Emerge, a Scottsdale technology company that facilitates freight procurement and shipping, said Thursday it has raised $130 million in series B funding.
The funding is a big milestone for the 4-year-old company, and Andrew Leto, founder and co-CEO of Emerge, said now is the time to build a technology that will be foundational in the freight industry.
“Imagine being in the hotel industry with no Hotels.com,” he said. “Freight has been the last thing looked at by every company, but now it's really the forefront of all their minds. We need to digitize a lot of how we connect to trucking companies and that's what Emerge does.”
Emerge runs on an online marketplace that connects the shippers looking to move their goods to the carriers driving trucks around the country, much like Hotels.com connects travelers to lodging.
Andrew Leto is co-CEO of Emerge along with his brother Michael. The pair previously founded and ran GlobalTranz, another shipping logistics company in Scottsdale.
The market opportunity for Emerge is clear — there are some 50,000 carriers for hire in an industry worth around $800 billion — but recently the Covid-19 pandemic has also been a boost for companies working in logistics considering it has jammed up international supply chains. Leto said the spotlight on supply chains helped open doors for the oft-overlooked logistics teams in companies around the country.
The funding round was led by Tiger Global Management, the Spruce House Partnership and 9Yards Capital, which previously invested in the company. New Road Capital Partners and Greycroft, both previous Emerge investors, also participated in the round.
Emerge is on track to make between $250 million and $300 million in revenue this year, up from $85 million in 2020, but Leto said Emerge has the potential to be bigger than GlobalTranz one day.
The Leto brothers and a cadre of early employees left GlobalTranz in 2016. GlobalTranz is merging with Worldwide Express and the company previously projected making $1.9 billion this year.
The Leto brothers grew up in the Valley and Andrew said his goal is to one day take Emerge public and grow it into one of the biggest revenue drivers in the state of Arizona. But he needs help to make that happen.
“One of our biggest needs with this money is to hire the best talent here in Arizona,” he said. “We're going to be doing a big hiring blitz this year.”
Specifically, Leto said Emerge, which currently employs about 200, is aiming to hire between 400 and 500 more people in the next year, tripling the total headcount.
The next freight hub?
The funding will be used to help truly bring the company’s platform to life, by expanding its market reach and adding new features. Part of that massive hiring effort will be adding new salespeople to get the Emerge name out there to carriers.
Leto said these first couple years of the company's existence were about building the product and attracting users, so now that the platform is established they can go out and scale it.
“We had to build enough capacity to get enough shippers using our product and start attracting the trucking companies to it. We're finally at that stage,” he said.
This type of software hasn’t been developed before, according to Leto, because it requires deep knowledge of the trucking industry, experience that he and his brother have in spades.
Chicago, Memphis and Los Angeles, among others, are major American freight hubs, but Phoenix has made its own mark thanks to Knight-Swift Transportation (NYSE:KNX), one of a handful of so-called mega-carriers in the U.S.
“Arizona is really becoming the next, I believe, freight hub,” Leto said. “We have the biggest truckload carrier in the United States here [Knight-Swift], one of the biggest brokers with GlobalTranz, I think it's just a perfect city for transportation logistics.”
The other key factor in cementing Phoenix’s logistics prowess is the fact that there are so many call centers in the area and these support staff still play a key role in connecting shippers to carriers. Lots of businesses have historically chosen Phoenix to house back-end and customer service operations because of cheaper labor costs and lower likelihood of natural disasters.
The Leto brothers aren’t the only former GlobalTranz executives to build new ventures in Phoenix. Michael Bookout and Chris Scheid also left GlobalTranz in 2016 and they’ve since founded MyCarrier in Scottsdale, which raised $8 million in funding earlier this year.
