- Flexport is a freight forwarder that uses technology to help businesses ship cargo around the world at a lower price.
- Freight forwarding is different from parcel shipping because it involves moving heavier products that require a different network.
- Flexport structures and organizes the unstructured data involved in the freight forwarding process, allowing each party in the chain to access the information they need.
- Examples of Flexport's customers include Georgia Pacific, Sonos, and small companies that sell through Amazon.
- Flexport's CEO, Ryan Peterson, has had various entrepreneurial ventures and believes in testing ideas and seeing traction before fully committing to a business.

- The speaker believes that businesses should prioritize keeping all major stakeholders happy, including vendors.
- Amazon is criticized for not respecting its vendors, which could be unsustainable in the long run.
- The six stakeholders for a business are customers, vendors, employees, investors, regulators, and communities.
- The speaker believes that if a business can keep all six stakeholders happy, it will be successful.
- The speaker does not recommend going against Amazon, as it is already successful and gaining market share.
- The speaker sees Flexport's role as empowering other brands to compete and thrive in the Amazon-dominated market.
- The speaker shares thoughts on the value of an MBA degree and recommends it for those who can afford it without incurring excessive debt.
- The first clients for Flexport were acquired through Google AdWords and SEO, with major companies signing up before the business was even launched.
- The speaker had previous experience in the freight forwarding industry and knew that software could improve it.
- After obtaining a license, the speaker hired Rails developers to build the product.

- The founder of Flexport started the company by hiring Rails developers after obtaining a license.
- The founder's brother also started his own company called Build Zoom.
- Flexport is based in Silicon Valley and hires engineers from all over the world.
- The company looks for "insecure overachievers" who are hungry, humble, and smart.
- Flexport has a decentralized work structure and encourages rotations and generalists.
- The main challenges in scaling for Flexport are culture and compliance.
- The founder finds books influential and recommends "Origin of Wealth" and "Good Profit" by Charles Koch.
- The company's biggest challenge is creating a good culture and engaged team members.
- The founder also started a company called getroom.com that makes phone booths for offices.

- The speaker emphasizes the importance of understanding people and their needs in order to scale culture in a business.
- The average person should not have any direct reports, while an average manager may have around 8.
- The speaker believes that trade is crucial to human development and that the opening of free market economic policies in the East has lifted many people out of poverty.
- The speaker's company, Flexport, aims to make trade easier, but they have been affected by the Trump policy on foreign trade, with about 2% of their shipments being affected by tariffs.
- Flexport tries to hire about 1 out of every 5 or 6 employees from the freight industry for their expertise, but they don't want too many industry veterans as it may lead to biased decision-making.
- The speaker discusses the seasonality of air freight and how prices can increase significantly during the holiday season.
- Flexport experienced significant growth recently, but they attribute it to businesses pulling their imports forward to avoid tariffs.
- The speaker admits that Flexport initially neglected marketing but has since realized the importance of investing in a marketing team.
- Flexport relies heavily on outbound sales, with 98% of their revenue coming from this strategy.

- Flexport is primarily an outbound sales model that focuses on providing visibility and control over international freight at the same price point as legacy clients.
- The company builds trust with customers by proving that they can offer better service and more visibility.
- The sales cycle is challenging due to the complexity and compliance involved in running a supply chain.
- Flexport's success in building trust and winning customers is attributed to having smart and entrepreneurial salespeople.
- The company focuses on entrepreneurial sales, which involves getting to a "yes, if" statement and finding ways to fulfill customer requests.
- Flexport's goal is to gain a larger market share and become the biggest company in the industry, which requires leveraging technology and automation.
- Automation in Flexport's business is about delegating tasks and creating interfaces for customers to directly provide data, making the process more efficient.
- Freight forwarding is a highly susceptible industry for automation, with most of the work being better done by software.
- Flexport aims to unlock the tribal knowledge and expertise of its competitors by digitizing it and making it easily accessible to customers.
- The CEO of Flexport has numerous entrepreneurial ideas but is fully committed to the success of the company.

