Convoy, the tech-heavy digital freight network and load board, will close down amid a hammering from the harsh freight market, according to an internal message from CEO Dan Lewis.
Previously, we reported that the load board had gone blank, canceling all current loads. We heard back from several truckers, some of whom reported loads completed as normal, and others concerned about payments as all shipments on the app were canceled in bulk.
Convoy representatives on Wednesday blamed the cancelation on a technical error in the app, but the company confirmed on Thursday that this was the end. In his message to the company, Lewis told employees, besides a select few that will stay on to help in the "transition," that "today is your last day at the company."
"So, what happened? In short, we are in the middle of a massive freight recession and a contraction in the capital markets," Lewis wrote. "This combination ultimately crushed our progress at the same time that it was crushing our logical strategic acquirer -- it was the perfect storm."
Convoy had raised venture capital funding, most recently being valued at $3.8 billion.
Anne Reinke, president and CEO of the Transportation Intermediaries Association, the trade group for brokers like Convoy, echoed Lewis' statements about the rate environment.
"The freight market currently faces some substantial challenges, evidenced by the rate compression throughout the supply chain, and we are seeing this impact on numerous TIA members," she wrote in an email. "With Convoy, we are, first and foremost, mindful of the employees who lost their jobs and the carrier relationships that will be affected. Many companies continue to grapple with this freight recession, necessitating constant adaptation. Nevertheless, the industry's inherent resilience leaves us confident that our members and our industry will overcome these obstacles over time."
Lewis thanked his team and detailed the efforts to keep Convoy afloat. The entire message is reproduced below:
All,
As you’re all aware, over the past few days we’ve been taking actions to minimize disruptions to shippers and carriers by ensuring that all in-transit shipments get to their proper destinations. Thank you to everyone who stayed focused and got it done. As usual, you guys do amazing work. With that action nearing completion, Convoy will be closing down its current core business operations. Some of our team will continue on to handle this windup transition and potential future strategic options (all whom have already been spoken with), today is your last day at the company.
We hoped this day would never come. We spent over 4 months exhausting all viable strategic options for the business. However, none of the options ultimately materialized into anything sufficient to keep the company going in its then current form.
So, what happened? In short, we are in the middle of a massive freight recession and a contraction in the capital markets. This combination ultimately crushed our progress at the same time that it was crushing our logical strategic acquirer - it was the perfect storm.
Convoy’s tech centric approach to trucking created real benefits. It also created the conditions for a truly scalable technology platform and business model that would have yielded real financial gains when market conditions improve. But in the end, market forces were too strong for us to withstand on our own.
We moved all business levers possible. But we were running up the down escalator…. and it kept speeding up. So despite your excellent work on our product and service innovation, extensive revenue driving efforts, and the painful and sweeping cost cuts you have had to endure, it was still not enough to get us into the financial position necessary to withstand the increasing pressures of the industry, without the need for outside funding.
Alongside this unprecedented freight market collapse, the dramatic monetary tightening we’ve seen over the last 18 months has dramatically dampened investment appetite and shrunk flows into unprofitable late stage private companies. Add to that, amidst these freight and financial conditions, M&A activity has shrunk substantially and most of logical strategic acquirers of Convoy are also suffering from the freight market collapse, making the deal doing that much harder.
The perfect storm.
Following an exhaustive process, spanning many, many months during which we explored all viable strategic options for the business, the result is where we are today. Convoy is closing the doors on its current core business operations and exploring and evaluating strategic options for what might come next.
The work you’ve all done will leave its mark on the freight industry forever. This industry needs to modernize. Shippers want it, carriers want it, and the market wants it. We still believe that this will be the future for this industry.
As I just shared on our call, I think the world of you. Over the past few months I experienced some of the highest highs and lowest lows in business, but throughout it I remained motivated because of the incredible people at Convoy who gave me inspiration every day. You guys rock.
#TruckYeah,
Dan
