Operators Ep 31 Transcript
Delian:
Hi, everyone. My name is Delian, and I'm a principal at Founders Fund, a venture capital firm based in San Francisco. This is Operators, where I interview non-VC, non-CEO, non-founder operators that make the startup world go round. Today, I'm interviewing Ben Braverman, Chief Customer Officer at Flexport. Prior to becoming the chief customer officer, Ben was the chief revenue officer at Flexport. He also worked at URX as the Head of Growth and at Heyzap as their director of sales. I hope you enjoy the show.
Delian:
Ben, so excited to have you on the podcast. Thanks so much for coming on.
Ben Braverman:
Yeah, man. I have followed you on Twitter for a long time. It's somewhat surreal to be here.
Delian:
Yeah, hopefully we can provide some entertainment. Excited. We chatted with one of the other Flexport C-suites, so it's going to be fun to hear about the story from a different perspective.
Ben Braverman:
Sanne Manders. One of my best friends. We have a plan to unite the empire. He has got a son almost exactly the same age as my older daughter, so every time our families are in the same city, we're just sort of like, "Why don't you guys go play together? Wouldn't that be fun."
Delian:
How is that working out so far?
Ben Braverman:
Honestly, they actually get along great. Mark this on the podcast, if 18 years from now Matteo Manders and Alexis Braverman are married, it's because of their fathers having machinations of real power condensation.
Delian:
I love that, I love that. With these types of interviews, I always like to dive all the way back in people's careers because I think it helps provide some context for the work that they're doing today. And so, on your LinkedIn at least, it says that you just did a single semester at Vassar but then ended up dropping out and going off to India to find enlightenment, and then came back to the U.S.
Delian:
That sounds fun. I dropped out but for a much more boring program where Peter just gave us 100K to work on startups, versus you went to India. Walk us through that.
Ben Braverman:
I tried to get Peter to give me that 100K but I'd already dropped out. A very nice lady who worked for him called me and was like, "Look. You seem like a really interesting young person, but you have to actually be in college to be eligible for this." So at any rate, I dropped out of Vassar because I just felt like one, $60 000 was a lot of money to pay to do whatever that was.
Ben Braverman:
It was fun. It was a fun place to be, but I was unsure that I was moving forward in the universe in any way, and I also at the same time felt this real draw towards Buddhism. I don't think I'm going to be immortal. I don't think the science is going to get there in my lifetime. Hopefully I'm wrong. But I don't think I'm going to be immortal. I don't think my family's going to be immortal. Impermanence seems to be the thing that we all have to grapple with. So I began really focusing on trying to escape from it.
Ben Braverman:
I've since made my peace with the fact that that just sort of is what it is. We're lucky to be in the game as long as we are, but that was what motivated it. It was the most sincere thing I've ever done. But I got there, and I was volunteering at Mother Teresa Center for the Destitute and Dying, and one day, one of the ladies who was working there as a nun, full-time, taking care of these people, said to me... She was like, "Look. It's nice you guys come here." She classified all as one group. She's like, "It's nice you guys come here, but we'd much rather have the money. Whatever you paid to get to India and get to this place, just give us that. You don't have any skills. You're not a doctor. You can't fix our sewage system. Just give us your American money. That's way more valuable."
Ben Braverman:
So I sort of left that with my tail between my legs, and I then went into the mountains of India and just tried to meditate my way to happiness. I was nine days into a solitary retreat where I just sort of lost my mind and ran down the hill screaming and then went home.
Ben Braverman:
I founded my first company not long after. It was not terribly successful, but it was enough that I would say I sort of bootstrapped my way into tech. I ended up meeting Jude and Immad through a platform called Higher Art. I think it was a YC company actually. And Jude and Immad, who if you don't know, they were the founders of a company called Heyzap. Now Immad is the founder of very well-known Mercury. Jude is the CEO of Golden. They're two of the world's most interesting humans.
Ben Braverman:
It was just sort of a gift that I got them as the first people I ever worked for in tech. I ended up through some combination of luck and discovering a skill, on my ninth day of working for them, I onboarded the biggest account in the history of Heyzap. I shouldn't say I. It was me and an engineer named Thomas Shaddox, who worked together to get this game online. But I realized, oh, I'm actually much better at sales than I am at seemingly anything else. I should just dribble down in this. I haven't really thought about it much since then. I've just sort of been sprinting in that direction since that day 10 or 11 years ago.
Delian:
Too funny. I'm curious. The company ended up getting acquired, and you went to URX, but it was more at birth, and so was it actually still mostly a sales role just titled as growth? What was the difference between that role, or how did that come about after the acquisition?
Ben Braverman:
I left Heyzap and joined URX shortly before they were acquired. I think the writing was on the wall, they were going to be acquired. It was an amazing business. I loved working for them so much. I actually probably at the time didn't value just how good they were, and just what a wonderful experience it was. Having worked for them, and now having gotten to work for Ryan, it's several lottery wins in a row. But at the time, I was just sort of, "I put my year in here." I think I materially changed the business for them, and I think they would probably agree with you.
