The Exchanges

Q So you, through all this experience, you've now built Flock Freight. Let's start with a tease there and then get more of your history. What's Flock Freight doing today?

A We do, uh, we create, we call shared truckloads or algorithmic carpooling. So it's a little complicated thing to think of, but if you have four pallets of commercially manufactured goods and you're in LA and you want to ship them out to Chicago, you would otherwise move them through the LTL industry, less than truckload industry or hub and spoke model. So just think terminal, terminal, terminal UPS without the aircraft. What we do is we come in and we use some really sophisticated algorithms to match your palletized freight with our other customers' palletized freight. And instead create a carpool, um, or a shared truckload. So we just book a big truck out of the full truckload industry, have them make multiple pickups, picking up our various customers, loads and shipments and have them drive direct to destination. The reason the customer cares is that, um, by making a hubless offering, no terminals, no warehouses, it picks up on time, delivers on time. It's faster. There's zero damage, no loss, no theft. It's just a much, much higher quality offering. Um, and it's a much greener offering, about a 40% reduction in greenhouse gas as the only certified B Corp in the freight industry, uh, because our model effectively, um, you know, negates or disintermediates the use of terminals. It's, we like to say, algorithms instead of warehouses.

AI assessment note: “We do, uh, we create, we call shared truckloads or algorithmic carpooling.”

Q Just to be clear, these truck drivers, you're trying to sign up to add liquidity to your marketplace, and they're saying, Oren, like, I'm not going to go through the work of signing up if you can't guarantee my truck's going to be full. This is why this is important to you. Is that right?

A Well, there's two components to it. That's the supply side of the marketplace. Yes. On the demand side of the marketplace is a manufacturer, is a shipper that says, if you can guarantee my four pallets move hubless, don't see eight trucks, eight drivers, eight terminals. If you can guarantee me that if I do business with flock freight, They'll move on one truck, one driver and never move through a terminal. That was the big, that was the big, uh, activation moment, the big aha moment. So we built that and that meant, uh, additional optimization capability, more algorithms, but what it really meant was a pricing engine. A pricing engine that could sell you a portion of the truck and predict whether or not we at Flock would be able to sell other portions of the truck and ultimately get that truck full. Um, it took us all of 2019 of getting it more wrong than right. Um, and then 20 20 it, it clicks. We go from twenty five million to a hundred million by the end of the year. We go from, you know, we're not, we're not totally explicit about the revenue numbers, but, but more than three hundred million at this point already. Um, in October, you know, so we're many multiples of growth on an annualized basis.

AI assessment note: “That's the supply side of the marketplace. Yes. On the demand side”

Q I mean, that's what everyone listens to me looking for that twenty five million in October revenue. I mean, that's SAS margins, right? I mean, you're not like having to pay truck driver. That's not like a GMV number, is it?

A Uh, it's not a GMB number. It is a revenue number, although I would not describe it as, as SAS margins to be fair. Um, we, we have a fair bit of cogs, uh, still in this firm. So we, uh, we've got a credibly automated middle of our marketplace, the optimization engine and the pricing engine is, um, is phenomenal, right? Like unlike anything that's ever been built before the demand side of the marketplace, the manufacturer who needs our services. Is largely very automated. It's never finished, but we are thrilled and it is easily stage appropriate. The supply side of our marketplace, we have a lot of cogs. We are still feverishly building out automated integrations with trucking companies with carriers. So right now we still have a fair number of humans that are involved in what we call the fulfillment. Hey, Mr. Trucker, are you available? You know, what's the price? Can we get it negotiated? Um, we are, that's the primary focus of R and D, you know, so in our latest fundraising round, you know, announced about a week ago, um, the preponderance of, uh, Don't bury that real quick.

AI assessment note: “it's not a GMB number. It is a revenue number, although I would not describe”

Q How do you have that long-term focus on? I mean, many startup founders, when they hit a 1.3 billion valuation there, they take secondary off the table. It's the first financial windfall for them. It's important for them. And then they go take a next big swing. Did you already have an exit before this? So like, this is your big swing.

