SaaS Interviews with CEOs, Startups, Founders
Freightos Grows GMV 800%, Exits COVID Stronger Than Ever
25 Jun 2021
Chapter 1: What is Freightos and how does it operate in the freight industry?
It's growing the whole time, but the SaaS is not, you know, it's really an enabler for us. We're not trying to build a big SaaS business. So yes, the answer is yes, but also we don't particularly care.
You are listening to Conversations with Nathan Latka, where I sit down and interview the top SaaS founders, like Eric Wan from Zoom. If you'd like to subscribe, go to getlatka.com.
We've published thousands of these interviews, and if you want to sort through them quickly by revenue or churn, CAC, valuation, or other metrics, the easiest way to do that is to go to getlatka.com and use our filtering tool. It's like a big Excel sheet for all of these podcast interviews. Check it out right now at getlatka.com. Hello, everyone. My guest today is V Schreiber.
He's the founder and CEO of Freytos. Freytos is the digital platform of the booking platform for the half-trillion-dollar international freight industry. The company connects airlines, ocean miners, freight boarders, manufacturers, and retailers to make international shipping digital and smooth.
Previously, he was the CEO of Light Tech, acquired by GE, and founder and CEO of Unicorn, acquired by IBM and other tech startups. He's spoken widely and written many articles, including many patents. He has a PhD in computer science and is the author of Phys, which tells the history of physics as a novel soon to be published, money going out of style. V, you ready to take us to the top?
Let's go. Patents, books, great logistics. You do everything, huh?
Like I always say, I just have a problem sitting still, so I do stuff, yeah.
Well, hey, this is great. Listen, quick update for folks that may have missed our first interview, which is back, I think, in 2018. Help people understand. Can you give a real-life example? There's an e-commerce brand in New York that sources 1,000 shoes per month from China. Where do you fit into their ecosystem?
Yeah. So we're a platform that connects all the players in international freight. And there's two main layers, actually. So if you're an importer, you're importing some stuff from China, then you need to arrange shipping. And typically, you'd source that from a freight forwarder. A freight forwarder is like a travel agent for cargo, right?
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Chapter 2: How did COVID-19 impact Freightos and its operations?
Yeah, it was a great company based in Barcelona, Spain, founded by two guys, Manuela and Enrique, out of their college dorm about 12 years ago. They'd built it up purely organically to the point where they had about 1,000 freight forwarders using their software. Now, since we merged, it's at least 2,000.
And, you know, with our backing, we've been able to transition that from being just a software business to being a real transactional platform, which is growing very, very fast. So that's been a fun ride.
So we can't obviously skip over the last year and a half. COVID was sort of interesting. When it first hit, what was going through your head? What was happening inside at Fredo's?
Well, it was quite a roller coaster. It's hard to remember now, but in April, this March, April of last year, suddenly it became clear that COVID was a big deal, and things happened very quickly. China shut its borders after Chinese New Year. The factories didn't come back. There was nothing shipping out of China, and China was half of our business.
And then the airlines worldwide got grounded, so there was virtually no air cargo. All of that happened very quickly. It was a scary time. We actually went through the sad process of downsizing our team a bit because we didn't know what was going to happen.
Having said that... How many employees were you and then how many did you have to let go, unfortunately?
We went down at the time from about roughly 240 to 200. Okay. So it wasn't a huge proportion of the team, but it's always very sad when you have to do that. We lost some good people, but we've actually... now bigger than 240. And in fact, in a couple of cases, the same people came back and worked with us again, which is great.
So yeah, so that was the flip side, you know, by the time August came around last year, retail people started shopping just as much as before, in fact, more than before, albeit more e-commerce and less, you know, high street, obviously less, you know, malls. But so that's good for us. E-commerce is a good sector for us. So yeah, Suddenly, shipping volumes were actually up and breaking records.
And that's continued till today. I mean, shipping is breaking new records of volumes and prices as we speak. We track that. We also provide the data feed for daily shipping prices. It's called the FBX Index. And that's being quoted a lot in the press at the moment because those prices are up 200%. depending on the routes, 250% or more year on year.
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Chapter 3: What strategies did Freightos implement during the pandemic?
There's been a combination of factors. First of all, retail remains strong. Even as people spend less money on restaurants and services, they're spending more money on goods. So retail remains strong. And then you've had these various events. You had the Suez Canal blockage that created a lot of stress on a system which was already at full capacity.
Just in the last couple of weeks, you've had a major COVID outbreak at the Yantian Port in South China, 25% of the goods that ship from China to the US ship out of Yantian. And that port is down, its capacity is down 70% because there was an outbreak of COVID and staff got sent home.
And there's a lot of ripple effects because the whole, the ships were full anyway, and then you get the Suez Canal blockage, you get Yantian outbreak. And then the ripple effects because there are something like 70 ships roughly anchored outside Yantian waiting to come into port. Mm-hmm.
That means that you've got tens of thousands of containers which are out of circulation, so now there's a shortage of physical containers, the metal boxes. So the whole system is very full. And then when you have more disruptions, they just can't recover and the prices skyrocket.
And as you're seeing, fbx.fredos.com is really where the industry tracks all of that price because we have more data than anyone else about what's happening in the pricing. And this will impact, just to be clear to your listeners, this is a big increase, big enough that it will impact the price of goods on the shelf this summer.