Ben Braverman:
At the time, URX was thought to be the mobile version of Google, or at least it was a bet that maybe you had some chance of that outcome. I met them through one of Heyzap's investors, and joined very quickly. Actually, in the moment I was joining URX, I was already trying to convince Ryan to hire me at Flexport. I invested my life savings into Flexport.
Ben Braverman:
I met Ryan at the dog park. For people that don't know, Ryan is the CEO of Flexport. I met him at the dog park when we were much younger, and we sort of immediately became friends and started walking around the city talking about this new thing he was building. As part of me courting him trying to get him to hire me, I had invested every dollar I had in the business. I was basically working for free as his sounding board.
Ben Braverman:
Before I joined URX, I said, "Look, man. Can we just do this? Can I just come work for you?" He didn't actually have the licenses yet to be fully operational, so he said, "No, no. There's nothing to sell. It would actually be illegal for us to bring you on and for you to do the thing that you do." So I joined URX, and then at some point, Ryan got all the licenses, and it just became very obvious it was the moment to go all in.
Delian:
What gave you such strong conviction on it, because in your prior experiences, it's not like you knew a ton about let's say logistics or shipping or things like that. You were in the world of more, I would say, standard, traditional, middle of the road Silicon Valley stuff. Versus Flexport's pretty far off from that in some ways. What gave you such strong conviction in it?
Ben Braverman:
Most likely, the correct answer is just luck, but the story I'm telling myself is that... I was blown away by a couple things. One, Ryan had already had a company that was extremely profitable. Importgenius.com, he and his brother, David, founded and ran for a long time. When I met him... Silicon Valley circa 2012, it was still a very [inaudible 00:07:51] place. A lot of companies that today are these juggernauts were still really early. People were deriding them for losing money. It was just a different environment. At the same time, Ryan had this business that printed cash. [inaudible 00:08:01], that bought assets. And I just didn't see a lot of businesses like that, and so I was impressed by that.
Ben Braverman:
I was impressed by the fact that Ryan had walked away from this thing like he didn't care about it at all, despite it having made him personally very wealthy. I couldn't believe how bad the websites were of the businesses that he said we were going to go compete against. It wasn't that I didn't trust him, but I went on Google. What are the market caps of these companies? Is this guy telling me a fairytale? When I realized, "Oh, these are abandoned websites from 1997 and this company did nine billion in sales last year, and Ryan is telling me this is what he's going to build the rest of his life around," you don't have to be that smart to be like, "Okay, I'm going to bet on this."
Delian:
So I guess you got the licenses. A year or so later you ended up joining, and then basically immediately on day one, you got chief revenue officer in charge of selling, selling, selling. What was that like?
Ben Braverman:
I just put it on LinkedIn. He told me he was hiring me. This is back when Ryan was a new founder. Ryan has a belief in emergent systems. There's more interesting things that happen when you build a system and just see what properties arise than if you try to dictate centrally, "Oh, this should arise over there," or whatever.
Ben Braverman:
And Ryan used to let the company really be run in a pretty loose way. No longer the case. Now, we're an Amazon Docs culture. Everything's done with six page PR FAQs. But this was a long time ago. In the intervening 24 hours between when we finalized my title and he offered me the job, I just put CRO on LinkedIn. I started doing outbound as a CRO at Flexport. At that point it was like, "Well, the world know me now as a CRO."
Ben Braverman:
Luckily, we ended up delivering on the growth side. I probably wouldn't have kept CRO had we not grown.
Delian:
Walk me through what was the early sales? Was it mostly to basically... I assume you have two sides of the market in some ways, of the folks that are helping you, with [inaudible 00:10:05] logistics that you're partnering with, versus the actual... Whether e-commerce companies or folks that are looking for something to ship. What was the initial seating of it and where was most of your time focused? How did you even convince them to shift over such a critical part of their business to such a young startup?
Ben Braverman:
So again, so much luck. I happened to meet Parker Conrad... The very first meeting I took as CRO at Flexport was meeting Parker to learn about how Zenefits was growing so quickly. Parker just said, "Look, it's all list construction. If you want to control your destiny, you need to be methodical about list construction, and you need to go and actually go find these customers." He said, "Inbound is effectively a myth. We don't believe in it. We build lists. We attack those lists, and we generate enough pipeline to keep everybody well fed." And not even well fed. He basically... I want to break the system. I want every AE's calendar to be so full, the wheels fall off.
Ben Braverman:
Maybe now with 10 years more experience, he wouldn't say the last part, but the first part ended up being just the most wonderful advice I've ever gotten. We took the data set that Ryan had from ImportGenius, which is this enormous data set of all the goods coming in to the U.S ports. They're categorized by who imported them, who manufactured them, what port they came in. You couldn't ask for a better seed from which to grow your outbound strategy.
Ben Braverman:
So we took that data set, we started parsing it, and we focused on a few categories. We focused on one, the category where we actually had some inbound, which was Amazon sellers below a certain size that were big enough to do full containers. So we were like, "Okay. There's a segment of the market that's big enough to spend real money, but small enough that our competitors literally will just hang up on them if they called them." That was really where started to get well fed.
