The death of Convoy has been one of the biggest stories in both tech and freight media over the past week. While the freight market has suffered a number of major shutdowns, few were as sudden as Convoy’s.
After all, Yellow was a much bigger company, but it died a very slow death, and because it was a publicly traded company, we all got to watch its journey on life support for many years. Convoy’s story, on the other hand, offers a cautionary tale of a meteoric rise to burnout in just eight years. For most of that time, it was respected, loathed and feared by industry insiders, both wary and weary of how a war chest of capital can disrupt the economics of the industry.
For a few years, that’s exactly what happened.
In Convoy’s earliest years, it used venture capital that it raised to “buy market share.” It offered shippers that agreed to be early adopters rates that were cheaper than market — discounted significantly compared to the rates of incumbent players.
This worked; some would say too well. Convoy was able to scale quickly and garnered significant market share from some major shippers along the way.
At first, Convoy offered shippers aggressive discounts on their major lanes and then used that wedge to get access to lower-volume lanes. This allowed the company to expand its margins in secondary lanes, offsetting losses in the primary lanes.