I was going to say, is this a leading indicator of what we're going to see with inflation and price increases and decrease in purchasing power? I mean, would you argue this is a leading indicator of that?
Yes, it is. Yeah, this is definitely a factor of inflation. Normally, on average, shipping is about 5% of the price of an imported good. When you buy a product in the shop, most of them are imported. And on average, shipping is about 5%. Now, of course, if you buy a really big, cheap toy... then shipping would be a much bigger proportion.
If you buy an iPhone or some jewelry, which is small and valuable, then the shipping is a smaller proportion. So it does depend on the product. But if we take an average, it's about 5%. And therefore, if shipping goes up 10%, 20%, it doesn't make a big difference. But when shipping goes up 200% or more... then that's 10% on the price of the good. Now, the retailer may eat some of that.
They may absorb some of that. But yeah, you're going to see a significant impact on prices. And likewise, this may not last. There may be a couple more ships come into use, and maybe the prices crash. And then that can make prices cheaper. So it could be that some of the inflation we're seeing right now in the US may be transitory-related shipping costs, which will eventually come back down.
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Chapter 4: How has Freightos achieved significant growth post-COVID?
Okay, and what was it during COVID?
COVID was up a bit. It was sort of closer to $30 million.
Okay, wow. Okay, so serious gains between 2020 and 2021. It's a fact that things are reopening, but also prices are increasing drastically.
Yeah, but also, to be fair, also because there's a real change in the airlines becoming digital. So we were getting very little transactions with the airlines directly. A year ago, we only had three airline groups who were able to connect to us digitally. At the same time as prices going up, like you said, volatility going up, but there's also been a revolution, which we call digital air cargo.
That's been a big part of our growth as well.
I see. Is this your number? This is your only revenue stream? It's percent of sales through your platform? Are there other ways you monetize?
So that is the main revenue stream, but we also provide software as a service tools, SaaS tools, to help the freight forwarders. We have 2,000 freight forwarders around the world who are using our software to help manage their buy rates and their sell rates. And we also make a very small amount of revenue from the data itself. You took a look, Nathan, at the FBX website.
So a lot of that we give away for free, but some people do pay us for more detailed data as well.
I want to get more into that in a second. But first, so on these 2,000 freight porters that are using you for buy and sell side instrumentation in the SaaS product, I think last time you came on the show, you told me that on average, they're paying like a grand per month. So like $12,000 sort of ACVs. Is that sort of still in line with what you're seeing today?
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Chapter 5: What role does digitalization play in Freightos' business model?
And so let me go back now as we wrap up to the media business. So SaaS companies say, if you can build a media brand, my gosh, that's arbitrage on cap because everyone comes to you as a source of truth. Whose idea was it to launch the FTX? What year did you launch it? And true or false, are you able to get customers cheaper than your competitors because everyone comes to you as a trusted source?
So true, first of all, yes. And believe it or not, the traffic, because of all the volatility in the prices, traffic to the FBX website has grown like 10x or more, I think, just in the last few weeks even. So that's a fantastic way of acquiring customers. So that's very perceptive, and that's correct.
We first launched that under a different name before we partnered with the B, the Baltic Exchange. We launched it about four years ago, I think. I don't remember the exact date. And the traffic to that site has been growing. But now, in the last week, it's been such a big issue and... The last few weeks, you mentioned inflation. It's been picked up in Reuters and Wall Street Journal.
All the major newspapers are quoting the FBX index, which is exciting.
Interesting. Add up, obviously, you have all your revenue streams. You're bringing back some of the employees you had to lay off on COVID, which is great. It was a great comeback story. What do you anticipate you'll grow as a business this year in terms of percentage year-over-year growth?
Well, in terms of ā if I look at the gross bookings ā Just do a quick calculation so I don't get it wrong. Yeah, we should grow 800% in the bookings.
800% on bookings, which you then take a percentage for your revenue.
Yeah, correct. Now, some of our revenue is growing. I'm not going to give you the exact growth of the revenue, but some of the revenue is growing absolutely linearly with that 800% other revenue. There's parts of the growth which we're not fully monetizing yet. So some of those bookings are growing, but we're in growth mode and some of it is monetized.
So the growth of the actual net revenue will not be as high as that, but it will be very high.
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Chapter 6: How does Freightos handle pricing and revenue generation?
I sleep seven hours or so.
That's great. And Z, minus your situation, married, single, kids?
I am married and I've got kids and grandkids. How many kiddos? Four kids and my daughter has three kids.
Holy mackerel. Busy guy. Okay. Married.
How old are you?
How old am I? I'm 52. 52. Last question. Okay. Happy birthday. Thank you. What's something you wish you knew when you were 20?
No, I don't know. I think it was fun discovering things for myself. I wouldn't have wanted any shortcuts.
Guys, there you have it. Frados launched many years ago. They survived COVID. In 2019, they helped process over $20 million of transaction volume through their platform. In 2020, they saw a slight increase of $30 million. Now in 2021, on track to break $200 million because they're getting a lot more traction with airline groups. The world's opening back up.
The FBX sort of average rate went from $1,500 to ship from China to the West Coast of the Americas up to like $6,000, which obviously helps drive Frados revenue. But they have other revenue streams. Their SaaS will do over $2,000. freight forwarders to manage buying and sell rates. They paid several hundred bucks a month for that.
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