Ryan Petersen's Flexport Aims To Simplify Global Freight Transport Business

Bruce Rogers ,

FORBES STAFF 

I'm Forbes' Chief Insights Officer & write about thought leadership.

A Series of Forbes Insights Profiles of Thought Leaders Changing the Business Landscape:  Ryan Petersen, Founder and CEO, Flexport.

Companies such as FedEx and UPS have shipping wrapped up, if you will, very neatly: One can always easily mail a package, and even more easily track its whereabouts from any computer or smartphone.

Ryan Petersen, Founder and CEO, Flexport

But the $9 trillion business of global logistics couldn’t be further from this model. When it comes to shipping, say, cargo crates of toys from China to the U.S., one company may handle the crate packing, another the loading, and several more  the actual movement of goods from one shore to another. Then there is the issue of paperwork: The customs forms and goods titles are nearly always written on actual sheets of paper—sent via fax and chased around the world by phone call from one destination to the next.

Enter entrepreneur Ryan Petersen, whose San Francisco start-up, Flexport, aims to bring global freight transport into the 21st century by automating one of the world’s oldest industries. “It’s really all about coordinating complexity,” says Petersen. Unlike with shipping smaller parcels,, “in the freight world, the user experience is just broken,” he says, explaining that “no company has enough assets to keep the goods within their own company the whole time—the shipments are forced to change hands many times. You’re going to need truckers in China. You’re going to need truckers in the United States, and an airplane or a ship to connect them, with warehouses all through the chain.”

So Petersen has developed a web-based software application that enables efficiency in an otherwise very disjointed system. For the first time, companies who place orders for large-scale goods can ship, track and manage all of their freight in a single online dashboard without spending millions on software and implementation. Flexport gives the software away for free and only makes money when goods are moved, competing head-to-head with traditional freight forwarders.

“Our whole thing is about software,” says Petersen, whose aim is achieving easier transactions, lower customer costs, and decreased error rates on freight shipments “But it’s also to really to fix the user experience,” he says, “so customers get more visibility: ‘Where’s all my stuff?’ in real time, ‘How much am I going to spend on it? How can we reroute things? How can I optimize my shipping? Should I be shipping by air or ocean?’ Help me make that decision. ‘How many units should we be ordering?”

One example of how Flexport reduces inefficiency here is simply by cutting the need for customer calls. Petersen figures that some 40% of all calls to freight forwarders are customers inquiring about their goods’ whereabouts—a rather expensive and time-consuming exercise that involves manpower to track things such as ships or cargo planes and then get back to the caller. “Not that we don’t want to talk to our customers, Petersen says with a laugh, but “if you could eliminate 40% of phone calls, you could certainly make things a lot cheaper for everybody, right, including those people who are asking where their stuff is. They just get a log-in and they go see it” in real-time on the dashboard, he says.

“This is just one example of many where, when you bring this old-school analog process onto the Internet for the first time, you get more than just a digital copy of the status quo.”

Petersen won’t disclose numbers, but he says Flexport has 600 customers who use its software to “run significant parts of their supply chain.” In the 30 months since Flexport was founded, it has increased revenue by 25% each month, he says. Investors include Peter Thiel’s Founders Fund, First Round Capital and Google Venture, among others.

Petersen, 35, has entrepreneurism in his blood. Both of his parents owned their own businesses in Bethesda, Maryland, where he grew up. His dad owned a software company that provided regulatory compliance software to large food companies, while his mom started Novigen Sciences, later sold to Exponent, a leading engineering consulting firm. He got his start as a boy selling Cokes to his mother’s company. “My dad taught me to write computer programs to generate invoices for her, so I got started young,” he says.

As a senior in high school in the late 1990s, Petersen teamed up with his older brother and his friend, who had started a cottage business selling gadgets and gimmicky toys on Ebay. It soon became obvious that by cutting the U.S. wholesaler and importing the goods directly from China, they could boost margins. As some of the first players arbitraging the price of goods onAlibaba.com with their price in U.S. markets, the business grew to generate over $5M in annual revenue.

Their initial focus on sales through online marketplaces like eBay and Amazon left them vulnerable to low cost competition, so the business went through a few rough patches. But the boys regrouped, focusing on their brand- and website building skills, even while Petersen earned his undergraduate degree in economics from U.C. Berkeley.

Over the ensuing decade, the team developed close to 40 e-commerce web sites selling everything from scooters and dirt bikes to toilets and sinks. They became masters at search-engine optimization, buying online ads, and building e-commerce experiences. None of the goods they sold had much in common, except that they were all very heavy objects that had to be transported around the world. Petersen sums it up: “We learned what a pain it was to move freight internationally and clear things through customs, make sure that you meet all the compliance regulations, and frankly, figure out where your stuff is and when it’s going to arrive, and how much its going to cost you and not get ripped off. It was a real struggle for years and years for that business.”

Petersen soon moved to China for the business, who’s flagship brand at that time was known as Wasauna. He studied Chinese in the morning and worked all afternoon to find new products and factories, negotiating deals and coordinating shipments. While in China, Petersen made a valuable discovery: All of the shipping manifests, or the documents that contain title information on goods entering the U.S., are public record in the United States. Working again with his brother and friend, Petersen collected some 380 million such documents, indexed them, made them searchable, and in 2008, launched ImportGenius.com, a subscription service sold mainly to importers and exporters. During development of the new service, Petersen went back to school, completing his MBA at Columbia Business School.

Petersen stayed with ImportGenius until 2013, when he peeled off to focus his efforts on fixing the massive problems—and opportunities— presented by global transport of large-scale goods. “I assumed that the terrible experiences I had working with traditional freight forwarders were the result of Wasauna’s small scale. But in running ImportGenius, we had some of the biggest companies in the world as clients, and they told me the customer experience and data they got from their forwarders was effectively the same poor quality that I was getting.”

He started Flexport as a freight forwarder that would use software to simplify global trade for businesses of all sizes. “New possibilities emerge where you can do things that you wouldn’t have imagined doing in a world where you’re doing all the transactions on pieces of paper [and] storing the data in file cabinets, which is currently the status quo at every major freight forwarder in the world,” Petersen says.

“For us, this means building the world’s best freight forwarder,starting with getting really good at moving boxes while giving people more visibility and control over their supply chain. The scale of the problems is so huge that you can build a very big business if you solve them. We’re getting really good at modeling the real world in software, and then using that software to drive better results back in the real world.”