Ben Braverman:
The other thing that seemed to work really well was going through the Investor Network. There was sort of this boom of hardware companies circa 2013, 14, 15. I don't know that you could build the company the same way again because these companies aren't getting funded anymore, but at the time, those companies were all getting funded. All of them were launching with very expensive air freight. I air freighted in a bunch of Juiceros.
Ben Braverman:
We were one of the last companies to get paid before they wrapped it up. And ultimately, we benefited tremendously from that tailwind. Maybe I'm going to get a lot of flack for saying this. The big part of our outbound in the early days was built around impersonating leadership. Everybody does this, or at least everybody confident. Outbound is not something that you can mechanize in a way that a lot of people want to. If you give people these scripts and lists and just say, "Hey, you have to work in a certain way," your conversion rates are going to be terrible.
Ben Braverman:
But if you arm them with all the tools of a sophisticated modern nation state, and you say, "Look. You can email as an executive. You're going to get access to our LinkedIn so you can see exactly how all the leaders of the company are connected to the rest of the world. We're going to maintain this giant list of references. We're going to give you every possible tool so that you can get creative and outbound to these people in a way that doesn't feel like a robot is doing it."
Ben Braverman:
And part of that was impersonating Ryan and I, and we had Ryan P. and Ben B. @flexport.com. The moment they would generate a response, Ryan or I would tag in. We would lead the sales cycle. But for the first 18 months, when you are nothing burger company, it is just tremendously valuable to give everyone the power of a title without actually giving them the title. So yeah, impersonating leadership early days outbound, I can't recommend it enough.
Delian:
How did you think about building out beyond just you guys as the founders, early hires, building out that early STR, BDR, AET. That you sort of know okay, this is a very particular profile. We're going to go for fresh grads from ASU that are willing to work 12 hours a week. Or was there some level of experimentation of okay, let's try three or four different types of profiles for these different types of roles, and then eventually found ah, it turns out when somebody has this type of personality or this experience or this capability, then they're much more successful at something like Flexport versus other types of sales?
Ben Braverman:
What we found was, as in most things, there's a real power law distribution between the best people and the rest of the pack. As a result, it's really worth it to spend what feels like too much time building up as an organization. In the early days, one of the number one things that we got flack for was not hiring enough sellers quickly enough, but the reality is we were just being really methodical in who we onboarded. If you look at the early crew of Flexport, Justin Schafer is now VP Sales of a series B company. Taylor Oliver, VP of Customer Success at a series C stage company. Maryanna Kessel, VP Sales at DataGrail. There's just this enormous list of alums of people who came in as [inaudible 00:14:57] at Flexport, and are now VP sales at big, high performing organizations.
Ben Braverman:
And it's partially because Flexport was a good place to learn, but it's also because upfront, we held such a high bar. To Parker's point, if you jammed a great reps calendar full of eight meetings, that was way better than eight reps each having one meeting a day. The conversion rate of that person actually doesn't go down the busier they get, until they reach some extreme breaking point.
Ben Braverman:
We scaled to a lot of revenue with relatively few people.
Delian:
Maybe a two-fold question, which is one, before these people that you brought in, that you had a high bar, how did you filter, or what was the thing that you were looking for? And two, once you chose them, how did you actually get them onboarded to the world of shipping, logistics, freight, so that they could speak the right language to the customers?
Ben Braverman:
It's so funny. The answer to both of your questions is the same. We effectively hired for intellectual curiosity and energy. Because so much of the Flexport sale is... First of all, you have to learn this entire new industry. My first month at Flexport, there was a wonderful gentleman named Michael [inaudible 00:16:04], who's still with Flexport, walking me through, on a 30 foot long whiteboard, what a freight forwarder does.
Ben Braverman:
Here's every step. Here's every document. Here's every law. I literally did not know what they did, and I think that's true for the majority of the best sellers that we've hired over the years. And not everybody wants to go through that. Some people just want to come in. They're like, "Oh, we are an email marketing tool. We are sold to this stakeholder. They spend between this much and this much." Our sale, it's this long-term consumption sale where you might build one business unit or a second business unit over two or three years. It's just not at all a sales that if you're not curious about the customer, you're never going to get these deals done. You're never going to learn the industry.
Ben Braverman:
So by hiring people who had enough energy to take those eight meetings a day we were talking about, and the intellectual curiosity to actually be curious in all of those eight meetings, the problem sort of solved itself. Those people also were able to learn logistics.
Delian:
Let's say opposed to actually getting a customer excited about it, there's obviously... This isn't a marketing software automation tool where you can just hand it off to them and they can typically start using. You actually have to deliver on the promise. Get the goods. Communicate well. How did you guys both execute that and make sure that the customer's successful, and increase wallet share? But then also, how did you make sure to feed that information back to the sales team where it's like, "Hey. We're actually not ready for the Fortune 50s yet because we don't have the infrastructure set up.
Delian:
How did you balance getting the customers happy and then also starting to expand what types of customers you could keep happy?
