Digital freight broker Convoy shuts down, citing 'freight recession'
The Seattle startup, valued at $3.8 billion 18 months earlier, told employees in October 2023 that it was closing its core business.
In October 2023, Convoy, a Seattle-based digital freight broker, told employees it was shutting down its core business operations. CEO Dan Lewis announced the move in a memo on Thursday, Oct. 19.
"We are in the middle of a massive freight recession and a contraction in the capital markets," Lewis wrote. He said the combination had "crushed our progress at the same time that it was crushing our logical strategic acquirer."
From $3.8 billion to closure
Convoy was founded to modernize freight brokerage, a fragmented business in which truckers and customers had long connected by phone and fax. It had about 500 employees before the week of the announcement, CNBC reported.
During 2022, Convoy raised $260 million in new capital in a round led by Baillie Gifford and Hercules Capital, and JPMorgan extended a $150 million line of credit. That valued the company at $3.8 billion, about 18 months before it closed.
CNBC reported that trucking rates had come back down since the peak of pandemic supply chain disruptions, removing what had been seen as a tailwind for Convoy's on-demand technology. The company had already gone through several rounds of layoffs over the previous year and closed an Atlanta office. The news came a week after supply chain software startup Flexport said it would lay off about 20% of its workforce.
Inside the memo
Lewis said Convoy had spent more than four months pursuing strategic options, none of which proved enough to keep the company going in its current form. He wrote that the company had been "running up the down escalator," and that "dramatic monetary tightening" over the previous 18 months had reduced investors' appetite for unprofitable late-stage private companies.
He said mergers and acquisitions had also slowed, and that most likely buyers were suffering from the same freight market collapse. Lewis said the company had been working to make sure all in-transit shipments reached their destinations to limit disruption for shippers and carriers. Some staff would stay on to handle the wind-down and possible future strategic options.
What it meant for carriers
The memo said Convoy's last priority before closing had been getting in-transit loads delivered so that shippers and carriers saw as little disruption as possible. Lewis tied the shutdown to the same freight downturn that, CNBC reported, had pushed trucking rates down from their pandemic peaks.