The Generalist - Flexport: How to Move the World

Hello friends,

Mask shortages.
Shanghai shutdowns.
Ships idling outside the ports of Los Angeles and Long Beach.
The Ever Given lodged in the Suez Canal.

The last two years have brought the importance of logistics into extremely sharp focus. No other company has defined this global conversation quite like Flexport. The $8 billion freight forwarder, and its CEO Ryan Petersen, have become the voice for progress in the space.

Today, I’m excited to dive deep into the company’s story, covering its history, market, product, and future. It’s this last subject that feels most important when it comes to Flexport. Despite being valued at $8 billion, it has only just set out on its most audacious goal: to build the definitive platform for global trade. To understand what that means and the monumental effect it could have, jump in.

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FLEXPORT: HOW TO MOVE THE WORLD

Actionable insights

If you only have a couple of minutes to spare, here's what investors, operators, and founders should know about Flexport.

• The freight forwarding market is fragmented. Pegged at $182 billion, it is a large market without an obvious dominant force. DHL boasts the biggest share with 6%. Sixty percent is controlled by players outside the top twenty.
• Flexport has brought technology to the party. Many incumbents have been slow to adopt technology, preferring phone calls and fax to contemporary tools. Flexport upended the space by building a large engineering team and creating a modern platform that offers visibility and control over the freight forwarding process.
• The company has bigger ambitions. Flexport doesn’t just want to be the most cutting-edge freight forwarder. It wants to build a global trade platform that offers accurate, real-time data for the entire industry. It is a goal no less audacious than constructing a digital twin for the world’s supply chain.
• There’s tension between Flexport’s two models. Supporters argue that Flexport has a leg up when it comes to building its global trade platform. Who better than a company with technical expertise and operational experience? The tricky part is that the freight forwarding division has different incentives than the platform team. Flexport will need to work hard to keep them siloed.
• Flexport is valued like an outlier. The company’s Series E valued the business at $8 billion. That represents a premium on Flexport’s $3.2 billion revenue compared to incumbents. Investors seem to be betting on CEO Ryan Petersen’s ability to create a revolutionary global trade platform.

***

At its best, logistics is a form of magic. An object begins on one side of the world, and by deft maneuver – over, under, across, though – it appears on the other. It is not unlike a sleight of hand trick with ships and cargo planes bending the planet like a card sharp teases an ace of spade into a shirt cuff. Food, clothes, office chairs, pocket umbrellas, scented candles, and fishing gear can manifest in days if not hours, appearing in front of our doorsteps as if we’d conjured them from thin air.

Though logistics seems like a modern miracle at its best, the last two years have exposed the current system’s many flaws. Pestilence and war, two horsemen of the apocalypse, have choked and snarled hangers and ports, warehouses and factory floors. Shanghai, home to the world’s largest port, remains in a lockdown that has forced manufacturers to close their doors, impacting the entire supply chain.

Flexport is a logistics business in pursuit of magic. Started in 2013, the hybrid freight forwarder and software provider is a rare company that seems to have elevated its ambitions over time rather than lowering them. Though CEO Ryan Petersen's founding journey began with importing motorcycles to the United States from China, he is set on it culminating in creating the definitive global trade platform. Hear him speak about it, and you’ll realize that the end state is a supply chain in sync, one that sings in near-perfect harmony, where goods arrive quickly and reliably – where the world moves with a kind of magic.

As a narrative, it has proven a compelling one. In February of this year, Flexport announced a near-$1 billion Series E at a valuation of $8 billion. While the financing represents a decisive vote of confidence from top-tier firms and strategic partners like Andreessen Horowitz and Shopify, respectively, it has also raised eyebrows. Industry experts suggest that Flexport’s metrics do not merit its current valuation and that its business model may sometimes work against it.

Today’s piece will examine the differing opinions surrounding the business and discuss the audacious mission at its heart. In the process, we’ll alight upon:

• The brothers Petersen. Flexport arose from Ryan and David Petersen’s obsession with logistics. Importing scooters from China soon turned to streamlining the customs process and, eventually, to a unicorn.
• Fractured freight. The market Petersen entered is highly fragmented. It is also antiquated. Most incumbents have been lethargic adopters of technology, providing Flexport a vector for attack.
• An elegant product. “Visibility” and “control” are Flexport’s two most significant product sells, according to Petersen. His company has constructed a full-featured and intuitive suite that has forced competitors to step up their game.
• Dueling models. Flexport is a freight forwarder that wants to be much more. Though building a global trade platform is a laudable ambition, it may conflict with the goals of the core business.
• Becoming the face. Flexport is a master of soft power. Though he does not run the largest freight forwarder (by some distance), Ryan Petersen has become the face of the industry for many. He and Flexport appear to wield outsized influence.
• Understanding valuation. It’s hard to make a case for Flexport’s valuation based on the numbers alone. Recent investors are likely banking on Petersen’s genius and the potential to create an N-of-1 company.

It’s time to set sail.

IN A MEME
​​​​For the pictorially inclined, here's the whole piece — all 4,900 words of it — in a single meme.

PUZZLER
​​​All guesses are welcome and clues are given to anyone that would like one. Just respond to this email for a hint.

Greg K was last time’s all-seeing eye. He was followed by a slew of Sherlocks, including Attison B, Kirk M, Steven V, Lisa W, Jim W, Ryan C, Thomas K, Samuel R, Austin V, Krishna N, Kunal G, Thomas R, Peter F, KC, Parth B, Gregg S, Tony D, Kaitlyn R, Aaron M, Andrew T, Jonathan R, William J, John G, SM, Jennifer E, SN, Robert H, Ethan L, David P, Twhy A, Alex S, and NMT. All saw through this puzzler:

The answer? A needle. Or, indeed, a hurricane as several sharp readers pointed out. Well played, my friends.

Wishing you all a lovely day, wherever you are in the world.

See you soon,
Mario

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