There are some really profound misunderstandings of how bankruptcy and credit work in this thread.
Creditors are ranked by seniority and get paid out in order by seniority. Equity is below every creditor and has been completely wiped out. Companies are not allowed to take cash or sell the furniture to pay out employees. That money is legally owed to creditors and attempting to stiff them is theft. I'm sorry to those affected at Convoy, but that is the reality of working at a startup that goes through a hasty liquidation. Convoy is not being "cheap" about this, as some are suggesting. Any "retention bonuses" are to keep executives around for long enough to unwind the company in an orderly fashion. Nobody is getting rich off failure; if everyone were to walk away there'd be nothing left and therefore nothing to recover and distribute. It's bad for everyone, but the alternative is worse.
As for the larger situation: Convoy were a digital freight brokerage. They acted as intermediaries between shippers and carriers and make money on the spread between the two. They got into trouble because the entire freight sector has been suffering a double whammy of cost increases due to inflation (ie. diesel costs) and a slowdown in demand. This has caused a number of carriers and brokerages to go bust. Freight brokerage has some other properties that make Convoy's situation particularly serious. In particular, carriers typically securitize their accounts receivable. In freight, this is known as "factoring." Convoy got stuck holding the bag after their partner carriers went under, having already paid them for their service, but still waiting for payment from the shipper.
Worst of all, Convoy had no exits because their only potential acquirers are in the same industry and are also getting completely crushed.
(Ex-)Convoy engineer here. No mystery as to why this happened, sudden tight market and low available capital demolished us. External reasons given in the article were the same we knew and couldn't do anything about considering that none of the M&A options materialized.
Detailed the shutdown on a call at 8:30am Pacific this morning. CEO said there'll be no severance or healthcare.
Lot of talented folks in Seattle and beyond who'll be looking for new gigs.
Given that you were in the company and presumably have an idea of how the company functions: where did the funding go? $260M gone in 1 year?
"Convoy, which raised $260 million in a funding round last year that valued the business at $3.8 billion, on Wednesday told employees in an email that it would stop accepting shipments until further notice and that it was rescheduling or canceling existing loads." (wsj)
I used to work for an IoT startup several years ago. We were a small team and focused on attracting big clients for big money. I realized the danger in that once I learned one of our long-standing clients had been paying us for years for a solution that wasn't in operation.
No one else thought it important to try and get developers using our product to reduce our reliance on big players and well, here we are. My last check was paid out from the CEO's personal bank account.
Certain spaces are exciting to work in because you can clearly see a need but sometimes the stars don't align for you. I hope the Convoy team (sans leadership) lands on their feet. Q4 is the worst time to find jobs.
Any insights on how effective the CEO and the executives were? I'm very curious how successful executives from big companies like Amazon function in a startup.
Classy. Learning a lot about how certain people treat their employees during these last couple of admittedly insane years. Good for future reference, I guess - though not much solace now. I feel for the employees.
Edit: Wow, more responses than I thought! I admit that the tone of my comment was too reactionary, but my opinion stands. I won't modify the original comment but instead will add this quote from Dalton Caldwell, YC Partner:
"So what happens if you have less than three months of cash? It's important to face the issue head on and account for your liabilities and the scenario of shutting down your company.
In many cases, <2 months is the point of no return. If you are in this state it is immediately necessary to lay off your employees and give them severance, pay down your obligations, and use your remaining cash for shutdown costs. If you don't do this and instead end up with zero cash and outstanding payroll, tax or other obligations, things will get Very Bad." [1]
Convoy raised $1.1b including a $260mm Series E almost exactly a year ago.
From a friend: Everyone was laid off with no severance or benefits. The CEO put all the blame on a lender in order to explain why there were no severance packages. This sucks because they took it upon themselves to offer staff retention bonuses earlier this year to keep people around after the earlier layoff.
I work for one of their competitors and I can empathize with them. My thoughts goes to all the employees and their families.