Ben Braverman:
Yeah. I'm sure Sanne talked about this. Very early on, we zeroed in on this squad model where you paired up a seller and what was effectively a very operational account manager at the hip. They are jointly responsible for everything that customer experiences basically from the discovery call all the way to full share wallet, multiple years in. Those two people are end-to-end responsible. The seller, more responsible later in the relationship for things like asking for more business, confirming we're going to be renewed, whatever you want to call it. And then the operations manager ended up being this pretty large scale people manager where a squad probably can get up to 10, 12, even 15 people before we would split the cell and create a new squad.
Ben Braverman:
By pairing those people up, we really diminished the incentive to sell things that were going to break the business, because it wasn't just this esoteric, "Someone else is going to have to deal with this but I might still get my bonus." There was no chance... Not only was there no chance you were going to get your business, you were screwing over your best buddy who was... You and this person have been working together hand-in-hand on every one of these deals for the last year. If you throw something over the fence that ruins their life, it becomes much more personal than some, "Oh, I passed it to another anonymous team in a big organization."
Delian:
So there's clearly been a lot of changes at Flexport, whether it comes from the systemic way that Ryan manages the business to even the types of freight you guys are doing. I'm curious if there was a certain inflection point or a moment where you felt quite confident, where it was like, "Oh, this thing is going to work. There's still a lot of challenges ahead of us, but we've clearly tapped into something that's very unique."
Delian:
When did that feel like it really became clear, and what was that moment?
Ben Braverman:
They were all customer moments. Every time we were surprised when someone either told us how broken their world was when they were a really big, sophisticated buyer. Warby Parker was probably the most impactful sale in the history of the business. They helped us refine exactly what a direct-to-consumer high growth brand needed. This was when Warby Parker was the number one article in the New York Times for two years in a row. Everyone was talking about Warby.
Ben Braverman:
We got in them in 2015. They had become our biggest customer. They helped us refine the product. And they were happy. It all happened very quickly in the second year of us building the machine. Then it felt like, "Okay, if we can get them, which was this halo direct-to-consumer brand, we can get every direct-to-consumer brand." So that was a big moment.
Ben Braverman:
When Georgia-Pacific started paying us to be their overall management layer... The majority of Flexport customers, they pay Flexport to actually move goods from call it China to the U.S, or China to Europe, or wherever it may be. Georgia-Pacific that said to us, "Look. We are too big to buy our freight through Flexport." In their case, they're the second largest exporter from the United States. In some years, they may even be the largest. They're negotiating directly with the vessel owners. There's just no way that Flexport's going to mediate that transaction in a way that's helpful.
Ben Braverman:
However, they said to us, "Look. You've built by far the best-in-class platform. We audited everybody. Even though you don't even sell this today, we want the Flexport experience across all of our shipments, and we're willing to pay you a pretty significant premium to get it."
Ben Braverman:
When they told us that as this very sophisticated, very large scale business that was so much bigger than any company we'd served before... And they ended up onboarding something like 75 of their customer service reps to the platform. They all now do their work inside of Flexport. So that was sort of the second. The first moment was, "Oh, we can build this product that allows a direct-to-consumer brand to fully outsource their logistics to Flexport. That can be a pretty big company."
Ben Braverman:
The second moment was when we were like, "Oh, the biggest companies in the world believe they want all of their data inside of our platform. That's pretty interesting." Where we are today, even as the market's been in total chaos this year, we've been able to grow volumes by a dramatic amount, revenue by a truly insane amount. And that's probably where I was the wrongest.
Ben Braverman:
When we got to a billion in valuation, that round that Founders Fund led four years ago, I was like, "Oh my god. There's only a handful of billion dollar companies on Earth. How much bigger can this thing get?" And I was just dead wrong about that. It turns out if your market is big enough and your customers are happy... I was just bad at math. The compounding actually happens much more effectively than I realized.
Delian:
All of the compounding happens in the last 10%. The first 90% is actually very little of it.
Ben Braverman:
Yeah. Again, I'm bad at math and I'm just now figuring this out.
Delian:
Maybe walk me through a little bit... The pandemic obviously changed a lot of different businesses in a lot of ways, but obviously, in the world of supply chain, extremely disruptive and continues to be so. Can you walk through a little bit... Was there a sort of battle room at Flexport where it was like, "Oh my god"-
Ben Braverman:
Oh yeah.
Delian:
"We're operating in China. We have a little bit of a heads up view on this vis a vis other people, and we need to start adjusting." Even on an ongoing basis, obviously this stuff still hasn't really settled. What do you think the organization has done well in terms of on the fly, adapting to such a rapidly changing supply chain?
Ben Braverman:
Chronologically, Chinese New Year 2019... Sorry. 2020 rather. Coincided with us all globally learning about what SARS-COV2 is. It was happening exactly at the same time that China is shut down for Chinese New Year. Normally the factories were supposed to resume late February and they didn't. The entire global supply chain just stopped.
Ben Braverman:
Our sailings dropped by 40%. The number of containers we had leaving China dropped by 40%, and then ultimately, there was a few weeks where almost no containers left China. Those were horrifying weeks. Especially when you get to some level of scale, you pride yourself on being able to at least decently forecast your business. It is horrifying to just see the business freeze like we saw it freeze in February 2020.
