Freight Founders

Adam Vazquez 00:01
Welcome back to Freight Founders. As we talked about last week, we are doing a deep dive into freight founders each week here on the show. And this week is Ryan Petersen, the co-founder and CEO of Flexport. Before we get in, I want to let you know if you want to receive these deep dive profiles directly in your inbox on Friday mornings you can head over to freightfounders.com and and subscribe that way. Alright, let’s dive into this episode about Ryan Petersen from Flexport. Flexport is one of that small handful of startups that are going to change the world. Paul Graham, founder of Y Combinator in 2016. Ryan Peterson just won’t go away from hustling motorcycles overseas to pissing off Steve Jobs to founding a freight unicorn battling COVID and saving the Port of Los Angeles from itself. This freight founder just keeps showing up and today he’s got a multibillion dollar company to show for it. Flex board has changed how freight moves around the world and the result of years of work from an opportunistic little brother who keeps showing up is this company. This is a story. We’re already seeing a trend emerging in the series experiences that founders have in their early years seemed to have a profound impact on the work that they produce later in life. If you remember in our last issue, we saw how Ted Elings early experiences watching his father run a dental surgery practice had a direct effect on how Ted eventually conducted business as well. Well, this week is another example and Ryan Peterson. Ryan began his entrepreneurial journey like a lot of people his age selling trinkets online for normies. This looks like selling junk from around the house on Craigslist or maybe some more aggressive folks starts flipping stuff from yard sales on to Facebook or eBay or Amazon. But Peterson takes took this to the next level the following his brother David Ryan flipped items from China to the US markets for motorcycles to medical bathtubs. The brothers challenge was finding cost efficient ways to get them from overseas to the US in a timely fashion. They unintentionally happened upon George Costanza, his dream job. They were actual importer exporters and the Petersons were early users of a little platform called Alibaba, which they use to source products and bring them stateside. Today. Alibaba is the 54th ranked company in the world, according to Forbes, so I guess they just got lucky. We’ll see the business continue to grow. And Ryan eventually moved to China for two years to help grow the company and facilitate relationships vendors. Here’s what he said when he talked about the experience to the verge. It was my older brother’s company, I was working for him. We were buying and selling them and we hated our freight forwarder. They have all these code words and Viking English. It’s like what are you talking about? How much is it going to cost? When is it going to arrive? What documents do I need? And what do these documents mean? The experience of running the business will change Ryan forever. As he and David built their version of Vandelay industries. They became fascinated with the old crusty methods used to organize, communicate and eventually deliver goods across the supply chain. They quickly realized how much public data their small operation was generating, and wondered how the data could be used when gathered from larger organizations that were transporting much bigger volumes of goods. lightbulb moment, Ryan quickly realized he had a gold mine in front of him if he could figure out how to extract the actual gold. But it wasn’t all green lights. Insert a little Matthew McConaughey Hey, all right. All right. All right, green lies I wish I could do the whistle better. But regardless, it wasn’t all green lights. The company called Import genius took advantage of the fact that the data existed but Ryan needed to find a way to let people know about it. Enter the Steve Jobs saga. It’s a myth Ryan says it that if you build it, they will come. It took us over a year to get our first customer. So I said why don’t we try to generate news with our data savvy moved by him founder trying to hack the news cycle to talk about his product. We discovered that Apple shipments were in the database and we saw that there was an importing a new product called Electric computers. It struck me that this must be a codename for something I did a bunch of research. It was right before the launch of the second iPhone ever made. So we published a blog about it on our platform, and I sent it to MacRumors who did the rest. One day I got a call from a gentleman at US Customs who said Steve Jobs had called him and screamed at him. Jobs didn’t understand how things these things worked. We didn’t have any revenue before republish that post, and we generated $1 million from that post. According to Forbes, 1 million bucks from one post. It’s insane. Well, the company would continue to generate over $5 million a year in revenue, which by all accounts is a very successful small business. But it’s not quite enough for Ryan’s ambition though the data was cute. But Peterson wasn’t about that small boy life he had an idea he thought would change By the way frameworks around the world, and so that leads to him building Flexport schlepp blindness is a phrase coined by Y Combinator, Ponte founder Paul Graham, who we quoted to open this issue, and it refers to the Yiddish Word for a tedious journey. The idea is that when there’s too much friction or schlepp, innovators tend to turn a blind eye to the core problem. Well, there isn’t a more obvious version of this than the logistics process. Here’s what TechCrunch had to say Ryan embraced both literal and figurative. schleps necessary to build something new in freight forwarding, kissing the frog, no matter how unsexy you may end up turning him into a prince. To scale past the schlep in 2011, Ryan decided to confront it head on and begin the process of applying for the proper licensure and