June 7, 2023

Next Trucking eyes possible sale; FreightTech experts weigh in


Digital freight marketplace Next Trucking is on the prowl for either additional capital or an exit, confirmed Monday by its advising firm BG Strategic Advisors (BGSA) after initial reports from The Information.

“As a matter of policy, BGSA does not comment on the details of confidential client assignments. That said, I can confirm that Next hired BGSA to explore strategic alternatives. We think highly of the company and expect to have multiple compelling options,” Ben Gordon, managing partner at BGSA Holdings, told FreightWaves.

According to reports, Next Trucking has been actively searching for new funding throughout 2023, with speculation around potential investments from Guggenheim Partners for $60 million with $15 million in continued investment coming from existing investors, which include Sequoia Capital, Brookfield Growth, Mucker Capital, GLP and others.

While the company did secure a valuation of $500 million during its $97 million Series C round in 2019, the last time it reportedly raised funds, Next Trucking is reported to have had losses of $40 million before interest, taxes, depreciation and amortization in 2021, $21 million in 2022  and is projecting a $12 million loss with 19% revenue growth to $176 million in 2023. According to research firm Pitchbook, the company has raised over $262 million to date.

In response to The Information’s claims, Next Trucking told FreightWaves it is not at liberty to discuss its financial and investment matters.

“The article is speculative and inaccurate and misrepresents information acquired through inappropriate means. Next Trucking is committed to its mission to help truckers and shippers through an efficient and sustainable marketplace,” said Vipul Shah, chief product officer at Next Trucking.

Industry thoughts

FreightTech experts weren’t completely surprised by the news, with most detailing concerns for the initially drayage-focused freight marketplace from its inception.

“I first learned about Next Trucking when Lidia [Yan, co-founder and former CEO] was on stage during a FreightWaves event in 2019. I was taken back at the time because, with very few slides, she had closed a significant round with Sequoia with a $500 million valuation all while only generating $50 million in top-line revenue while supporting losses,” said a technology expert familiar with the matter.

The expert said that what Next Trucking and its investors are currently going through is what many FreightTech companies with high valuations are going to struggle with — inability to disrupt.

“Unless there is massive platform value, you are not really consolidating port operations when they are all on completely different systems backed by a number of different unions. … That is just a very difficult piece of the supply chain to bring together. They niched down into an area they felt like there was plenty of room for disruption, which I actually don’t disagree with, but it is a very difficult area to disrupt and they have not supplied them well in the past.”

In regard to Next Trucking’s plans to raise more funds or sell, the technology expert does not see a clear vision.

“Outside of valuations that don’t make sense, coupled with smarter venture capitalists that are likely unwilling to put money in, early investors who are not going to want down rounds, no path to profitability, I just don’t see a path forward for them,” he said.

Next Trucking representatives confirmed the fragmentation of the industry is a challenge and one the company is dedicated to making more efficient for all parties involved.

“Drayage is a fragmented process involving many parties in the ecosystem, from shippers, terminals and ports to carriers, yards and chassis providers,” Shah said. “Our technology platform and marketplace harmonizes the container move and aligns interests across the ecosystem. We are in this business specifically because there is huge inefficiency and an opportunity to drive value for all stakeholders. The current economic and industry environment only reinforces that belief.  We remain steadfast in our goal to create economic opportunity and expect that it will take time, as with any other transformation. We remain very excited about the gains we’ve enabled for carriers and customers, and look forward to scaling that value.”

FreightWaves spoke with another technology expert, Ryan Schreiber, chief growth officer at industry consulting firm Metafora, who echoed profitability concerns about this area of technology.

“Investment in our space depends on how big the problem is,” Schreiber said. “Huge problems will get money, like autonomous vehicles, electric vehicles and fuel alternatives. Smaller problems, like digital brokerage or brokerage tools, must have a reasonable plan that shows monetization and a path to profitability. Unit economics matter more than they did. If you need money to prove out a concept, you could previously say, ‘That will work at scale,’ but that’s not going to fly anymore.”

While Schreiber said he had heard of Next Trucking’s problems in its early days and agreed with the other expert that the company underestimated how broken drayage is, he believes that Next Trucking can still hit 19% growth in 2023.

“You can grow in any market, especially when you are an intermediary,” he said. “If you have been a freight broker, it seems harder to grow as a broker in a deflationary market but it’s actually easier than as a trucking company. As a broker, if one part of your business is difficult, like shipper sales or account growth, the other side, capacity management and procurement, is easy. If you understand the levers of those capabilities, you will win sustainably.

“The key is what Next did during the upcycle. If they invested heavily in the other part of the business, they will grow. Meaning, did they take on the business because of the upcycle and service it because of the upcycle? Or did they focus on upskilling the sales force, not just hiring reps to take calls but building an effective sales organization even though they didn’t need to? Do they have a meaningful measure of cost to serve by customer, liquidity of the capacity organization and the cost to serve elements of their capacity providers — they’ll grow. If they did the things they didn’t need to do because money was plentiful, they will meet those numbers with no problem.”

Moreover, if Next does look to sell, Schreiber and the other expert believe that there should be a strong partner out there for the company.

“Even with imports slowing, every major 3PL still seems to see drayage as a strategic priority in the conversations I’ve had. I’d be surprised to learn that any weren’t willing to take a look,” he said.

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