Ben Braverman:
What happened then I think shocked all of us, which was we all were locked in our homes. The government did a stimulus that was unprecedented in its scale and swiftness of deployment. And people weren't allowed to spend it on anything other than physical goods. All of those physical goods are made in a few regions in Asia. All of those goods go on the same vessels across really two major ports in America, and the circulatory system was not able to expand quickly enough to support the deluge of goods that poured into the United States.
Ben Braverman:
February 2020, we thought it was the apocalypse. Over the next six months, really led by Ryan, Flexport's business pivoted very quickly into being almost exclusively PPE-focused. From March through June of 2020, I don't have the exact numbers but I think we moved something like half a billion pieces of PPE around the world. And it was both the focus of our .org arm and our commercial arm. It was the majority of the cargo moving in the world for that first six weeks of COVID.
Ben Braverman:
We were very quick to react there. Again, luck comes into play. We made what some people thought was a strategic blunder in 2018, 2019, which was we built an asset-based air strategy. Which means instead of moving air freight in the belly of passenger planes... So a lot of people don't know this. You can put about 40 tons of cargo underneath people's feet in a Triple 7 that's leaving Asia, or leaving anywhere for that matter.
Ben Braverman:
In the old world before COVID, with so many passenger flights going Asia to the U.S, literally 60 a day in some cases, it was really, really easy to run an air network that was based around that belly capacity. The network was so big. With 60 flights a day, there's always an under-utilized flight, which means if you're very active in the market procuring that space, you can buy well below actual cost. You can make lots of money as an air freight forwarder, and you can sell very competitively to your customer.
Ben Braverman:
We were historically at a disadvantage because we built our strategy around freighters. So freighters are dedicated 747s that have been gutted on the inside or the nose opens up, the tail opens up, and cargo's loaded in by forklift. That strategy is nice in some ways because it gives you a ton of control. It's in some ways a more predictable product. You can move bulkier things. You can move things that aren't allowed in the bellies of passenger planes. But per kilogram, it is a strategy that just costs more to operate.
Ben Braverman:
There's fewer of those opportunities to buy excess capacity in the market. There's fewer opportunities to create margin out of thin air. You're running a fixed network, and you have the additional downside risk of you're running this asset. Every single flight is 100 tons that you're going to fill up yourself or you're going to lose money on the flight.
Ben Braverman:
So pre-COVID, this strategy was something that we really did a lot of soul-searching about, where it was like, "Man. We thought we were optimizing for a quality product, but we might have priced ourselves out of the market." Fast forward to six months into COVID, it's clear that we're not going to get back to 60 flights a day from Asia for a very long time, at least not for another couple years.
Ben Braverman:
The freighter network that we had built up in partnership with, Atlas, has turned out to be the enormous gift to both Flexport and to our customers, where we've had a huge amount of space that was incredibly reliable at a time where the air market, on most weeks right now, your four or five X, the historical norm per kilogram on the air, this month on the ocean side... For a little bit of context on ocean freight, the port of Long Beach was seeing 50 or 60% more containers showing up in a day than they had ever seen before. The terminal just couldn't process it.
Ben Braverman:
Even today, there's not enough empty containers making it back to Asia fast enough. And the carriers are really in a tough position where they just don't have enough capacity to fill global demand. As a result, the prices in the market have gone up to 22, $24,000 a container. A couple years ago, it was more normal to see $2500 a container.
Ben Braverman:
So we're looking at 5X the norm on the air, 10X the norm on the ocean. And the net result for Flexport is incredibly positive from a gross margin realization perspective. With prices this high, you do make a bit more money per transaction. The problem is we are maxed out on capacity. The limit for our growth right now is purely can we get more space on vessels? Can we lease more aircraft? There's sort of unlimited demand because we've been able to move, in many cases, I think more quickly than some of the traditional folks to add new services.
Ben Braverman:
Even doing something as simple as when the prices have changed so dramatically, it's tough if you don't have a good inventory system to update your customer on what price you actually have to pay to get cargo moving. It may be from week to week that $18,000 dollars last week got a container loaded onto a vessel, and in realtime, the market has changed so much that same $18,000 rate no longer gets the container loaded.
Ben Braverman:
Obviously, if the customer knows this, they'll gladly pay $19,000. That extra thousand dollars is surely better than living up to your commitment to one of your customers. But if you don't actually know that, and you don't have the inventory system that says hey, we have this slot available on this carrier for $19,000, you can't solve that problem for that customer.
Ben Braverman:
You sort of put all this together. There's more demand right now than we can get capacity for. We've turned down hundreds of millions of dollars of bookings in the last few months. I'll put it to you that way.
Delian:
Maybe a two-fold question, which is one, do you feel like because Flexport has been such a software-driven freight forwarder obviously since day one, do you feel like you guys were just so well-suited for an environment that so volatile? Because obviously software's better at dealing with realtime pricing and adjustments and understanding this stuff.
Delian:
Then second question being as you've realized you had to turn down hundreds of millions in bookings, has there been a shift towards, "Okay, do we have to go even more full stack?" In terms of starting to lease more and more assets, and running more of it ourselves as opposed to having to book on other people's services.