certifications to manage the scale of freight his vision required and it wasn’t easy. The process required an FBI background check become a licensed custom brokerage and hiring a pricey legal and compliance expert. But there was always light at the end of the tunnel. A simple pre launch landing page confirm Peterson suspicions of the opportunity. Here’s what he said about the time before I even launched, I had a website that offered the service to see if people would want it if it existed. One day Saudi Aramco signed up for my website, this is insane. Listen to the rest of this. If the Saudi national oil company, and one of the biggest companies on Earth, I thought, wait a minute, I thought I was attracting Amazon merchants. If we can do this service, we can make a lot of money, even the biggest company on Earth wants to use us. So just to clarify, he throws up a basic landing page about this idea for the data company that would be able to help basically automate freight a little bit and thought that they would could get other resellers kind of like what they were doing with the goods from China in the US to basically book freight through this automated service. Instead, they get the biggest company in the world, Saudi Aramco an oil and gas company from Saudi Arabia, who signs up and express interest. So like, this is like the classic story of just putting a step forward. And then somehow, you know, founders like this seem to generate this, this magnetism where they fall into these situations because of all the energy that they’re putting out. So this is how he begins to see that the idea definitely has legs. And the idea quickly shifts from another novel way for the hustler to make money into an entire reconfiguration of how freight is moved globally. According to investors Ryan’s energy made the vision of automating freight entirely believable, despite the inherent obstacles facing the company. They’re taking on automating shipping, automated shipping, Paul Graham extols just imagine the potential energy to be released here. It’s 15% of the global economy, and it’s much of the backpressure constraining the other 85% the potential energy is all the greater because this domain is currently so backward, and Flexport has it all to itself because schlepped blindness has prevented anyone else in the startup world from seeing it. Another investor said it more simply, he is a machine Petersons magic seems to be more than smoke and mirrors as a hype man, though, the company employs several savvy strategies to make their vision a reality. My favorite, selling fast, small doses to get customers addicted to the product like a frayed dealer. You see there’s a common error and b2b startups that think they need to take big swings in order to acquire scale. That’s true on some level, investors certainly expect a return on investment that reflects the enterprise level investment but how you get there is where a hustler like Ryan can strategize circles around a purely technical or B School founder rather than selling a full solution all at once. Peterson delt shippers doses of automated freight management to show them what’s possible. Here’s what Patrick shuts DOT who is an operations at Sonos talks about it. If a company agrees to trial to manage at least 10 cargo loads through Flexport. Peterson thinks he can prove the company’s value with Flexport software helping optimize each route to prioritize speed, reliability cost or a combination of the three. That is how Qlik Flexport started to work with the sound system maker Sonos, which tested flex port with one lane of its business, it’s China to Australia route in early 2016. Now it’s one of four main logistics partners Sonos uses globally alongside two multibillion dollar revenue freight forwarding giants and ups. Sonos was initially skeptical of trusting a startup says global leader Patrick Stewart. They showed their value over time, my advice, give them a chance. Senior executives though, from companies all over, saw what Ryan was trying to accomplish, saw the ambition of his project and laughed. In fact, in TechCrunch, he says senior executives at big companies were making fun of us. One of them compared us to Doc Emmett Brown from Back to the Future in his Flux Capacitor But what he missed is that the doc invented a time machine and it actually worked. And by 2019, the company had doubled its annual revenue year over year to exceed $500 million annually and they employed over 1000 soldiers marching marching to the Flexport mission. Still, it wasn’t enough to achieve Ryan’s full vision. To build the operating system for global trade Flexport would need a war chest. Enter Masayoshi Son, fans of the show we crashed will be familiar with the famous investors name because son is the founding founder of the investing giant Softbank and was deploying the notorious Vision Fund that boasted assets of over $32 billion. In addition, we work son had used the fund to invest in unicorns like Uber DoorDash bite dance or TikTok, Slack FTX and others. Sudden Softbank led a $1 billion investment into flex port that push the company’s value over $8 billion. No more small boy stuff here. This investment seemed to have a larger personal impact on Ryan past the obvious. In his post announcing the investment he said the following about son, personally partnering with Softbank carries even more significance. Like many I’m inspired by the dedication and vision of the organization’s chairman, CEO masayoshi son in his commitment to an ambitious vision for using technology to advance human happiness. At flex port. One of our core values is to play the long game disrespect. We are in all the long term thinking of SoftBank, which champions both a 30 year vision and a 300 year growth strategy. Working with sun and Softbank allowed Flexport the opportunity to achieve Ryan’s grand vision but it also brought new questions regarding how they would tactically achieve that vision. Change was on the horizon for flex port organizationally. And for Ryan personally. 