Convoy, the trucking startup once hailed as “Uber for freight” and valued at a whopping $3.8 billion, has shut down operations amid a sharp decline in shipping demand.
“Today is your last day with the company,” CEO Dan Lewis said in a memo Thursday to the roughly 500 employees who remained with the company after several layoffs.
“In short, we are in the midst of a massive freight recession and a contraction of capital markets,” he added. “It was the perfect storm.”
It comes two months after 99-year-old trucking giant Yellow shut down operations and filed for bankruptcy after the company was crushed by debt and falling demand for shipping.
The freight industry is still feeling the lingering effects of the pandemic, which sent shipping costs soaring three years ago as demand for freight delivery skyrocketed, prompting many carriers to rapidly expand their operations.
But as consumer trends have returned to normal, newly expanded shipping capacity has far exceeded demand, sending freight rates to record lows.
“Today is your last day with the company,” Convoy CEO Dan Lewis said Thursday in a memo announcing the trucking startup is winding down its core business
Convoy, the trucking startup once hailed as “Uber for freight” and valued at a whopping $3.8 billion, has shut down operations amid a sharp decline in shipping demand
Lewis called it an “unprecedented freight market collapse” in his memo.
Headquartered in Seattle, Convoy was co-founded in 2017 by Lewis and Grant Goodale and promised to revolutionize shipping with a digital freight network that would increase efficiency.
The venture involved major investors including Bill Gates, Jeff Bezos, Barry Diller and Marc Benioff.
Convoy also attracted major Fortune 500 customers including The Home Depot, P&G, Niagara and Unilever.
At its peak, Convoy had about 1,500 employees and was valued at $3.8 billion in a funding round about 18 months ago.
But as shipping prices plummeted, Convoy was unable to raise new capital or find a buyer after higher interest rates dealt a major blow to the venture capital and mergers and acquisitions markets.
“In addition to this unprecedented collapse in the freight market, the dramatic monetary tightening we have seen over the past 18 months has dramatically dampened investment appetite and shrunk flows to unprofitable late-stage private companies,” Lewis said in the memo.
He added that “M&A activity has contracted substantially and most of Convoy’s logical strategic buyers are also suffering from the collapse of the freight market, making the deal much more difficult.”
Headquartered in Seattle, Convoy was co-founded in 2017 by Lewis and Grant Goodale and promised to revolutionize shipping with a digital freight network
As consumer trends return to normal patterns post-pandemic, newly expanded shipping capacity has far exceeded demand, driving freight rates down
Lewis said the company had spent four months looking for a buyer or other strategic options that would allow it to continue operating, but was unable to find a solution.
“We’ve moved every possible business lever. But we ran down the escalator…. and it just kept accelerating,” he wrote.
Stock options for company employees, as well as the millions of shares owned by venture capital investors, will now be essentially worthless.
However, at least one early investor timed the market correctly to make a tidy profit.
New York-based investment bank Allen & Co. injected a small investment into the startup during an angel round in 2015, when Convoy was worth less than $60 million.
Allen & Co. sold all its shares last year, at the same time that Convoy was valued at $3.8 billion in a new financing round, according to Bloomberg.