A Um, I haven't had exits, but I have founded two previous, uh, traditional freight companies and I've made a very nice living, uh, for, you know, 1015 years. So, you know, I'm, I'm okay. I, I, you know, I don't know that I want to disclose my salary here, but I'll tell you, I am far from being the highest paid person at flock. I've got a relatively modest salary and that's okay. I'm playing for the equity. Um, and I think, uh, and I'm playing for significance and I'm playing for purpose. You know, we're the only certified B Corp in freight. We have an opportunity to make a 40% reduction in greenhouse gas if we're successful at scale. That's important to me. I want to, you know, relentlessly remove waste and inefficiency, you know, from the US transportation system. Um, you know, I, I figure everything worth doing is hard. So let's take hard off the table. It's not that interesting. I want to do something that's purposeful and something significant. And I, I think I'll be financially rewarded along the way. So, you know, the secondaries are great. Give a lot of comfort. You know, there were, there were, there was some wealth, uh, distributed last week and I couldn't be more proud, uh, to have been a part of that, you know, seeing people on my team and, and the first, you know, the OGs as we call ourselves.

AI assessment note: “I haven't had exits, but I have founded two previous, uh, traditional freight companies”

Q Now, Orrin, is that, is that that number? Sorry, I don't mean to cut you off, but you told me last time in twenty-nineteen, you had 10,000 freight bills go through the platform. In twenty-twenty, you said it was between 10,000 and a 100,000 for 400% growth. Is that what you mean when you say number of like quotes going through? No.

A I mean, we moved last month now already like 16,000 freight bills in the month. So, you know, that's the growth. Um, when I mean automation right now on the demand side of the marketplace, it's automated customers order via integration or self-serve online. Now we have humans here to support that, but, but it's, it's as automated as we kind of feel it should be within the middle of the firm, the technology, the hard, hard tech of optimization, the algorithms, the pricing probability work that we do that is also automated. Um, but when we get to the support Supply side, you know, Hey, uh, truck driver, will you move this freight? And if so, at what cost, how much available space do you have on board? It's only about 10% of the transactions on that end are, are really totally automated at this point. We want to take that number up. It's not going to be a hundred percent, but to 80 or 90%, and we want to do that in the next 12 to 18 months.

AI assessment note: “I mean, we moved last month now already like 16,000 freight bills in the month.”

Q Yeah, no, no. I mean, that's what I wanted. I mean, I would be shocked if you knew the exact number down to the actual palette, and that's obviously changing by the day. Um, talk to me about SoftBank. They just wrote a check. What was the size of the check, and how much have you raised to date total?

A Uh, SoftBank's investments, a hundred million dollars. Uh, we also brought Volvo in, which is a really exciting strategic for us, both for a commercial partnership. They spend a lot of money on moving freight, and they do it suboptimally, and they want to partner with us, but also to work with their innovation labs on really defining what the future of transportation will look like. Autonomous driving vehicles as an OEM. They make these trucks, or they're working on that technology. How a marketplace partnership like us could work with a Volvo over the long term. You know, we think of Volvo here in North America as these, like, lovely Swedish cars. And, and they are, but, but, um, not a lot of people know they're like the second or third largest truck manufacturer. I say truck, I mean like tractor trailer, you know, um, freight truck in the world. I think them and Daimler are, you know, are the biggest in the world. So in the U S they own the brand Mac truck, which more people are probably familiar with. Um, and then we had participation from all of our insiders, Google ventures, signal fire and GLP. Um, at that point, you know, we set out to raise honestly, 30 to fifty million bucks. We ended up raising 115. So it was a bit of like, No more capital can come in, work with your insiders to, you know, prevent too much money from coming in. Um, and that puts the total raise at a 1…

AI assessment note: “SoftBank's investments, a hundred million dollars... puts the total raise at a 180”

Q or O-three was number of contacts. And it's exactly this thing that you're talking about. So real quick, before we get your back straight, can you help me try and understand the economics? This is sort of foreign to a lot of people. If I want to ship two full trucks from LA to Chicago, and let's say they're Adidas shoes, what am I likely going to pay for that?