Ben Braverman:
Wow. Look at the big brain on you. No wonder you're building factories in space. Full stack is exactly the direction that we have to go. We're still exceeding our growth goals. Thank the powers that be in the universe, God, whatever you believe in, we're still hitting all the goals. But it's terrifying to know that the limiter is an external variable.
Ben Braverman:
Unless we start building vessels, which is unlikely to happen anytime soon, there's a variable that is outside of our control that we cannot build or think or execute our way out of. We've got to develop relationships with these carriers, and, to your point, we've got to build more of a full stack for our customers.
Ben Braverman:
I think you're going to see a bunch of new stuff coming out over the next six months that gives customers more ways to stay on platform with Flexport, and allows to keep growing even if we can't get incrementally more and more space on these vessels.
Delian:
That's super exciting. Can you maybe talk to a little bit to how being a software-driven freight forwarder has allowed you to adapt in some of these scenarios vis a vis more traditional providers?
Ben Braverman:
Totally. The great example is the Trump tariffs. When Trump was announcing his tariffs, the world was shocked. Shocked not just because it was unprecedented in how aggressive they were getting, but there was no preamble. It was just, "Hey, we're doing this. It's effective immediately. Have fun." And for a lot of our customers the moment those tariffs were announced, it fundamentally changed the economics of the businesses they were in. If you're selling some durable consumer good at 25% change of your cost to bringing it in the U.S, it may be that every single one of your retail relationships has to be renegotiated. It may be that you should stop importing that product altogether, or at the very least, you need to be aware that the economics have changed.
Ben Braverman:
Because we have this realtime living product library of every single thing Flexport is moving at every second of every day, we could see in realtime, okay, here's all the tariffs that Trump just announced. Here's every Flexport customer that's affected. Here's the projected financial impact. Here are the customers that we think we can dispute it. And we were able to alert these people within 24 hours of the announcement. We were having the meetings that week with the customer on how we were going to deal with it. They were then able to go back to all the rest of their supply chain and say, "Hey, here's the decisions I made as the result of the tariffs."
Ben Braverman:
And it may sound crazy that having a searchable database is a big competitive advantage, but in our industry, it was amazing the gratitude our customers had when we were able to do that. Another example is when Hanjin collapsed. For those who aren't big shipping groupies, about six years ago, one of the big shipping lines when bankrupt. It was called Hanjin. All of this cargo was held hostage on the water as Hanjin negotiated with their creditors.
Ben Braverman:
And so for six months, people had all this cargo stuck in limbo. Really big companies didn't know which of their containers were on Hanjin ships and which weren't, therefore they didn't know which of their retail partners to update and say, "Hey, we're not going to deliver on time." It was chaos, and one, it showed our customers how important it was to know where your stuff was. If the universe is going to deliver a message to the market in the same year that Flexport's being founded, the message we wanted it to deliver was, "Hey guys. It's really important to know where your stuff is. You should have a platform that does that for you."
Ben Braverman:
You couldn't ask for something better from our perspective there. And again, the pricing in the market changed really quickly. I'm not sure if it's because we're a tech company, or it's because we're just playing a longer game. When the market changes, our competitors tend to want to profit take. They tend not to want to deal with the overhead of renegotiating with a carrier to try to get a customer loaded. There's all of these things that happen when the market is disjointed that either require more work, or may require you to sacrifice margin in the short-term, or at the very least, require you to act very quickly.
Ben Braverman:
All of these things are made easier by software. There's not one silver bullet that I could say, "Oh yeah. This is why we're winning." But across the last 10 years of turmoil, I think Flexport has been in a good position every single time in the market has done something crazy just because our team's on the platform together, we see what's happening in real time. We communicate it back to our customers. None of this stuff is... It's not rocket science. We are literally not doing anything nearly as complicated as what you're doing, but we're just serving our customers in a way that they're not used to being served in our industry.
Delian:
Speaking of turmoil, can you talk through the Suez Canal incident. If there was any interesting adaptations or issues that you guys had to deal with to work around that for some of your customers?
Ben Braverman:
The most interesting thing from my perspective... I was so impressed. Ryan got a children's book written and illustrated. He wrote it and one of our designers illustrated it within two weeks of that incident, and they went crazy for it in Egypt. It's the most popular children's book of 2021 in Egypt. So on a personal note, that's one of my favorite things that happened in the whole Suez debacle. But again, it was another example of if you were a Flexport customer during the Suez debacle... And it wasn't just that vessel impacted. It was all the vessels that then couldn't transit the Suez.
Ben Braverman:
If you weren't a Flexport customer, you were scrambling trying to figure how are we impacted, which products run which vessels, how long is this delay going to be, what's our lead time if we want to have new skews leave the factory. All of these things on our platform just let these folks dive into in realtime. If you didn't have Flexport, you had to do all this work. And in many cases, you had to get data from people that were hard to get data from.
Ben Braverman:
It was just another example of... Yeah, it was difficult. I'm sure the ops team would think I'm crazy for saying this because they were going through this living nightmare of trying to reroute all this cargo, but it was another example of chaos generally being good for Flexport.