- The speaker discusses the concept of "schlep blindness," where people avoid thinking about difficult problems.
- They suggest asking the question, "What problem do I wish someone else would solve for me?" as a way to identify potential business ideas.
- The speaker gives an example of creating office phone booths to address the annoyance of noise and lack of privacy in offices.
- They emphasize the importance of talking to customers and finding out what annoys them.
- The speaker also talks about the importance of funding and suggests using personal funds or starting a business that doesn't require investor money.
- They discuss the compounding nature of success and the importance of celebrating small wins.
- The speaker advises against taking on unnecessary debt and ensuring that all stakeholders benefit from business decisions.

- Flexport is a technology-based freight forwarder that helps businesses ship cargo at a lower cost.
- The company organizes and structures data in the freight forwarding process, benefiting all parties involved.
- Flexport's customers include Georgia Pacific, Sonos, and small companies selling through Amazon.
- The CEO, Ryan Peterson, believes in testing ideas before committing to a business.
- Keeping all major stakeholders happy, including vendors, is crucial for business success.
- Amazon's treatment of vendors is criticized and may not be sustainable in the long run.
- The six stakeholders for a business are customers, vendors, employees, investors, regulators, and communities.
- Flexport empowers other brands to compete and thrive in the Amazon-dominated market.
- The company started by acquiring clients through Google AdWords and SEO.
- Flexport hires engineers from around the world and values "insecure overachievers."
- The main challenges for Flexport are culture and compliance in scaling.
- The founder recommends influential books and started another company called getroom.com.
- Understanding people's needs is crucial for scaling culture in a business.
- Flexport aims to make trade easier but has been affected by Trump's foreign trade policy.
- The company hires experts from the freight industry but avoids too many industry veterans.
- Air freight prices increase during the holiday season due to seasonality.
- Flexport experienced significant growth due to businesses avoiding tariffs.
- The company realized the importance of investing in marketing and relies heavily on outbound sales.
- Flexport focuses on providing visibility and control over international freight.
- The sales cycle is challenging due to complexity and compliance in the supply chain.
- Automation is a key aspect of Flexport's business, making processes more efficient.
- The company aims to digitize and make accessible the expertise of its competitors.
- The CEO has numerous entrepreneurial ideas but is fully committed to Flexport's success.
- Identifying problems that need solving and talking to customers is essential for business ideas.
- Personal funds and avoiding unnecessary debt are advised for funding a business.
- Celebrating small wins and ensuring all stakeholders benefit are important aspects of success.

Ryan Petersen - https://twitter.com/typesfast - is the founder and CEO of Flexport - https://www.flexport.com/. 

Flexport is a global freight forwarder powered by software and analytics. They are making international trade easier for over 10,000 companies in 70 countries. They were part of the YC Winter 2014 batch.

The YC podcast is hosted by Craig Cannon - https://twitter.com/craigcannon

***

Topics

00:00 - What is a freight forwarder?

2:45 - Selling electric scooters on eBay 15 years ago

5:30 - Ryan’s business school experience

10:00 - Amazon competing with their vendors

13:00 - Matt Susk asks - What were the most important takeaways from Columbia Business School? Would you encourage entrepreneurs to pursue a MBA?

16:40 - Tyler Hogge asks - How did you get your first three clients at Flexport?

19:40 - Being a solo founder

22:45 - Varun Khurana asks - What's your strategy for rapidly hiring the best talent in so many different global hubs?

25:30 - Challenges of scaling Flexport

27:15 - Some of Ryan’s favorite books

29:20 - Scaling culture

34:00 - Jassim Ali asks - How has the Trump policy on foreign trade affected your business so far?

39:00 - PowerDecal asks - How do you poach clients from legacy providers?

46:00 - Automation in freight forwarding

49:00 - Jason Yannos asks - If you weren't operating Flexport and had to source a new idea to work on, where would you start?

53:00 - Derisking product ideas

56:30 - Biggest lessons learned at Flexport

Ryan Peterson, thanks for coming in for the podcast.

Let's start with a brief explanation of what Flexport is, because many people might not know what a freight forwarder is.

Yeah, so, well, Flexport is a freight forwarder, first and foremost, and that means we help businesses ship cargo around the world.

We're also a technology company, so we use technology to give companies more visibility and control over their freight, and at a lower price.

We use technology to automate a lot of the labor.

We're all used to, the analogy that people want to go towards is like a FedEx or a UPS, which are parcel shippers.

And the difference between parcel and freight is actually a very simple 1.

It's like, is the product too heavy for the driver to lift up and put in the truck?

And it needs a whole different network to move it.

