Convoy co-founder and CEO Dan Lewis on Sunday provided some insight into the freight network startup's final months.
Responding to a LinkedIn post from Nikesh Parekh, a general manager at Microsoft, Lewis said he is busy working on the next steps for what remains of Convoy, and the company had "credible inbound interest earlier this year" for an acquisition. Lewis made the comments after announcing last week that Convoy would be shutting down its core business, and that Oct. 19 would be most employees' last day at the company.
"We had strong relationships with other companies who periodically asked about deals," Lewis wrote on LinkedIn Sunday. "It was a warm start vs. just calling around. We got to the actual 1/2 yard line in a couple months, and then again. Something happened. We reset and expanded. There was no lack of interest in how the tech and biz worked."
Parekh, who works on the Microsoft's low-code platform, detailed in his post the challenges in selling a company. He was the co-founder and CEO of the cash flow management tool Suplari, which Microsoft acquired in 2021.
Parekh noted that selling companies often lack leverage because they are "distressed in some way," and they need to balance burning cash at a fast pace with the fact that acquirers are in no rush to close the deal.
"Every month, you are getting closer to hitting the wall, needing funding or shutting down," he wrote. "Buyers can smell your weak negotiating position and can see your balance sheet and cash flow. There is no urgency for them to close a deal, reducing the price. My assumption is that most companies in the transportation and logistics space have thin margins and do not want a high growth but money-losing business."
He added that having venture debt is particularly burdensome for a selling company. Convoy had raised $100 million in venture debt last year. Parekh also said a well-run sales process takes at least six to nine months.
Lewis, in his response, wrote the freight recession added to Convoy's burn rate and hurt potential acquirers.
Convoy, founded in 2015, connected shippers to trucking companies, or carriers, with the goal of reducing the number of empty miles truck drivers spend on the road. Trucking companies, meanwhile, could find and bid on loads through Convoy's app. Convoy counted as clients companies like Unilever, The Home Depot and Anheuser-Busch.
Convoy hit a valuation of $3.8 billion in April 2022 after raising $260 million between equity funding and venture debt. Since June of last year, however, Convoy conducted multiple rounds of layoffs and closed its Atlanta office as the freight market struggled.
Microsoft co-founder Bill Gates, Amazon founder Jeff Bezos, Salesforce CEO Marc Benioff, Uber CEO Dara Khosrowshahi and former Starbucks President Howard Behar were all early investors in Convoy.
Lewis announced Convoy's shutdown in a memo to employees Thursday. He said some employees would stay on to help with "this windup transition and potential future strategic options," and that the company had spent four months exploring its options. Nothing materialized, and the market conditions made further funding or an acquisition challenging.
Lewis didn't say in the memo what will happen to what remains of Convoy, but the company is "evaluating strategic options for what might come next."