The Freight business is collapsing after an unrealistic high during the pandemic. Since April 2022, revenue per load has decreased to about 70%, this means less ways to generate a profit under the same headcount.
We also saw a decrease in volume as companies overstocked and consumer spending has shrunk to less than 50% of what it used to be. Just add it all up and you see why so many companies are collapsing, carriers and brokers alike.
What would a buyer have even been purchasing in this scenario?
A bunch of talented employees? Cool, they are all on the market anyway.
A bunch of tiny commodity contracts? Why?
A pile of code? Is it particularly hard to recreate?
Valuations are having a big wake-up call across the industry. While a company can be more than the sum of its parts, VC-backed tech companies have really struggled in industries where unit-economics rule.
Great deep dive into how drastically the freight market has shifted the last 12 months and the likelihood that Convoy will be the first of many more to fall in coming months.
Fascinating explainer of a market I didn’t know much about, especially the terms (covenants) laid out by banks that float the money on shipping accounts receivables.
Trucking startup? Convoy sounds like an ordinary freight exchange to me, where truckers trade available loading space against transport orders. For each assigned order, the trucker pays a transaction fee to the platform. Plus there are additional services like factoring: get paid immediately by the platform instead of 30 days later by the shipper, platform usually keeps 5% commission for this.
Dozens of platforms like this exist in Europe, not sure why everybody makes a fuss about it.
From what I can tell, convoy has not filed for bankruptcy protection yet, which indicates that after dumping the load of their payroll, they believe they can remain solvent long enough to continue to shop their tech stack around.
That’s kinda disgusting imo. People deserve severances.
“Hyper growth mode” = hiring as fast as possible. Startups gotta borrow and spend their way to success, and fast, ya know. Can’t keep the VC’s waiting on their returns.
"Between the lines: The shipping and logistics markets have turned south since the pandemic era's boomtimes."
I think what you mean is this business makes no sense when interest rates aren't zero and investors aren't looking for places to stuff money.
>The trucking marketplace gained a lot of buzz a few years ago, raising over $670 million from top investors like Jeff Bezos, Bill Gates, Capital G, Greylock, Y Combinator, and Fidelity.
My navel-gazing take (as a very early Convoy person):
It is really hard to get the kind of exponential efficiency gains in this space that a 'blitzscale'-focused startup needs in order to really succeed.
Trucking is an industry that relies heavily on relationships (trucker <-> broker, broker <-> shipper, broker <-> facility, etc), and you're not going to change that (required for true automation) without already being at an absurdly large scale.
Convoy spent too much effort on chasing things that had the potential to give the company those exponential gains without addressing the high-touch nature of the industry (but were just not a good fit, and ultimately fell flat).
And Convoy—conversely—had very little incentive to spend most of its effort on iterative improvements to the core brokerage (which would have probably led to profitability, but not the kind of returns that VCs ultimately want)
And so it begins. A large wave of unprofitable startups that raised in 2021/2022 are going to fail at becoming profitable and be forced into fire sales or bankruptcy over the next 12 months.
If I had to guess, bankruptcies like this peak sometime next year since many of these companies will find a way to last 24 months on their last fundraise.
Another recent example is Clutter, a moving company that raised $300m, who was forced into a fire sale for $30m.
Never heard of this company. Thought it was another automated trucking company. Bloomberg profile of the company shows it’s actually a platform for truckers (finding “routes”), and larger companies to manage routes, their fleets, and status of delivery. Most of this appears to rely on GPS.
Not sure why this was valued at $3.8B. Wall Street investment bankers smoking crack while evaluating this one.
Because trucking is an enormous industry and $3.8b is a tiny slice. Sure, it's a tough nut to crack, but if someone does crack it they can be worth a lot more than that.
