“I didn’t know what the term” freight forwarder “meant until a year after starting business.” Considering his shipping logistics start-up Flexport The last quote from my first interview with CEO and founder Ryan Petersen was worth $ 3.2 billion back in 2016 now seems even more surprising.
But it also shows why he is one of the most talented and exciting leaders in technology: he is learning. Humble. Relentless. About everything that the role requires as it develops.
At the moment this means learning that 1.15 million medical masks will fit on a Pasenger plane if you attach boxes to the seats as if they were human. Flexport has delivered approximately 62 million personal protective equipment, over 7.7 million of which were funded by the company’s nonprofit organization Flexport.org. Petersen and Flexport have now helped build the Frontline Responders Fund, which raised over $ 7 million in aid for COVID.
“He is one of the most impressive founders I know,” said Peter Pham, FRF chairman and co-founder of science . “Ryan only wants to solve problems without ego.”
In this profile, TechCrunch shows Petersen’s growth in our six interviews with him over the past four years, when he raised $ 1.3 billion and generated sales of hundreds of millions.
Overcome Shlep Blindness
Petersen soon found out that “freight forwarding” means coordinating all deliveries and deliveries to bring pallets and containers of goods on one side of the world to a retailer on the other side by truck, boat and plane. Until then, Flexport had been through Y Combinator in 2014 and was preparing to take over the trillion-dollar freight industry.
“I thought the problem was too big and I couldn’t solve it,” he recalls. “How will I regulate world trade? It wasn’t until much later that I realized we should try it! It can’t just sit there broken forever. “Somehow the shipping company was still organized with fax logs and paper manifests or Excel files and emails if a customer was lucky.
The shipping company had plagued many founders, but none had tackled them because it seemed so insurmountable that it led to “drag blindness”, as YC’s co-creator Paul Graham called it.
“Schlep blindness is so severe that your brain doesn’t think about it. I think it is a necessary feature of our brain. Otherwise we would sit here and think about our mortality all day and never be able to do anything,” explains Petersen. Anyone who has ever sold anything on the Internet before Stripe has gone through this terrible process. 100% of Internet entrepreneurs have recognized this problem and then went their own way. “Who wants to get involved with its 100 year old shipping companies and endless acronyms for regulation?
“Ryan is what I call an armor-piercing grenade: a founder who continually overcomes obstacles that other people give up,” said Graham, who donated $ 1 million to Flexport.org’s COVID-19 relief effort . “But he’s not just determined. He sees things that other people don’t see. The freight business is both huge and very backward, and who of the thousands of start-up people noticed it?”
Petersen. What really annoyed him was that the major carriers didn’t want these customers to know what was affecting prices and schedules to keep them in the dark about how suboptimal their routes were. “They only made money from not understanding how it all worked. And I assumed at the time that this was just about entrepreneurs who are new to the area, but it turns out that even the biggest ones Companies are struggling with this stuff. They are afraid that carriers will try to take advantage of it. “
But Petersen wasn’t that naive. In fact, he was in the freight business all his life.
From sling soda to founding startups
“M.Maybe she trained us to be entrepreneurs without realizing it, ”thinks Petersen. He and his brother David grew up with a biochemist who ran her own food safety business while her father did the programming for the company. “All of our childhood conversations were about using software to make government regulations more accessible.” When would Flexport eventually jump through the hoops of the 43 different U.S. trade regulators, it felt natural to its CEO.
Petersen radiates a kinetic energy that shows subtly that he always itches after the next knot comes loose. “At the time, I was terribly bored with everything.” So his mother let him work. “SchAs a child, I paid my allowance by delivering sodas to fill their office. My father would drive me to Safeway to buy sodas for four dollars a case and sell them for nine. “With a laugh, he thinks,” It may have been an opportunity for you to make my allowance tax-free. “
Petersen soon moved larger objects over longer distances, bought scooters in China and sold them online in the USA. Petersen lived in China until 2005 to get closer to the supply chains. The next year he founded ImportGenius with his brother and Michael Klanko. Having found that there was a lot of valuable information in paper manifests, they started scanning the data and selling it to importers and exporters to keep an eye on the competition.
Petersen’s first spotlight was in 2008 when he accidentally hit Steve Heads with Steve Jobs. ImportGenius found that Apple shipped a large number of “electronic computers,” a new classification for the company. “We have completed the launch of the iPhone 3G with our public manifest data. Steve Jobs called US Customs, who called me, ”he told me in 2016.
Although ImportGenius finally reached a plateau, Petersen had gathered the knowledge to lift the veil and pierce his drag blindness. “I realized that the biggest problem was staring at my face. Global trade is too difficult and there is no software to manage it, ”he recalls. “I thought there was no software for SMEs. I have found that there is NO software. “
At first he wanted to build Flexport within ImportGenius, but it was difficult to get existing investors to take the risk. It would be scary but also exciting to start something separate. “My brother is my best friend and my best adviser,” says Petersen. They had always put pressure on each other with a cheerful sense of competition – Ryan’s Twitter handle is @TypesFast. David’s @TypesFaster.
