At one point, with a valuation of $3.8 billion, a unicorn in the United States announced the closure of its core business, intending to disrupt its freight brokerage business

On Thursday, October 20th, the digital freight brokerage company Convoy informed all employees that due to a "large-scale freight recession", the company will close its core business. A week earlier, Flexport, a supply chain software startup, announced that it would lay off about 20% of its workforce

On Thursday, October 20th, the digital freight brokerage company Convoy informed all employees that due to a "large-scale freight recession", the company will close its core business. A week earlier, Flexport, a supply chain software startup, announced that it would lay off about 20% of its workforce.

Convoy is headquartered in Seattle and aims to disrupt the dispersed, low tech freight brokerage business of contacting truck drivers and customers through phone and fax. Prior to this week, the company had approximately 500 employees.

Convoy has been selected five times on CNBC's "Top 50 Disrupting Companies" list and is currently ranked 47th this year.

During the COVID-19, supply chain problems and surging demand led to soaring prices in the logistics field. But since then, truck freight rates have gradually fallen, reversing the favorable situation of Convoy's on-demand technology.

Similar to other startups in the freight industry and beyond, Convoy has undergone multiple rounds of layoffs and closed its Atlanta office in the past year.

During the difficult period of the freight industry in 2022, Convoy received $260 million in new financing from investors. This round of financing was led by Baillie Gifford and Hercules Capital in the UK, with JPMorgan providing a $150 million credit line to Convoy. Just 18 months ago, Convoy's valuation reached $3.8 billion at one point.

According to data from research firm PitchBook, Convoy has raised over $1 billion from investors, including more than 20 angel investors such as Amazon founder Jeff Bezos, LinkedIn founder Reid Hoffman, and Salesforce founder Marc Benioff. Later, Microsoft co founder Bill Gates also made investments. Capital G, a venture capital group under Google's parent company Alphabet, and Generation Investment Management under former US Vice President Al Gore are also investors in Convoy.

Convoy is led by co founder and CEO Dan Lewis, who previously led the New Shopping Experience business at Amazon and worked at Microsoft.

According to a memo sent to employees on Thursday morning, Lewis stated that the company is facing an "unprecedented collapse in the freight market" and "severe currency tightening". This has also brought enormous pressure to potential strategic acquirers, and ultimately the company decided to close its current core business and explore and evaluate future strategic choices.

The following is the full text of the memo sent by Lewis:

Hello everyone

As we all know, in the past few days we have been taking measures to ensure that all goods in transit arrive at their destination on time and minimize the impact on both the shipper and the carrier. Thank you to all those who focused on their work and successfully completed the task. You have done an excellent job.

As this action is nearing completion, Convoy will close its current core business. Some of our teams will continue to handle this transitional stage and potential strategic choices for the future (we have already communicated with them), and today is your last day in the company.

We had hoped that this day would never come. We spent over 4 months searching for strategic choices that were suitable for the company's development. However, in the end, there was no choice that could meet the company's requirements to continue operating in its current form.

So, what exactly happened? In short, we are in a large-scale freight recession and capital market contraction. The combination of these two ultimately dealt a serious blow to our progress and also put enormous pressure on our potential strategic acquirers. This can be said to be a perfect storm.

Convo has brought tangible benefits to truck transportation methods centered around technology. It has created a truly scalable technology platform and business model for us, and is expected to bring substantial financial benefits when market conditions improve. But in the end, the power of the market is too strong for us to withstand solely on our own.

We have adjusted all business leverage as much as possible, but we are like running on a downward escalator, and the speed of the escalator is still accelerating. Therefore, despite your outstanding work in product and service innovation, driving revenue growth, and enduring difficult comprehensive cost reduction, this is still not enough to enable us to achieve financial stability without the need for external funding support to withstand the increasing pressure of the industry.

In addition to the unprecedented collapse of the freight market, the intense monetary tightening in the past 18 months has greatly reduced investment interest in later private companies and reduced capital inflows. In addition, in this freight and financial environment, merger and acquisition activities have significantly decreased, and most potential strategic acquirers have also been affected by the collapse of the freight market, making transactions more difficult.

A perfect storm.

After a long and detailed exploration process, we finally arrived at today's results. Convoy will close its current core business and explore and evaluate future strategic choices.

The work you have done will always have a profound impact on the freight industry. This industry needs modernization, shippers need it, carriers need it, and the market also needs it. We still believe that this will be the direction of future development.

As I said during our conference call, I have full respect for you. In the past few months, I have experienced ups and downs in business, but because Convoy's incredible employees inspire me every day, I have always maintained motivation. You guys are great!