Sep 09, 2015 Uncategorized Comments Off on Israeli Freightos pulls into port with $14M for new platform (Geektime (Israel))
The logistics technology startup Freightos announced on Wednesday that they have closed a Series B round with an impressive $14 million in new funding. With this round, the company’s total capital raised sails to $23.3 million. Sadara Ventures and MSR Capital took part in the Series B as new investors, joining existing investors Aleph Venture Capital, Annox Capital, Our Crowd, and ICV. The influx of funds coincides with the launch of their new platform aimed at helping companies simplify their shipping operations and get the best prices.
CEO Zvi Schreiber founded the Jerusalem-based company in late 2011. Having previously worked at an electronics company, Schreiber was astounded at how cumbersome it was to organize basic shipments from China to the United States, perhaps the most chartered shipping route in recent decades. They now employ a team of 85 across their five global locations, including sales offices in Taiwan, Hong Kong, and Germany.
To say that freight shipping is a giant sector considerably understates the reality. According to a report by the World Trade Organization, 2013 saw $18.3 trillion worth of goods exported across the globe.
Since 1976 when the shipping container was first brought into use, standard methods of shipping goods have remained constant, traveling by truck, rail, air, and ships, with a large-scale ocean liner capable of carrying over 18,000 container units. Transporting goods can involve a long supply chain and is very complicated for a normal company to handle the job.
The three central players involved in the shipping process are the shippers who want to transport their goods from one location to another, the carriers who operate the ships or other modes of transportation, and finally the middlemen who arrange the transactions, referred to in the industry as the forwarders. Most companies will work with a freight forwarder who will handle the whole deal.
Unfortunately, the process of finding a quote, even as a forwarder, can be convoluted and frustrating. In speaking with Marketing Manager Eytan Buchman, he explains that until today, the process of receiving a quote for making a shipment was comprised of multiple, constantly changing elements that were available only through massive spreadsheets listing the potential costs. Even worse, these quotes, which could take up to three days to receive, held numerous hidden charges that only became apparent after the fact for the client, often making for an overall frustrating experience for everyone involved.
In attempting to overhaul the process of organizing global shipments, Freightos has built a cloud-based repository where the new prices and details are uploaded to help their clients sort through the large quantities of data more efficiently, helping them provide clients with instant quotes. Their service compares thousands of options, taking into account details like prices, time, routes, and even the carbon footprint resulting from the operation. Their system produces reports that break down the elements of the quote to show the user exactly what the client is paying for, including security, fuel costs, and other expenses.
They currently work with many of the largest freight forwarders to help them manage their freight contracts internally, utilizing their big data centralized system.
Freightos is now rolling out a platform where users can go online and instantly compare prices and routes to find the best deal. They are billing this new service as the “Expedia of freight shipping,” compared with the ‘travel agents’ that they had been acting as previously. This service is aimed at helping the freight forwarders sell their services online, but will eventually allow the shippers to work directly with the carriers for even faster and cheaper service.
In thinking about the development of international trade and how far the shipping industry has to go in catching up with the digital marketplace, Buchman notes that, “One thing that strikes me is the B2B side of Alibaba that allows companies to source from thousands of providers from around the world. The problem is that they’re not making it any easier to actually move it from the source to its final destination.” He adds, “This is where a service like Freightos can step in to help complete this cost saving process, bringing better value for their users.”
Freightos says that they stand out from the crowd based on their years of experience working with the large freight companies. Along with their pricing technology, they claim to be the most advanced players working in this sector. It is worth noting that their latest investors include Robert Mylod, who was until recently the CFO and Chief Strategy Officer at Priceline.com, and likely has a decent insight into the scale of managing massive logistical comparison services.
One of the biggest challengers appears to be Flexport, a company that works primarily as a freight forwarder. While Buchman says that Flexport is well organized and automated internally as a service provider, Freightos works with multiple forwarders, something Flexport does not do.
The marketplace for their direct services to the companies that use the shipping services is still in its Beta stage, and they are not yet ready to approach these users en masse at this point. The company is still working on expanding to the market’s consciousness, relying very heavily on inbound marketing at the moment. They have not approached a large number of shippers yet. Buchman says that they expect the live release of the marketplace to the public sometime in 2016. It is worth noting that working for change in this expansive industry is likely to be an upstream battle in the early stages.
As the world becomes increasingly interconnected and supply chains reach out to more locations across the world, the demand for shipping will likely continue at a rapid pace. In launching this platform, the company is taking a shot across the bow against the opaque process. If they can successfully release their end user product next year, then expect to see serious waves as its impact ripples out across the industry.