Are they not going to pay us? We hauled the load from convoy but didn’t get the payment that was supposed to released yesterday. I tried calling them but nobody answered.we are just a small company and we are not getting paid for the we have done. Diesel is so expensive. Do I have pay expense out of my pocket?
Hopefully the ZIRP idea that dies is that VC and Big Tech can create companies off a conveyer belt.
VCs today go after shiny baubles, like “27 innovators under 27” nonsense, and have forgotten they’re mainly looking for high talent very resilient technical weirdos and any other characteristics are bonus.
We normally talk about the risk burden of founders (we're all either founders or will be soon, right?).
We don't often talk about how everyone involved in a business takes on risk. This is a great example of all the employees risking being cut off from funds and health care.
Those employees won't be lionized for "learning from their mistakes" when they get a new (better paying?) job, will they?
Those employees also didn't get a say in how the company was run despite the fact that they were taking a serious risk, too. Probably a more serious risk than a founder, given that most founders are wealthy or backed by wealth.
Convoy closing sucks. But it does not suck at all as an illustration of the problems in startup culture . . .
Wow! I did not expect this. Convoy was hiring like crazy at one point, touting how fast they are growing and how much money they have raised. They were going to be the Uber for Trucking.
[+] [-] neonate|2 years ago|reply
[+] [-] revel|2 years ago|reply
Creditors are ranked by seniority and get paid out in order by seniority. Equity is below every creditor and has been completely wiped out. Companies are not allowed to take cash or sell the furniture to pay out employees. That money is legally owed to creditors and attempting to stiff them is theft. I'm sorry to those affected at Convoy, but that is the reality of working at a startup that goes through a hasty liquidation. Convoy is not being "cheap" about this, as some are suggesting. Any "retention bonuses" are to keep executives around for long enough to unwind the company in an orderly fashion. Nobody is getting rich off failure; if everyone were to walk away there'd be nothing left and therefore nothing to recover and distribute. It's bad for everyone, but the alternative is worse.
As for the larger situation: Convoy were a digital freight brokerage. They acted as intermediaries between shippers and carriers and make money on the spread between the two. They got into trouble because the entire freight sector has been suffering a double whammy of cost increases due to inflation (ie. diesel costs) and a slowdown in demand. This has caused a number of carriers and brokerages to go bust. Freight brokerage has some other properties that make Convoy's situation particularly serious. In particular, carriers typically securitize their accounts receivable. In freight, this is known as "factoring." Convoy got stuck holding the bag after their partner carriers went under, having already paid them for their service, but still waiting for payment from the shipper.
Worst of all, Convoy had no exits because their only potential acquirers are in the same industry and are also getting completely crushed.
[+] [-] wooly_bully|2 years ago|reply
Detailed the shutdown on a call at 8:30am Pacific this morning. CEO said there'll be no severance or healthcare.
Lot of talented folks in Seattle and beyond who'll be looking for new gigs.
[+] [-] emgeee|2 years ago|reply
[+] [-] dpflan|2 years ago|reply
"Convoy, which raised $260 million in a funding round last year that valued the business at $3.8 billion, on Wednesday told employees in an email that it would stop accepting shipments until further notice and that it was rescheduling or canceling existing loads." (wsj)
[+] [-] NetOpWibby|2 years ago|reply
No one else thought it important to try and get developers using our product to reduce our reliance on big players and well, here we are. My last check was paid out from the CEO's personal bank account.
Certain spaces are exciting to work in because you can clearly see a need but sometimes the stars don't align for you. I hope the Convoy team (sans leadership) lands on their feet. Q4 is the worst time to find jobs.
[+] [-] bdcravens|2 years ago|reply
[+] [-] duxup|2 years ago|reply
Was it largely spot rates, a bid board, and lots of small carriers?
Customers easily could just get rates / carriers elsewhere and walk from Convoy?
No other services making income keeping customers around?
Rates are pretty fluid in logistics, very strange that they would rely on that alone if that was the case.
