The Exchanges

Q So, so even COVID didn't really make a blip in these prices. When I look at the twenty-twenty time period on here, they sort of fluctuated between 1400 and sort of 2200. What's driven the massive increase in, in the, in the cost of this, you know, really in the last six months, January, twenty-twenty-one to today?

A Well, first of all, to be fair, that that's more than a blip, you know, going up from 1400 to 2200 is in itself a very nice increase. Um, almost 50%. So, so COVID, um, You know, the second half of last year did have a positive impact. It did drive prices up, but as you say, not nearly as dramatically as we've had in the last half year. Um, it's interesting. There's been a combination of factors. First of all, retail remains strong. Uh, even as people spend less money on restaurants and services, they're spending more money on, on goods. So, uh, retail remains strong. And then you've had these, these various events. You had the Suez Canal blockage. That created a lot of stress on a system which was already at full capacity. Uh, just in the last couple of weeks, you've had a major COVID outbreak at the Yantian port in South China. Uh, 25% of the goods that shipped from China to the U.S. ship out of Yantian, and that port is down, its capacity is down 70% because there was an outbreak of COVID and staff got sent home. Um, and, and there's a lot of ripple effects because the whole, the ships The ships were full anyway, and then you get the Suez Canal blockage, you get Yantian outbreak, and then the ripple effects, because there are something like 70 ships roughly anchored outside Yantian waiting to come into port. That means that you've got thousands of, I mean, tens of thousands o…

AI assessment note: “There's been a combination of factors. First of all, retail remains strong.”

Q And how does Alt-Impact as a business, your ability to grow your revenue when, when you go from 1500 FBX up to what, you know, almost 6000 now today over the course of 12 months, do you guys make more money on that? How do you price?

A We do actually, yeah, because, you know, our revenue is a percentage of the, of the transactions that we bring in. Um, and so when the, when the prices are higher, then, uh, we're making more revenue. Having said that, I don't like growing that way because, yeah, The problem with that is it can go both ways, right? So, so you get all excited. Your revenue has gone up and up and up, and then suddenly the prices crash back down. So I don't like growing that way. I much prefer the growth that comes from doing more transactions, which we're seeing as well. Um, the other thing that helps us is the volatility. You know, when things are stable, then a lot of importers get lazy. They do a long-term contract. You know, they, they use the same freight forwarder and the same Um, and when things are volatile and the prices are changing and the Suez Canal is blocked or, or, or the Trump tariffs or things are changing a lot, um, that's good for us because then people need quick data.

AI assessment note: “We do actually, yeah, because, you know, our revenue is a percentage of the”

Q So what is the equivalent of like Delta and American air in your world?

A Well, Delta and American air, they both do a lot of cargo. Um, so they are, uh, they, they have cargo departments, uh, you know, below the, you're familiar with the upper deck where the passengers sit on the lower deck is not only your luggage, but also cargo. Um, both of those are companies we have a relationship with, of course. Uh, but the other equivalents, of course, are, um, In, in Ocean, Maersk Line, and CMA, CGM, and Costco. Uh, so, so you may not, you may or may not know those companies, but there are, for Ocean, there are, there are big carriers who, who you would not be familiar with. Um, and then what typically happens is you typically don't work directly with, uh, Delta, or American, or, or Maersk Line.

AI assessment note: “In Ocean, Maersk Line, and CMA, CGM, and Costco”

Q Break that down for me, Zvi. Is that trillion dollars? Is that like the gas for the boat plus the car container? Like, what, break down the three biggest costs in that trillion dollar spend?

A Yeah, so it's, it's sort of door to door in the end. So it's the truck to get to the port. It's the ocean liners. So it's the, I mean, it's your share of the gas and of the, of the ship. A ship can contain up to 18,000 containers right now, but your stuff is in one of those containers and you're paying your, your share of the, of the gas and the other operating costs and the capital costs of the ship. Uh, then the handling, the port handling, it could come in through Long Beach, for example, is the biggest port in the US and California. So you're paying for the port handling, and then you're paying for a train or a truck to get it all the way to the destination. So it's the totality of all of that, probably the ocean shipping, and also the airlines as well are the biggest cost, because some of the more urgent stuff is going by air. So the ocean and air are probably the biggest cost components, but there's a lot of other cost components as well.

