Convoy CEO Dan Lewis said his company got to the “1/2 yard line” on two potential M&A deals before the trucking marketplace startup abruptly shut down.
Lewis revealed that insight on LinkedIn over the weekend in his first public statements since news broke last week of the company’s collapse.
Convoy told employees last week that it spent the past four months exhausting various strategic options amid an ongoing freight recession and dampened investor appetite, particularly for late-stage unprofitable startups.
But it could not find a deal, forcing the 8-year-old company to shut down operations and lay off a majority of its workforce in one of the biggest Seattle startup implosions ever.
Before last week, Convoy had around 500 employees, down from a peak of about 1,500 people. The company, which built technology to match truckers and shippers, raised $260 million in equity and venture debt at a $3.8 billion valuation just 18 months ago.
Nikesh Parekh, a Seattle tech vet who sold his last startup to Microsoft, wrote a post on LinkedIn about Convoy, drawing from his experience buying and selling companies.
“Four months is not enough time to sell unless you already had a buyer or two buyers in hand,” Parekh wrote. “A well run sale process will take 6-9 months, minimum.”
Here’s how Lewis responded:
“…we started on this path vs. others b/c of credible inbound interest earlier this year. We had strong relationships with other companies who periodically asked about deals. It was a warm start vs. just calling around.
We got to the actual 1/2 yard line in a couple months, and then again. Something happened. We reset and expanded. There was no lack of interest in how the tech and biz worked…but factors you mentioned, especially a freight recession adding to burn and weakening our suitors, played a role…some other things I hope to be able to share to help others in the future.”
Lewis added: “Nikesh, thanks for taking the time to share a point of view on something that a lot of people invested a lot of time and energy into. In the future I plan to share more learnings…I’m not isolating myself, just have been heads down working to deliver a vNext opportunity for a bunch of Convoy’s employees and the tech/system.”
In a video call with employees last week, Convoy President Mark Okerstrom said the company was still “exploring strategic options” with potential acquirers.
The Information reported that Convoy had deals with trucking giants C.H. Robinson and J.B. Hunt fall through in recent months.
Lewis posted two other comments on a thread published by strategy and supply chain consultant Brittain Ladd about the company’s closure.
“If many of the companies we met with could share, I think people would be surprised how they viewed the value of the opportunity,” Lewis wrote. “But, given the ultimate outcome x long-standing assumptions people have held, I’ll have to really think through how to convey it in a way that is credible.”
He struck a similar tone responding to a separate comment on Ladd’s post:
“I’m thinking about writing up what did work and what didn’t work. It will help other entrepreneurs, industry operators, and investors. But a challenge I will face if sharing Convoy’s learnings is that with this outcome there is a credibility gap. When something like this happens the level of insight, learning, and introspection of those directly involved is very high, but any audience would assume that those involved are skewing skewed the story to ‘offset the bad narrative’ etc., so it is harder to take at face value…this is doubly true if the actual story doesn’t align with some broadly held assumptions, etc. So, I gotta think about that :)”
Founded in 2015 by two former Amazonians, Lewis and Grant Goodale, Convoy raised around $1 billion from a who’s-who list of investors that included Bill Gates, Jeff Bezos, Marc Benioff, former U.S. senator Bill Bradley, and even Bono and The Edge from U2 fame.
The company’s $260 million raise last year included $100 million from venture debt investor Hercules Capital. Convoy also secured an additional $150 million line of credit from J.P. Morgan at the time.
The Information reported that Convoy won’t be returning any money to equity investors, and that Hercules Capital is trying to sell off Convoy’s assets.
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