Convoy Inc., a prominent Seattle-based trucking startup backed by notable investors such as Jeff Bezos and Bill Gates, is announcing the unfortunate closure of its operations. The decision comes after a prolonged four-month search for an acquirer proved unsuccessful. In a memo addressed to Convoy employees, Founder and CEO Dan Lewis expressed the difficult news, stating, “Today is your last day at the company.”
The closure marks the culmination of an extensive process, spanning several months, during which Convoy diligently explored various strategic options to sustain its business. Lewis’s message acknowledged, “Convoy is closing the doors on its current core business operations and exploring and evaluating strategic options for what might come next.”
Despite its previous valuation of $3.8 billion by investors last year, Convoy had already taken steps to downsize its workforce, reducing it from a peak of 1,500 employees to around 500. The company was on the verge of running out of financial resources within a matter of weeks, according to sources with knowledge of the situation. Regrettably, most of the remaining employees had to be let go on Thursday. Lewis attributed Convoy’s challenging circumstances to “a massive freight recession and a contraction in the capital markets,” which also hindered the progress of their potential acquirer.
Convoy had been successful in securing more than $1 billion in funding from a range of investors, as reported by research firm PitchBook. The closure of the company may result in substantial losses for many of these investors. However, for Allen & Co., this marks a significant success. According to PitchBook data, this New York-based investment bank made a modest investment in Convoy back in 2015 when the startup’s value was less than $60 million. Joining Allen & Co. in supporting Convoy were over two dozen angel investors, including notable names like Bezos, Reid Hoffman, and Marc Benioff. Bill Gates made his investment in a later funding round. Capital G, a venture group affiliated with Alphabet Inc., and Al Gore’s Generation Investment Management also backed Convoy, as reported by PitchBook.
Interestingly, Allen & Co. chose to divest its shares in Convoy last year, as indicated by the data. Coincidentally, this decision came at the same time that Baillie Gifford, T. Rowe Price, and other investors collectively valued Convoy at $3.8 billion in a fresh funding round.
Convoy’s fate is not unique in the current landscape of logistics startups. Several such businesses have encountered challenges, including declining shipping prices and demand, as well as a less favorable environment for venture capital fundraising. In the face of these obstacles, other companies in the industry, such as San Francisco-based freight-forwarding firm Flexport Inc. and Seattle-based warehousing startup Flexe Inc., have had to implement layoffs as demand receded from the heights reached during the pandemic.