AI assessment note: “ocean and air are probably the biggest cost components, but there's a lot of other”

Q So we, we can't obviously skip over the last year and a half. COVID was sort of interesting. When it first hit, what was going to react? What was happening inside at Fredo's?

A Well, it was, yeah, it was quite a rollercoaster, um, as it's hard to remember now, but in April, you know, this March, April of last year, suddenly it became clear that COVID was a big deal, and things happened very quickly. China shut its borders. After Chinese New Year, the factories didn't come back. There was nothing shipping out of China, and China was half of our business, you know. Um, and then the airlines worldwide got grounded, so there was virtually no air cargo. Uh, all of that happened very quickly. It was a scary time. We, we actually Went through the sad process of downsizing our team a bit because we didn't know what was going to happen. Um, having said that.

AI assessment note: “Went through the sad process of downsizing our team a bit”

Q All right. For those of, uh, those folks that missed our first interview back in May of 2017 together, what does Fredos do, and what's the revenue model? How do you make money?

A Yeah, I mean, Fredos does a couple of things which are all related to making international shipping just way easier. Um, the model in a way is passenger travel. We want to make it just as easy to ship a container from China to the US as it is to book a flight from China to the US. So we're all about making a freight, air and ocean, uh, international freight. So really easy using modern digital techniques. Um, in order to do that, we have to do a few things. We have to help to get, um, data about rates and capacity from the carriers to the freight forwarders and from the freight forwarders to the importers and exporters. In the end, it all, it all funnels through to freighters.com, which is a public website, a little bit like booking.com or Expedia, but for international shipping. So in the end, we give you the modern digital experience. There's quite a lot of infrastructure behind that to, to actually get the data and the prices and the routes.

AI assessment note: “Fredos does a couple of things which are all related to making international shipping just way easier.”

Q the, um, the, the media business. So SaaS companies today, if you can build a media brand, my gosh, that's, Arbitrage on cap because everyone comes to you as a source of truth. Whose idea was it to launch the FBX? What year did you launch it? And true or false, are you able to get customers cheaper than your competitors because everyone comes to you as a trusted source?

A So true, first of all, yes. And believe it or not, the traffic, because of all the volatility and the prices, traffic to the FBX website has grown like 10 X or more, I think, uh, just in, in the last few weeks, even. So that's a fantastic way of acquiring customers. So, so that's very perceptive and that's correct. Uh, we first launched that under a different name before we partnered with the B, the Baltic exchange. Uh, we launched it about four years ago. I think I don't remember the exact date. Um, and the traffic to that side has been growing and the, but, but now in the last week, it's been such a big issue. And, and, and the last few weeks you mentioned inflation. So it's been picked up in Reuters and Wall Street Journal and, you know, all the major, uh, Newspapers are quoting the FBX index, which is, which is exciting.

AI assessment note: “So true, first of all, yes... we launched it about four years ago”

Q I see. Interesting. Okay. So the company was founded in 2012. Do you know the information, the life of the company? What were those metrics? Tonnage of air freight, number of containers per ocean, how much have gone through your platform?

A Well, funnily enough, we only started our platform, um, in 2016. Um, and the reason for that is that before, yeah, the reason is, you know, actually we, we mentioned sort of Expedia. So if you think about the history when Expedia launched, uh, right, I think around 97, um, the, the, the data for air travel was all collected by companies like Sabre and Amadeus had been around for, for decades actually. Um, so they had all the, the, the backbone of the, of the data, and they could start marketing. In our industry, there was no such thing. So we had to spend the first four years building the equivalent of Sabre and Amadeus, getting all the data from the freight forwarders, the, the data, the rules, the, Uh, in order to have automated pricing. Because if you call up a freight forwarder, you do not get a price instantly. You get it after two or three days. So we had to create that infrastructure first. In a way, we had to be like a Sabre or an Amadeus who collects all the data.

AI assessment note: “we only started our platform, um, in 2016”