[+] [-] faefox|2 years ago|reply
Just not enough to offer any severance or healthcare. #TruckYeah!
[+] [-] camhart|2 years ago|reply
[+] [-] bloopernova|2 years ago|reply
That should be illegal.
How much are the executives making from this?
I'm really sorry you're in the middle of this. I hope you can find a better job soon.
[+] [-] toomuchtodo|2 years ago|reply
[+] [-] hintymad|2 years ago|reply
[+] [-] spieswl|2 years ago|reply
[+] [-] tapatio|2 years ago|reply
[+] [-] f6v|2 years ago|reply
[+] [-] moneywoes|2 years ago|reply
[+] [-] xxpor|2 years ago|reply
[+] [-] vogt|2 years ago|reply
Classy. Learning a lot about how certain people treat their employees during these last couple of admittedly insane years. Good for future reference, I guess - though not much solace now. I feel for the employees.
Edit: Wow, more responses than I thought! I admit that the tone of my comment was too reactionary, but my opinion stands. I won't modify the original comment but instead will add this quote from Dalton Caldwell, YC Partner:
"So what happens if you have less than three months of cash? It's important to face the issue head on and account for your liabilities and the scenario of shutting down your company.
In many cases, <2 months is the point of no return. If you are in this state it is immediately necessary to lay off your employees and give them severance, pay down your obligations, and use your remaining cash for shutdown costs. If you don't do this and instead end up with zero cash and outstanding payroll, tax or other obligations, things will get Very Bad." [1]
Convoy raised $1.1b including a $260mm Series E almost exactly a year ago.
[1] https://www.ycombinator.com/library/3Z-advice-for-companies-...
[+] [-] rdl|2 years ago|reply
[+] [-] hintymad|2 years ago|reply
[+] [-] hipadev23|2 years ago|reply
[deleted]
[+] [-] kepano|2 years ago|reply
1. the entire ecomm supply chain got way ahead of their skis during the pandemic thinking boom times would never end
2. no matter how good your software is, supply chain is cutthroat — a motivated low-tech salesperson can always undercut you
3. margins are razor thin, so if you're subsidizing prices with VC money to buy growth you can easily rug yourself
4. when the storm comes to supply chain, the ones who stay alive are those with the biggest balance sheet and diversified business (e.g. Amazon)
[+] [-] infrawhispers|2 years ago|reply
[+] [-] thegginthesky|2 years ago|reply
The Freight business is collapsing after an unrealistic high during the pandemic. Since April 2022, revenue per load has decreased to about 70%, this means less ways to generate a profit under the same headcount.
We also saw a decrease in volume as companies overstocked and consumer spending has shrunk to less than 50% of what it used to be. Just add it all up and you see why so many companies are collapsing, carriers and brokers alike.
Though market.
[+] [-] legitster|2 years ago|reply
A bunch of talented employees? Cool, they are all on the market anyway.
A bunch of tiny commodity contracts? Why?
A pile of code? Is it particularly hard to recreate?
Valuations are having a big wake-up call across the industry. While a company can be more than the sum of its parts, VC-backed tech companies have really struggled in industries where unit-economics rule.
[+] [-] Johnie|2 years ago|reply
[+] [-] e2e4|2 years ago|reply
> A pile of code? Is it particularly hard to recreate?
I think you are buying time. Yes, code could be written, but would probably take at least a year.
Additionally, money-wise what matters is net, even if something is overpriced, all that matters in the end, can you make more than you've spent.
p.s. thanks for the interesting question to ponder and discuss
[+] [-] sharkweek|2 years ago|reply
https://www.freightwaves.com/news/freight-brokerage-bubble-b...
Great deep dive into how drastically the freight market has shifted the last 12 months and the likelihood that Convoy will be the first of many more to fall in coming months.
Fascinating explainer of a market I didn’t know much about, especially the terms (covenants) laid out by banks that float the money on shipping accounts receivables.