A So the way to think about it, I'm going to give you some really simple kind of silly math, but this is just, I've used this in fundraising and again, it's a reflection of very sophisticated audiences, but taking a lot of industry experience and Kind of putting it to layman's terms. So imagine you could typically fit 26 pallets in a big truck, a full truck load carrier truck, the big ones you see on the freeways. Um, if you could fit 26 in there, we'll just imagine that trucking company is going to charge you 26 dollars to go from Chicago to Los Angeles. We can infer that that's a dollar per pallet, right? 26 dollars to fit 26 pallets. Now, to be fair, that trucking company is not charging you a dollar per pallet. They're charging you 26 dollars. Whether you put one pallet on board or 26 pallets on board, you're going to pay 26 bucks. You're a smart guy. You want to get the truck full. You want to get your lowest possible unit economics. You put 26 pallets on board. You have in your head a dollar a pallet. Conversely, now you're a small shipper or you have a small order. It could be a big shipper, but you have a small order. You just have one pallet to ship. That's it. It doesn't make sense to buy the whole truck for 26 dollars, right? So instead, you go to the LTL industry, these hub-and-spoke operators, the UPS FedEx Without the truck, without the aircraft, they charge you two…

AI assessment note: “I'm going to give you some really simple kind of silly math”

Q Okay. Very cool. Let me ask you a different question. Anyone doing the calculations in their head, they're thinking three hundred million dollar run rate, 1.3 billion dollar valuation. That's a very low multiple for others that are like at this revenue stage. Would you just say that's because your cost structure and the cog is associated with the business model?

A Yeah, it's largely a, an issue of cogs and we have to balance that all the time where, you know, uh, every founder does, right. As you think about, we call it the balance between Between fear and greed. And the key word there is balance. You know, there are times where you don't want to raise because you're very greedy and there's times where you'll take every dollar thrown at you because you're, you're fearful. Um, as a founder, I've been in both of those situations and there's no shame, you know, you got to capitalize your business and make payroll. I think the key lies in the balance flock, um, is going to be something gigantic. You know, we believe we can build a 50,000,000,100 billion dollar revenue firm. Um, I, I think it's fair though, to put us more in an Amazon type Uh, quadrant, you know, than a Google type quadrant from a cost structure. We are always going to have some cogs, uh, in this firm. And so from a multiple standpoint, um, they are lower than they are in a true, uh, SAS firm. I think that's fair. The flip side is we're in a U S one trillion dollars space, and we're going to build a multiple, many billions in revenue in the next three or four years. So I think the, the, ultimately the exit value of this business will be in the many, many, many billions going into the public market.

AI assessment note: “Yeah, it's largely a, an issue of cogs”

Q Anything else I haven't asked about that you're like, why hasn't he asked about this? It's critical to our business.

A Um, no, you know, I'd say, you know, we, we are really proud and passionate, um, about being the only certified B Corp in freight. So, you know, we have an opportunity here kind of from a social entrepreneurism angle to create significant market value, you know, real returns for our investors and ultimately in the public markets and have a real market cap. Um, we want to build both the largest freight company in the world and the most profitable freight company in the world. We want to do both of those things. The scale will come before the profit, but, but we intend to do both. Um, while we simultaneously help do our part to save the world, you know, we believe passionately there can be a 40% reduction in greenhouse gas through our model, so much so that we're on the precipice of being able to launch actual carbon credits to our customer for buying from us because the model is so much more efficient. Um, you're actually kind of getting the first word on that externally, that we're in the process of bringing that to market right now. The outside world doesn't know it yet, but we've got a certifying entity of like actual carbon credits, not some, you know, White labeled, you know, off market product, but like, you know, Tesla carbon credit, so to speak, uh, to Toyota, um, of bringing that to market now because the, the certification entities are looking at what we're doing and s…

AI assessment note: “we are really proud and passionate, um, about being the only certified B Corp in freight.”

