An Ozaukee County venture capital fund participated in a round of Series A funding for a Cincinnati tech startup building an Uber-like last-mile delivery platform.
The startup, Frayt, said Tuesday it has closed a $7 million round as it looks to roll out a new product offering and build its team. The financing was led by Cincinnati-based Refinery Ventures with participation from Wisconsin’s Capital Midwest Fund, Atlanta-based Venture 53 and JobsOhio.
Based in Mequon, Capital Midwest Fund invests in revenue-stage companies in the central U.S. with a focus on technology firms that serve enterprise industrial and manufacturing customers. In late 2021, it announced it had raised the first $41 million for its fourth fund.
Wisconsin-based companies in Capital Midwest Fund’s portfolio include AIQ Solutions in Madison and RealityBLU in Beloit.
Luke Denny, Frayt’s co-founder and CEO, told me the funds will support the company’s planned rapid market expansion along with new additions to its leadership team.
The company is also building out a new product offering, scheduled to go to market later this year. Denny declined to give further details but said it’s something “no one else is doing in the space.”
Frayt, founded in 2018, has been largely heads down for the past couple years, he said. The company had experienced explosive growth driven by the Covid-19 pandemic — when customers shifted their purchases online — but it failed to raise its Series A at that time.
It’s since restructured, which included Denny, formerly its chief operating/chief financial officer, replacing co-founder Lawrence McCord in the CEO role. The company's third co-founder, Josh McCord, remained and now serves as chief design officer.
Two days after his promotion, Denny had to lay off half his team.
“There was a point in early January 2021 where we were about six weeks away from running out of cash,” he said. “We were not learning fast enough, and we were chasing too many shiny objects. We were able to transition and move the company forward with a lot more focus, and we came out of the woodwork a different way. We now have the unit economics (necessary) for this venture backing."
Frayt works like Uber but for last-mile delivery and logistics, meaning shippers and drivers can connect instantly.
Companies can use its on-demand software-as-a-service, or SaaS, platform to offer scheduled or same-day delivery. Frayt connects shippers with drivers — typically small-freight and independent van owners with excess cargo space — in a matter of minutes.
Once a request is posted to its marketplace, a driver accepts the dispatch, either from a distribution center or retailer, and the delivery is tracked in real time.
Currently, Frayt has more than 12,000 drivers in 50-plus U.S. markets, and 300 customers, including Bridgestone, Sherwin-Williams, The Tile Shop and Cargill.
Denny said Frayt is on track to add new cities and roughly double its team of 30 while tripling its revenue growth in 2023.
It’s already hired vice presidents of marketing, sales and partnerships to bolster its leadership team, which was previously depleted.
The remaining new hires will include sales and development roles. Frayt's number of development jobs has already more than doubled this calendar year to support the launch of its new product, which Denny said be available this summer.
"This is something no one else is doing in last-mile today — it's all centered around local delivery — and this backing will allow us to really grow it," he said.
The Series A brings Frayt's funding total to $10 million.
Denny said adding JobsOhio as an investor means the startup can continue to make its mark as an Ohio company. Roughly 70% its team is local. Refinery Ventures also adds a wealth of experience in helping get products to market. Refinery is also based in OTR.
“That’s huge for us,” Denny said. “They're absolute brainiacs, and they believe in this new product we're building as well as the power of the current product that we have.”
Tim Schigel, Refinery’s managing partner, said last-mile delivery — an industry he valued at more than $124 billion — has failed to keep up with expectations. That “became more apparent during the pandemic.”
“Frayt's innovative technology empowers companies to extend their delivery services, ensuring every item is delivered quickly and efficiently while saving time and money,” Schigel said. “I look forward to working with Luke and his team to help scale and grow the company in 2023 and beyond.”
Wisconsin Inno's Teddy Nykiel contributed to this article.