2020 brought the same shock to flex port to the rest of the world encounter from the COVID 19 pandemic after an initial 3% reduction in workforce. Ryan and the Flexport team went into hyperactivity mode. The founder quickly switched his focus from flexport.com to his nonprofit sibling flipboard.org and raised over $7 million for pandemic aid really good. He didn’t stop it just raising money though. Peterson took his responsibility as a Global Freight leader seriously and began brainstorming how Flexport could best assist the world during the shutdown. The results were massive. In addition to the money raised Flexport foundation delivered over 6.9 million masks to earn 40,000 gowns, 1000, ventilators, 155,000 gloves and 250,000 meals for vulnerable populations. Something clicked for Ryan during this process. For the first time, Peterson found himself focusing less on the private sector, let alone flex sports performance, and instead found himself pouring his limitless energy into the greater good. In the absence of proper federal crisis management Peterson had become the decK de facto general in the war against Coronavirus. TechCrunch says given the scale of the problem and the complexity of the market failures outlined above, there’s no way for the US government to solve this on its own but it can and must provide leadership, providing doubt breaking down obstacles and coordinating the response of the private sector. His feeling of working with the private sector wouldn’t shake quickly. Wouldn’t be shaken quickly. In 2021. A new disaster was unfolding in the freight markets. The 2020 hysteria of shipping had begun to have negative effects on the supply chain and there seemed to be no answers to the overcrowding and inefficiency facing ports, especially in Los Angeles. But by golly, that’s Ryan Peterson’s music. Following his instinct, Peterson took a boat into the actual port of LA to see the damages for himself. And at this point, I’ll let the LA Times tell the story from here. On his crews around San Pedro Bay, Peterson got a firsthand look at the more than 70 hooking shipping containers idling at anchor there’s $64 billion in cargo waiting to be unloaded and the mountains of steel boxes stacked up on the docks waiting days on end to get picked up and shipped out. He learned the docks were too crowded to accept returns of empty containers, which meant the truckers couldn’t pick up a full new containers since they were stuck with an empty one on their trailer chassis. The following morning, Pete Harrison tweeted this all out and his thread became a rare viral sensation about logistics. Big thinkers from the worlds of business, politics and media shared his tweets, and then Governor Gavin governor, Governor, Governor Gavin Newsom called him up personally. The governor listened to Peterson’s advice and put several recommendations into action immediately and although policymakers ended up diverting from all Ryan’s recommendations, the effects were clear. Ryan Peterson’s actions had moved the government faster than they ever would have on their own. And it was now a second time in just a few years that Peterson had put it aside his company’s interest for the pursuit of public good. In fact, he went as far as to offer to fix the problem entirely. According to LA Times, he offered in one tweet to lead this effort for federal or state government if asked, it would have meant walking away from his own rapidly growing logistics business because flex sports revenues are on track to hit $3.2 billion in 2021. More than double the previous years bookings according into the company. The previous two years of behavior probably should have painted a picture of a founder who was torn between growing the company he loved and potentially contributing to a newer, bigger problem the world was facing. Still, it was a shock in 2022 when Ryan Peterson announced he was stepping down as the CEO of Flexport. His reasoning was humble and optimistic. The company had grown massively new challenges lay ahead, different leadership would be required to help Flexport arrive at their final destination. And founders seem to realize that much of the culture and decision making that brought the company this far would only keep them from going further. Here’s what he’s told inc.com Over the years, he learned when a company is growing extremely fast, unreasonable to expect humans and their abilities to grow at the same pace. He wished when hiring people, he’d sat down with them, showing them the growth curve Flexport was on and explained, here’s the company growth that we want to do. And here’s likely what’s possible for a human to grow. It’s unlikely to be at the same slope, you probably can’t grow your own capabilities 100% In one year, what are the odds? Unlike many leaders, Peterson actually applied this logic to his own status at the company. Yes, he’d grown but not necessarily in the ways that the company would need to scale. Ryan’s a problem solver, a super thinker with the ability to throw on a cape and change the outcomes for people on a global scale. He isn’t necessarily enthused about creating managing structures that will allow the company to progress at a predictive and sustainable pace. The scrappy startup hypergrowth days are likely behind Flexport new challenges await. For me, it’s refreshing to see a founder who seems so in touch with his strengths and weaknesses, that he can make a decision like this one. While I’m sure it’s not easy, it seems to be for the benefit of both the company the world and for Ryan himself. But just in case we should probably invest in an RPG light to call when the next free disaster presents itself just to be safe. Hey, listen, if you enjoyed this second issue of free founders, I would ask that you consider sharing it with somebody else and head over to freightfounders.com Link is in the show notes and subscribe yourself. I really appreciate you listening and hope to catch you soon.