Delian:
So right before the pandemic, you shifted your role. Maybe it just more in title than actual responsibilities, but at least on LinkedIn you have it shifting from being chief revenue-
Ben Braverman:
No, no. It was a real shift.
Delian:
... officer to customer. Yeah. Just walk me through that shift, six and a half years being at the company. How did that shift come about, and what was the change in focus?
Ben Braverman:
The gentleman who took over is named Will Urban. I love Will. I actually brought Will through Flexport as an advisor because as we were maturing, it became clear that the problems that we had... I was becoming a late stage CRO. I was studying DCR rows of tech companies, and I was realizing so many of Flexport's problems were not problems that the SAS companies can solve. Forecasting a SAS company is so different than forecasting our consumption business with so much price volatility, and there was sort of a limit to how much we could learn from the best-in-class SAS companies.
Ben Braverman:
And also, there was a limit to how much we needed to focus on growth, where the growth was happening pretty much with or without me at a certain point. Where the machine was just going to keep growing and the snowball's going to keep rolling down the hill, but the transactional excellence and really unifying the commercial org in a way that allowed operations and the customer to be served in a way that's end-to-end, and for the teams to be able to focus on transactional profitability, it was just really helpful to have someone come in... In Will's case, he ran the western United States' Expeditors, which is the most profitable per transaction freight forwarder. It was just really useful to have someone with that skill set who solved a lot of these problems before come in.
Ben Braverman:
It is pretty brutal from an ego perspective when your world changes to that degree, however it very much was the right thing for Flexport. I think Will's doing an amazing job, and if you look at the numbers, our transactional profitability's getting better. I right now am mostly focused on building a few new things on the side for Flexport, but that haven't launched yet. We've been running the Flexport fund, where we've actually very quietly done about 80 investments in the last six months.
Delian:
Yeah. Walk us through the Flexport Fund. It seems like a very interesting model. Is it a fully on balance sheet? How do you guys think about the types of things you invest in, because you guys have also invested in a variety of companies. I've been investigating [inaudible 00:37:57] having you guys as co-investors, so I would love to understand what's been the strategy, thesis behind that? Do you think more corporations at your guys' scale should be doing that to keep up a pulse on up and coming new innovation?
Delian:
I would love to understand it.
Ben Braverman:
When I look at the fund, it's one of those things where there is so many virtuous things happening in parallel that I'm surprised more companies don't do this, and I think in the long-term, more and more great companies that have more cash on the balance sheet than they can officially deploy into the core business, I think you're going to see more folks doing it. We're Flexport. We sit at the intersection of these ten thousand customers, or however many it is, that we've spent all this time cultivating this really close relationship with. We've got thousands of vendors around the world that we also spent all this time cultivating this very close relationship with.
Ben Braverman:
They're on this platform together. We ourselves are this enormous buyer of software and service from other tech companies. And if you put those three things together... And the fourth track is we've raised a significant amount of capital from people that we respect a whole heck of a lot, and so we see their deal flow. We see which of their deal flow is applicable either to our customers, to our vendors, or to Flexport corporate itself. If any of those three boxes are ticked... Or if it's just something that we're like, "Hey, we're going to learn a lot from this founder. We're going to learn a lot from this new business model someone is building."
Ben Braverman:
For all those reasons, we were able to put these small checks in, and they get accepted because Flexport's brand is good. We run this really operationally complex business. And the [inaudible 00:39:29] of the fund is that if we open our doors and say, "Look. If you want to talk to an executive who manages the two million accounts payables that we have to do every single month, and is in charge of automating that, I'll introduce you to them. If you want to talk to Jen, our chief impact officer, about how she views our org chart and if she's willing to put it in public, great, I'll connect you to her."
Ben Braverman:
There's all of these people in our company that I think are useful to these founders. Flexport in some cases is going to become a customer ourselves. And in some really special cases, particularly in the cases of companies that are selling adjacent logistics products to what we do, we're able to go, "Okay, look. Send us your customer profile. We'll come back with 25 that we think are a great fit and we'll go co-sell them together, and I'll drive revenue from our platform into your business."
Ben Braverman:
It just feels like this thing that's very low downside. We're deploying relatively small amounts of money, 100K checks. We're occasionally leading smaller rounds into companies that are founded by ex-Flexporters who are doing things that we think are really strategic. But for the most part, it's deploying small checks in a relatively large quantity, and we're keeping the option open to double or triple down on companies that are either going to build on top of the Flexport platform, or that are just sort of absolute winners.
Delian:
So I'm curious, there are many employees that will join an early stage company, and it experiences such rapid growth that they manage to not really scale up with the company, even for a year or two. Versus for sure, at some level of scale, you guys brought in somebody with this very particular domain expertise, but you still scaled with the company for a very extended period of time.
Delian:
What do you think you did well vis a vis let's say other peers and other companies in terms of being able to continue what you do. You scale yourself, adapt, get new skill sets. What is it having a set of ventures from other companies? You mentioned meeting with Parker Conrad in the first week of the role? What do you feel like set you up for success? Being at a company seven years in and still having a lot of impact at it.