So David took the first step and founded BuildZoom, which raised $ 23 million to coordinate the logistics (can you sense a pattern?) In hiring contractors. Ryan lept in 2013. “I think part of me wanted to go out and prove myself. . . to prove that I was able to run the show. It was a really, really challenging to do it. Then it was the day I did it the most liberating, greatest feeling ever. “
They laugh at you, then you collect $ 1 billion
It took a few years for all regulatory approvals to be received and the basis for the Flexport product to be developed. With the early capital of the Founders Fund, Petersen built the freight software he had been looking for. Nevertheless: “Managers in large companies made fun of us. One of them compared us to Doc Emett Brown [from Back To The Future] and his “flex capacitor”, but we missed that Doc invented a time machine and it worked. “
By 2016, Flexport served 700 customers in 64 countries. I described it as the unsexiest trillion-dollar startup that attacked a huge industry that was so boring that it fended off previous innovations. The saturation in consumer start-up industries has prompted investors to examine where technology has developed in previously untouched markets. Flexport rallied a high-profile $ 110 million round, led by DST, on a post-money valuation of $ 910 million in 2017, and Silicon Valley began to notice this.
Fortunately, the big cargo wigs were still laughing, though Flexport moved 7,000 shipping containers a month for 1,800 customers. “I’m not worried about startup competitors. I’m worried that the big boys will stop seeing us as such a joke,” said Petersen this year. Soon-to-be companies like 25-year-old Chinese private delivery giant SF Express Allied with Flexport and led another round of $ 100 million in 2018. In the meantime, Flexport was trying to sound more like its older competition. Petersen said to me, “We’re trying to pull the word” startup “off. [Our clients] I want a company that helps them grow, not the startup that flies at night. “
At that point, Petersen didn’t care whether the freight was appealing or not. “I never thought it was sexy or unsexy. I just thought it was a backstage pass for the global economy, ”he said later. However, SoftBank’s vision fund, supported by Saudi Arabia, felt the pull. Flexport was vertically integrated, adding freight finance so retailers could pay for factories that they would sell months later. They also chartered their own aircraft and built their own warehouses where they could experiment with next-generation logistics and scan the physical dimensions of everything that came through its doors to optimize future deliveries.
Until then, Flexport had many exit options. But Petersen enjoyed the ride. “I’m just kidding. You have a purpose. You’re invited to interesting things. Once you’ve sold your business, you’re just a rich man. I never want to sell the business. “Fortunately, the potential to make more of the shipping profits convinced SoftBank to invest a staggering $ 1 billion in Flexport in early 2019 at a $ 3.2 billion post-money value.
“It was controversial with our board. They thought it was a lot of watering down, but I convinced them that this was going to go up and down and we wanted us to have money to get through the cycles. I think the world is insecure. You should be prepared for all results, ”explains Ryan. As long as it can weather the storm, “we’ll win at some point.”
This strategy soon paid off. When trade with China effectively ceased, when COVID-19 exploded in the country and Flexport had to coordinate far fewer containers, it did not have to carry out mass layoffs like other late-stage startups. On February 4, 3% of the employees or around 50 employees were cut proactively, with the focus on recruiting, which is to be slowed down. “It is painful to disappoint people,” says Petersen.
The transition to a CEO from the recession and learning to reduce the number of employees with empathy became Petersen’s new goal. “I wanted people to know that I take personal responsibility for it. I wanted people to know that there was transparency here, ”he tells me, his voice tense under the seriousness of the situation. “When people are afraid and then look at the leadership and think that the leadership is not afraid, the fear increases. When people are scared and see, “Oh, are the leaders scared too? Then okay, they will behave appropriately. “
By taking decisive action before COVID-19 was released in the US, Flexport’s momentum remained strong and the runway was long. Petersen proves that he can run the company through both bankruptcy and boom.
Flexports management tricks
“My great realization in the past 18 months is that you can’t do everything. You can do anything you want, but you can’t do everything,” Petersen says. “I see good ideas and say ‘DO IT! ‘”He tells me with an ironic smile.” Soon you’ll be pretty thin. You need a top-down discipline to say no to things. We really lacked that in the early years. “
The pursuit of discipline led him to develop and build on two important framework conditions for prioritizing customer needs and maintaining corporate culture. They are now critical as Flexport has grown to 1800 employees in 14 offices and 6 warehouses and 10,000 customers, including Sonos, Kleen Kanteen and Timbuk2.
The first frame comes from Petersen’s mentor and American business mogul Charlie Munger. It lists the six stakeholders or “customers” that a company has to meet in order to be successful. Here is how Petersen describes it:
- Customers: The people who pay you money. For Flexport we have both importers and exporters
- providers: The people you pay for. For Flexport, which owns the planes, ships and trucks
- Employees: Make sure they are treated well. It has to be a win-win trade.
- Investors: You earn a return on your money. You took a risk
- Regulators: You decide who you give licenses to. For Flexport, there are only 43 regulatory agencies in the United States that are interested in imported products.
- Communities: Where you work. Maybe one day it will be global society
“If you do not have at least a B grade in all and ideally an A grade, you are probably not sustainable in the long term,” explains Petersen. It is a smart lens for anyone who rates companies, whether they work with, invest in, work with, or are a leader trying to improve.
