Emerge Raises $130M Series B To Scale Digital Freight Marketplace

Scottsdale, Arizona-based digital freight marketplace Emerge announced Thursday morning that it has closed a $130 million Series B funding round led by 9Yards Capital, Tiger Global Management, and The Spruce House Partnership. Existing investors New Road Capital Partners and Greycroft also participated in the round.

"We've been fortunate to experience explosive growth in the past few years, and this funding will be very useful to Emerge's future success," said founder and co-CEO Michael Leto. "It's no small task and will take a lot of collaboration, but our ultimate goal is to enhance how the industry operates for everyone involved. We are looking forward to continually evolving our cloud-based procurement software to create the most sophisticated freight solution in the country."

Emerge's latest funding round brings the company's fundraising total to more than $150 million. The new valuation was not disclosed, but in an interview with FreightWaves, company officials said that 2021 gross revenue will come in at approximately $200 million. The company expects to run about $4 billion in freight through its system this year and wants to scale to $15 billion next year.

"Logistics is the hottest industry in the world right now, and we have one of the biggest opportunities in that industry in front of us," said Emerge's other founder and co-CEO, Andrew Leto.

The deal is a watershed moment, signaling the gradual maturation of the FreightTech space: sophisticated global asset managers writing large checks to seasoned entrepreneurs in a year when the supply chain has taken center stage. 

Founders, co-CEOs, and brothers Michael and Andrew Leto are serial entrepreneurs in the transportation industry, having previously founded freight brokerage GlobalTranz in 2003 and visibility provider 10-4 Systems in 2012. According to Pitchbook, GlobalTranz was valued at $1.55 billion when it merged with Worldwide Express in June. 10-4 Systems was acquired by Trimble in 2017.

Meanwhile, Tiger Global has become famous in its own right this year, garnering media attention for closing deals at a blistering pace of nearly one every two days in the first quarter. Tiger's relatively small team of about a dozen investors has $75 billion of assets under management and appears to have settled on a strategy of partnering with co-investors to accelerate its deal-making process. Tiger has earned a reputation for executing quickly and paying high prices for equity without asking for board seats.

The Letos said that the new capital will be used to scale Emerge's digital freight marketplace, which is built around a radical reimagining of transportation procurement and request-for-proposal management. 

Emerge begins with the premise that the way shippers run bid processes with just a few dozen carriers and brokers introduces profound inefficiencies into freight markets. A shipper looking for outbound capacity from Chicago has no way of knowing, for example, that a second shipper is sending carrier X's trucks into Chicago and that carrier X should be included in its bid.

Meanwhile, the carrier has no way of accessing the first shipper's freight — it probably never sees the RFP or the shipper's available lanes. The result is that shippers have no way of knowing which carriers are in the best position to haul their freight, and carriers have no way of easily bidding on the best freight for their networks.

"If you're a shipper, 99% of carriers in the U.S. do not have access to your freight," Andrew Leto said. "That's why so much freight goes to load boards, and that's why there are 300,000 people in Chicago brokering trucks — because of this problem."

Because even large shippers run their freight procurement processes through spreadsheets and email, their transportation departments cannot simply choose to include 1,000 carriers and brokers in a bid instead of the customary 20 or 30. The document management, multiple rounds of bidding, and implementation would stretch into months — long enough that the rates in the bids could become stale. Even the most sophisticated shippers use business procurement platforms like Coupa or Jaggaer to run their bids, generic tools designed for commodities like office supplies, not a purpose-built transportation procurement system. 

Emerge's platform aggregates shipper volumes and transportation capacity and provides shippers, brokers, and carriers with visibility into each other's networks. Shipper A can see that Shipper B is sending Carrier X into Chicago and that Carrier X should, in theory, be an inexpensive outbound option. Meanwhile, Carrier X can balance its entire network inside Emerge's platform by rapidly bidding on hundreds of enterprise shippers' freight. In-platform feedback and communication tools help shippers and transportation providers negotiate within a single round, avoiding multiple bid processes. 

Shippers use Emerge for free, while brokers and carriers pay to Emerge to access the shippers' freight. One way of looking at Emerge's platform is that it's a technology layer that disintermediates 4PLs and managed transportation solutions by returning the power over buying decisions to shippers but providing the same opportunities for optimization across multiple shipper networks. 

That means that Emerge's platform enjoys powerful network effects, with each newly onboarded shipper or transportation provider creating additional value for existing users. 

"If every shipper was on the same RFP, the United States' economy would be 10-15% more efficient," Andrew Leto said.

Although shippers use the platform for free, the change management associated with completely rethinking transportation procurement means that Emerge does need talented enterprise salespeople to demonstrate the value of the new approach. An enterprise sales team of just three people got Emerge its first 300 shippers, but Andrew Leto said that he wants to grow the team to 25 by 2022 and 40 by the end of that year.

The new capital will also allow Emerge to triple its R&D spend, Andrew Leto said, and build new ways of managing information in the platform that will drive market efficiencies. 

A priority on Emerge's product road map is carrier scorecarding. Leto explained that in the traditional RFP process, a trucking carrier seeking freight from a new customer will often have to "buy" the freight, or agree to haul subscale volumes at an uneconomical rate until its service record can be established. But a carrier that has a great track record of moving truckload freight for enterprise shippers at a 95% on-time rate should not have to prove itself over and over again with every new customer acquisition. Emerge's carrier scorecard will let carriers bring their prior performance with them to a bid and, for shippers, de-risk the process of adding new carriers to their routing guides.

Emerge will also seek to bring freight brokerage agents into its platform, reasoning that its procurement system is one of the most valuable pieces of technology that an agent can bring to a shipper.

FreightWaves President George Abernathy serves on Emerge's board of directors.