[+] [-] jsdwarf|2 years ago|reply
Dozens of platforms like this exist in Europe, not sure why everybody makes a fuss about it.
[+] [-] toomuchtodo|2 years ago|reply
https://news.ycombinator.com/item?id=37931893
https://news.ycombinator.com/item?id=37937165
https://news.ycombinator.com/item?id=37935804
https://news.ycombinator.com/item?id=37946017
https://news.ycombinator.com/item?id=37945817
(dang: feel free to macroexpand and replace my comment with yours if you happen upon)
[+] [-] joneholland|2 years ago|reply
That’s kinda disgusting imo. People deserve severances.
[+] [-] gcampos|2 years ago|reply
How you go from "hyper growth mode" (according to the recruiter email) to closed operations within 13 months?
[+] [-] boringg|2 years ago|reply
[+] [-] tmshu1|2 years ago|reply
[+] [-] baq|2 years ago|reply
[+] [-] whalesalad|2 years ago|reply
[+] [-] moralestapia|2 years ago|reply
I'd definitely want to know more about how things came to be like this.
[+] [-] Mistletoe|2 years ago|reply
"Between the lines: The shipping and logistics markets have turned south since the pandemic era's boomtimes."
I think what you mean is this business makes no sense when interest rates aren't zero and investors aren't looking for places to stuff money.
>The trucking marketplace gained a lot of buzz a few years ago, raising over $670 million from top investors like Jeff Bezos, Bill Gates, Capital G, Greylock, Y Combinator, and Fidelity.
[+] [-] nevir|2 years ago|reply
It is really hard to get the kind of exponential efficiency gains in this space that a 'blitzscale'-focused startup needs in order to really succeed.
Trucking is an industry that relies heavily on relationships (trucker <-> broker, broker <-> shipper, broker <-> facility, etc), and you're not going to change that (required for true automation) without already being at an absurdly large scale.
Convoy spent too much effort on chasing things that had the potential to give the company those exponential gains without addressing the high-touch nature of the industry (but were just not a good fit, and ultimately fell flat).
And Convoy—conversely—had very little incentive to spend most of its effort on iterative improvements to the core brokerage (which would have probably led to profitability, but not the kind of returns that VCs ultimately want)
[+] [-] fairity|2 years ago|reply
The capital constriction really started in Q3 2022. Here's a graph: https://techcrunch.com/wp-content/uploads/2023/03/Screenshot...
If I had to guess, bankruptcies like this peak sometime next year since many of these companies will find a way to last 24 months on their last fundraise.
Another recent example is Clutter, a moving company that raised $300m, who was forced into a fire sale for $30m.
[+] [-] xyst|2 years ago|reply
Not sure why this was valued at $3.8B. Wall Street investment bankers smoking crack while evaluating this one.
[+] [-] paulddraper|2 years ago|reply
Well that puts you in a perfect position to value it.
[+] [-] chadash|2 years ago|reply
[+] [-] hshsbs84848|2 years ago|reply
[+] [-] trucking|2 years ago|reply
[+] [-] throwaway9274|2 years ago|reply
VCs today go after shiny baubles, like “27 innovators under 27” nonsense, and have forgotten they’re mainly looking for high talent very resilient technical weirdos and any other characteristics are bonus.
[+] [-] drewcoo|2 years ago|reply
We don't often talk about how everyone involved in a business takes on risk. This is a great example of all the employees risking being cut off from funds and health care.
Those employees won't be lionized for "learning from their mistakes" when they get a new (better paying?) job, will they?
Those employees also didn't get a say in how the company was run despite the fact that they were taking a serious risk, too. Probably a more serious risk than a founder, given that most founders are wealthy or backed by wealth.
Convoy closing sucks. But it does not suck at all as an illustration of the problems in startup culture . . .
[+] [-] paulddraper|2 years ago|reply
Back that up
[+] [-] nojvek|2 years ago|reply