse to new technology sales companies. Jorge Mora, who runs the fast-growing trucking company Southern Cos., works with about 10 digital brokerage platforms. With 26 years in the trucking industry, he sees the technological influx as something to dive into, without making big bets.
“It’s funny. Suddenly the tech industry has caught on to the fact that in their mind there is a very inefficient system: all you need is technology to fix everything,” Mora told Insider. “It’s not that simple, unfortunately.”
Both Junction and Southern Cos. they are midsize operations in the trucking world: Junction is targeting $80 million in revenue this year, while Southern plans $40 million. Both have seen massive growth in the last two years and have ambitious plans to ride the wave of supply chain chaos as far as they can.
Mora isn’t spending a lot of time or money with tech brokers (about 5% of its total business comes this way) for similar reasons of administrative overhead.
“I think they’re getting a lot of kickbacks from the trucking companies because it’s a lot of work to get into the portals and update them all the time,” he said. “There’s definitely a sense of frustration.”
For Mora it is worth working with these platforms, he said, because some of them are using their risk dollars to pay a higher rate and it is better to be friends in case one becomes a big winner, he said.
“They have money, so they are going to pay their bills,” Mora said. “Their margins are not that important initially. They are looking to get market share.”
A ceiling to growth?
The cost of doing business with trucking apps is more pronounced in short-haul trucking than Junction and Southern Cos do. Shorter trips with fares in the hundreds of dollars lose their profits due to administrative costs faster than long-distance charges that generate thousands.
But those companies feel it, too, according to Tommy Barnes, an adviser to cargo technology startups and chief revenue officer at transportation software startup MyCarrier.
“The economies of scale are a little bit different, but there’s still a lot of administration,” he said.
And drivers who must use several different apps to record their own movements feel it the most.
“I feel bad for a lot of the pilots in space,” Barnes said. “Most of the people who are building these apps haven’t walked or driven a mile in their shoes. The app is a hassle.”
Industry leaders see some solutions. The first is to create more passive opportunities to exchange data. The trucks are equipped with telematics systems that could do much of this work, according to Barnes. But it would require massive industry coordination and a healthy dose of technology adoption by operators.
Shoaib Makani, CEO of Motive, which makes telematics and fleet management tools, said digital brokerage startups were ripe for aggregation or even consolidation, as airlines have seen with Expedia and Kayak.
But perhaps a more achievable tactic in the short term is for tech companies to put more energy into making it easier for trucking companies to work with them. LaBar said meeting trucking companies where they are has been a successful strategy at Cargomatic.
“We have companies that we do all their appointments for,” he said.
If tech companies don’t make that kind of effort, the result could be that more operators, like Weiland and Torres, simply say no.
“If they need you to cover the load, and I have the truck power, but I’m not going to run the system, they’ll get the load and figure it out for themselves,” Weiland said.
As technology infiltrates more aspects of the industry, the proliferation of platforms will only get worse, Barnes said. And if the trucking industry heads off ramp from a two-year boom, it’s time to take solutions up a notch.