Q Are there any startups that have already figured that out that you'd go buy?

A Um, maybe we're, we're, we're, we're taking a cold, hard look at it. There are, there are, there are a few that make that claim. It's unclear. It's real. The U S truckload industry is enormously fragmented, which in the long run is great news through marketplaces thrive in fragmentation. Um, you know, little players have a chance to, to, to participate day one. The challenge though, is there's no like clear, uh, aggregated point of volume where you can just go plug into a startup either as a partner Or to acquire, you know, obviously we've got a pretty big balance sheet. We also have enormous capital partners, um, you know, who, who would love, they, we had a board meeting two days ago and they're asking me, Hey, you know, any acquisition targets, we got our checkbook out, you know, we, we feel pretty great about you. And the answer is, you know, we're looking at it. We're looking at it, you know, um, uh, but it's unclear that, that acquisitions are always the panacea that, that many believe. I mean, the, the, the data on acquisitions is pretty, pretty gruesome, you know, To say, yay, we're a billion dollar company, do some secondaries, and that's that. You know, Flock is being built to be a hardened, scalable platform that goes into the public markets and endures for decades, and fundamentally changes the way freight moves in this country initially, and then ultimately globall…

AI assessment note: “There are a few that make that claim. It's unclear. It's real.”

Q Yep. Um, how do you guarantee that you have the truck inventory if, I believe LTL is paying the same as you are, but you're just doing it more efficiently? Like, how do you make sure you have enough trucks if there's a Christmas blip or something?

A Yeah, it, that, that's not just a billion dollar question that these days that's a trillion dollar question. Yeah, trillion dollar question. Uh, it is really hard. So one of the hardest things, but I would say the most fun and the most interesting things that we do is we work in probabilities. So we have a lot of applied data science and machine learning environments here where we are constantly ingesting as much data as we can. Uh, from third party data lakes. So data sources where you can build a, an integration with, and you bring in the, like, what's the spot market doing? What, what's tender rejection, meaning freight that's not getting picked up for, you know, if there's freight not getting picked up, you can infer there's probably not a truck in that market to pick up that freight.

AI assessment note: “we work in probabilities. So we have a lot of applied data science”

Q because this is gonna go back to your roots in terms of you maybe buying your first truck, running those first routes back when you were younger. At some point, it makes sense for you to start, if you're not already, holding cars, maybe autonomous trucks, on your balance sheet. Uh, maybe from Volvo, by the way. You know, what is the tipping point where that starts to make sense?

A It's a good question. Look, I've told people, whether it's media or colleagues or people on the team, I don't personally think we're going to see another parcel carrier. Parcel would be like FedEx UPS start ground up like ever. I think what we'll see is, is Amazon come in and build the largest parcel carrier in the world, sort of from the side door or top down, depending on how you want to think about the metaphor. You know, we're seeing Amazon become the world's most vertically integrated firm, which is not to say they don't use a tremendous amount of contract support top to bottom. They do. Um, but they're operating their own aircraft. They're operating their own trucks, their own warehouses. I mean, at some point it's interesting, Amazon tech company, tech company, they absolutely are a tech company. The data insights they have, I mean, they know what you and I are going to Three days from now. I mean, they do. It's the world's largest machine learning environment, as best I could tell. That being said, um, they're a logistics company, and they're going to be one of the largest logistics companies, if not the largest in the world, no matter what. How do I think about that? I want to stay tech as long as we can. Um, I, I don't see a world in which we start operating warehouses and terminals. That would be antithetical to our very model. We are the contactless. We, yeah, we do…

AI assessment note: “I want to stay tech as long as we can... antithetical to our very model”