Take Airbnb for example. Customers generally love the alternative to hotels, they have been able to hire employees continuously and effectively, and investors have offered and committed billions to survive COVID-19. But the seller hosts and their neighbors are struggling with disruptive guests, and the communities and their local regulators have argued with the startup about the impact on home supply. The six-customer concept identifies where Airbnb has to work harder.
The second framework that Petersen developed to ensure that a company’s core values are preserved when scaling. It contains the six cultural questions:
- Why?: Why do you exist? What is your goal, your mission, your vision and your impact?
- WHO?: Who are you hiring and what values and behaviors are you looking for?
- What?: What do you focus on and what metrics do you use to measure success?
- How?: How are decisions made and how do you shorten the feedback loop for improvements?
- When?: When should things get done and when should you ship your product?
- Where?: Where does your team feel and how do you become more inclusive?
Petersen compares these principles with the treatment of an illness. It is easier for leaders to incorporate them into their culture early than to try to fix them later. “If you do these things right in a company, you will outperform,” he believes.
To implement this, Petersen built a team near him that only “ensures that our OKRs (goals and main results) are clear, that we conduct inclusive meetings with good documentation and that we hold people accountable”. The method is heavily influenced by Amazon’s corporate style. As Petersen told me last year: “The English language lacks a positive word for bureaucracy.”
Taking the process seriously has made the CEO a hit with his employees. “Working for Ryan has accelerated my career for at least a decade. He has the uncanny ability to get people to perform at their best, ”said Flexport’s longtime former product vice president, Sean Linehan. who went on to set up placement. “Ryan is building the playbook for operationally intensive tech companies. Building a global logistics giant from scratch is an incredibly complex task. But Ryan lives on complexity. Where most entrepreneurs fall apart, he takes his step. “
Given the economic headwind, Petersen will need this drive if he wants to bring Flexport to the public. As expected, he learns from it. “I like to read annual reports. It’s like a hobby of mine, especially with my competitors, ”says Petersen. “I want to go public. But I don’t want to go public until we are profitable because I don’t want to match the vagaries of Wall Street. IIf you lose money and you are public and Wall Street doesn’t like your shares, you can get into this death cycle. “
As the CEO of a company that is outperforming, new mentors such as Executive Coach Matt Messari and Microsoft Satya Nadella have also opened up. Petersen asked Nadella: “How can you make learning and development measurable?” Redmond’s head Honcho replied, “You don’t have to measure everything.” Petersen took the note. Sometimes you just do what you think is right.
The wartime CEO
The leadership with his heart led Flexport to join the Coronavirus relief effort in a tremendous way. “We were not brought to earth to lie in bed and stay warm under the covers. It’s time to do something for the world, ”tweeted Petersen.
Flexport’s response started in January with several blog posts per week explaining how COVID-19 affects world trade, how aid organizers solve supply chain problems, and how governments and private companies can help. The Frontline Responders Fund was then launched and the forwarding of all contributions from Flexport.org started. The costs for the forwarding agency have been massively reduced in order to obtain PPE wherever they are needed.
“100% of your donation for this purpose goes directly to the masks being sent to people at the front as soon as possible. I give you my word that we won’t waste a cent of your money, ”tweeted Petersen. Even though his business encountered his own problems with world trade and demand was disrupted, he spent his full time running Flexport.org and promoting the FRF. With the help of celebrities like Arnold Schwarzenegger and Edward Norton, over $ 7 million was raised. The FRF has delivered over 6.9 million masks, 240,000 dresses, 1,000 ventilators, 155,000 gloves and 250,000 meals to vulnerable populations.
Petersen was not shy about recruiting more executives and wrote this detailed guide to the major bottlenecks that block relief. “Philanthropists should also increasingly lend money to organizations that have received PSA orders but can only afford to buy the equipment if they are paid in advance.” Since they get their money back when the pandemic subsides, it is currently one of the most effective forms of philanthropy. “
This willingness to get involved has inspired his employees to roll up their sleeves. “In a crisis, executives really show the values they embody,” says Susy Schöneberg, head of Flexport.org. After the COVID 19 outbreak, Ryan immediately offered us more resources to support our commercial and nonprofit customers. In the past few weeks, my days started and ended talking to him no matter what time it was. “
In his view, Petersen also has special insight into who is trying to take advantage of the crisis. “As of now, Flexport will not ship personal protective equipment unless the customer can demonstrate which hospital system or other frontline emergency worker they will be provided with, ”wrote Petersen. “There are worldwide bottlenecks in these products, and it is immoral to allow war profits to entrepreneurs who want to earn a simple dollar. “
In the absence of adequate federal crisis management, Petersen has become a defacto general in the war against the corona virus. “Given the scale of the problem and the complexity of the market failures described above, there is no way for the US government to solve this itself. But it can and must take the lead, remove obstacles, and coordinate the response from the private sector.” Until then, Petersen learned as fast as he can to become the CEO needed in the war.
Petersen describes Kobe Bryant and concludes: “If you know what your goal is, the whole world is your library. “
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