Ben Braverman:
I think I was fortunate in that I was so outclassed by the opportunity on day one that I didn't have any delusion, that I was like, "Oh, I'm good. I can just show up and I'm going to nail it." I knew from day one, from the moment Ryan said yes and I felt that shudder of just oh my god, now I actually have to do this. I really felt the pressure and the weight of this is the biggest opportunity I've ever had in front of me. I need to give this everything.
Ben Braverman:
I think one of the other things that became clear pretty quickly is if you're working on a company, that that descriptor is true. That you're just like, "This is the biggest opportunity I'm ever going to work on." You have to subjugate everything that you feel to what the company needs.
Ben Braverman:
The more you can do that, and the more you can dependably, for the founder, that they can just trust that in any situation and any moment, you are always going to do the right thing for Flexport, almost with religious fervor. There is never a moment where you will ever go, "Oh, this is slightly better for me. Maybe it's a wash for Flexport. I'm going to do that." You can't ever even get close to that line. And if you operate that way, you end up just getting an enormous amount of trust in the organization, because the founder doesn't have that many people for whom they believe that to be true.
Ben Braverman:
That for me was sort of the foundation of how I was able to get enough leeway to rebuild myself every 12 months. The other part is I sold a lot. You cannot keep these jobs without selling a lot of stuff. It's sort of like Elon's thing. If you don't build stuff, there is no stuff. If you don't sell a lot of stuff, you're not going to lead sales. And I don't think anybody wants to work for a sales leader who has not sold a lot. I don't think I would be excited to work for a sales leader who couldn't go in and show me how to dance in a way that I don't know how to do myself.
Ben Braverman:
I think because I was consistently delivering on that, and because Ryan just trusted that in every moment, I was always going to air on the side of what is best for Flexport, I had a lot of then breathing room to get better at the things I wasn't as good at.
Delian:
Makes a ton of sense. Ben, it's been a really fascinating conversation, and truly appreciate you coming on to walk us through all this stuff. Some really great stories.
Ben Braverman:
Yeah, man. Thank you so much. While I have you on here, can you fell the world more about the space factories? In particular, is there enough raw materials in space to produce an amount of stuff that would be worth bringing back to Earth? Or are we making stuff in space just for consumption in space?
Delian:
So I'll give some one liner answers to that, which are Varda is explicitly working on space manufacturing for Earth. So we build stuff up there that we bring down here. The plan for that is it turns out there are a lot more buyers on Earth than there are in space. In terms of the raw materials, for now the supply chain looks like bringing the raw materials up with you on the rocket, and then fabricate them in the factory, and then bring them back down.
Delian:
So it's focused on this stuff that's viable and commercially pragmatic today. For sure over time, do we eventually sell stuff in space, and do we eventually get raw materials from space? Maybe, but the nearest term thing is bringing the raw materials from Earth, and also deliver the finished product back to customers on Earth since there's a lot more customers down here.
Ben Braverman:
Is this big upside that you don't have to overcome as much gravitational force? Or is the big upside that you can just pollute to whatever degree you want? Why are we going through all this trouble? I'm sorry. The only reason I'm so curious about this is Ryan and I were talking about this other day. I'm sort of on the side of let's make everything in space. Let's figure out how to harvest from up there, and let's make everything up there and we'll just drop it down where people need it.
Ben Braverman:
He was saying he thinks it's a little harder to accomplish than I'm realizing.
Delian:
Yeah. Unfortunately I don't think that's going to happen anytime soon. When Bezos talks about let's take all polluting industry and move it out to space, it's like, "Well..." Let's take cement pouring. If you take the cement up to space and then manufacture it up there and then you have to send it back down, turns out that's just more pollutive than just sticking with making the cement you have down here. So doesn't really make a ton of sense.
Delian:
There are certain materials though, in particular types of sensitive, high value materials, things like semiconductors and fiber optics on the materials side, or, onto the more biologics side, pharmaceuticals, organs, things like that. Where you need molecules to stay in very particular structures or formats. That's a lot easier to do when you don't have to deal with gravity because you manipulate them much more precisely.
Delian:
Whereas on Earth, there's lots of things that will cause it to erode, even if you have it inside a very protected chamber, if one part of the molecule or the protein or the crystal is hotter than the other, there's sedimentation conduction. The way that I would sometimes describe it is on Earth, you have the idiom of hot air rises. That doesn't happen in space because there's no up or down.
Delian:
If you have a candle that's on in the International Space Station, it just heats air around it and then very slowly diffuses that heat throughout the space station, rather than if I put a candle on Earth, all that heat goes up. So it turns out there's a lot of material science processes that are much better controlled, and you can make much higher quality products. And they're so high quality that people are willing to pay for the cost of having them sent to space and sent back down.
Ben Braverman:
I did this podcast just to ask you that question. Now we both got what we wanted out of this. Thanks man. I appreciate it.
Delian:
I'll make sure to include it in the recording. Okay. Thanks so much for coming on, Ben.
Delian:
Thanks for listening everyone. If you'd like to support the podcast, please sign up for a paid Substack subscription which we use to pay for transcripts, mics, and other improvements. If you have any comments or feedback on what kinds of questions I should ask, who should come on the show, or anything else, please you let me know. Have a great rest of your day.