Are “Uber for Trucking” Start-ups Stalling?

 

In the past couple of years several companies labeled either by themselves or by the press as “Uber for Trucking” have launched their products claiming to revolutionize the trucking and freight brokerage industry. Millions of dollars were poured into these start-ups by eager Venture Capitalists that saw the huge size of the market and the historical lack of technology as a good opportunity.

It is surely too soon for a broad diagnosis on whether these investments will bear the aggressive return that VCs usually expect. But it is time to recognize that things did not go according to plan for many of these companies. What happened? Are Uber-for-Trucking startups stalling?

Keychain logistics went off the air around February (although apparently their site is back up). Cargomatic sacked both the CEO and COO after laying off half their salesforce. There are unconfirmed reports of layoffs in other start-ups, mainly sales and operations departments. What happened?

To grasp the challenges of the new entrants, you have to understand how start-up funding works. In order to justify a sizable investment, companies promise a new and better technology-driven product and an aggressive growth rate in order to justify an ever higher valuation.

But what happens when companies overestimate the power of their technology and underestimate the market dynamics all while under pressure by unrealistic burn rates? They face two options: (1) fail or (2) focus on growth-at-all-costs in order to justify the next funding round.

When companies survive this scenario by focusing on growth they end up becoming what they had promised to disrupt: a traditional freight broker with 2/3 of their personnel composed of a sales force and an engineering team purely focused on maintaining the system with no bandwidth to work on innovation.

At Loadsmart we try our best to avoid this mistake. We are 100% focused on product-market-fit, which we define as a product that is ten times better than the current market solution. Half of our team is composed by engineers and designers. And we understand that introducing technology and automation into this industry is a marathon, not a sprint – and we plan accordingly.

Before entering “growth mode”, start-ups should focus on building transformative technology, not incremental features. That’s what Loadsmart is doing.

 

Felipe Capella is co-founder of Loadsmart and Chief Product Officer

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