The conveyor belts are too narrow for freight, for pallets.

And what fundamentally happens that's different is in the parcel business, it's from end to end 1 company.

And therefore, they can have scanners at each mode, they can at each node in the network, They can give you that nice user experience with the milestones telling you where your stuff is.

In the freight world, because of the size, there's no company big enough to keep it in their own network from door to door.

You would actually have to be the biggest company in the world by far.

You'd have to have a port leaving every port going to every other port every day right.

You'd have to have a ship rather leaving every port going to every other port.

You would need the same for airplanes, and then when that ship arrives, remember that these big container ships now you need 10000 trucks to meet the ship.

So you would need 10,000 trucks in every port every day.

So what the freight forwarder does in the freight network is you're moving this freight as a relay race, being handed off from a trucking company in China to the warehouse, to another trucking company, to a port, to an ocean carrier, right door, and then the mirror image on the other side, door to door.

That process looks like a bunch of unstructured data being handed off in a relay race.

And so what's different about Flexport is we're taking all that data, structuring it, creating a platform so that each of those parties can get what they need to do their job or give us what we need to pass to the next party in the chain.

So to kind of contextualize this for someone.

1 of our bigger customers is Georgia Pacific.

We also have Sonos as a customer, so we ship all the speakers.

Georgia Pacific is the biggest paper company in the world.

But we also, I think, are the best way to ship stuff to Amazon.

So we have about 2,000 merchants that sell on Amazon that use us.

And they're going directly to Amazon warehouses or what are they doing?

So probably about 10% of Flexport shipments get delivered to an Amazon warehouse.

And that's, we have small companies doing that as well as big companies that sell through Amazon.

And you were selling through Amazon 10 years ago, 15 years ago?

Actually, back in my day, eBay was a bigger platform.

Amazon, Amazon introduced the third party seller.

I remember I was 1 of the first people to sign up for it and I thought it was amazing that for 40 bucks a month I could become an Amazon merchant and add products to their catalog.

You could just add with the photos everything.

I don't know if you can still do that, but I could just yeah, I couldn't make up.

Yeah, but I would just make up my own brand name and create it.

Like, oh, wow, I'm on Amazon is live is legit.

You used to do capitalism works, and so people see someone making profit where they shouldn't, and then other people pile in until the profits are gone.

So our business was importing motorbikes from China, as well as electric scooters.

The scooter mania that's happening now is so fascinating for me because 15 years ago, my brother and I and our other business partner, Michael Kenko, we were importing electric scooters, almost the same form factor, similar price point.

And in fact, I saw 1 for sale on eBay Mexico like a month ago, just checking out to see what happened to our old brand that we invented.

And there's 1 for sale for 125 bucks on eBay in Mexico, which maybe these things hold value better than we thought they would.

I mean, this is like a classic Silicon Valley story, right?

Where people find something that's good, but not until the market is ready for it will it really take off.

I'm like if only I would have invented the iphone.

I could be rich with the scooter business I had

and so so obviously the scooter thing didn't work out or just kind of was fading.

It was a tough business, So I lived in China for a couple of years.

We were never trying to like change the world.

It was like a couple of guys trying to earn a living.

I live there for 2 years running supply chain for that business and then kind of use my story as an entrepreneur with international experience.

I speak 5 languages and told that story to get into business school.

In fact, the year before business school, I only made 17000 dollars, which I'm almost certain was the lowest of anyone who was trying to make money that year.

I'm sure that some business school students weren't trying, but I was trying hard and not succeeding.

And I thought business school would be a path for me to at least have some sort of backup plan in life and I could get a job.

Yeah, I never really had a job in my whole life.

I've worked for Domino's Pizza, making pizza when I was 15, and that's more or less it.

Yeah, do you feel that that affected your decisions?

I mean, obviously you're working for yourself now, but.

It did affect my decisions, but I was determined.

I knew that, like I looked at my classmates and I could tell that I was a little bit different than them.

Like I've never had a job, I'm an entrepreneur, and I looked at the recruiting cycles and processes and the types of jobs that were available to MBAs, and I just knew I'd be bad at them.

too good for them, it was like, I'm not good enough.

You would fire me if you hired me to do this management job.

Like I'm not that's not I'm not cut out for it yep and so what I did to manage the debt was actually I got a bunch of part-time jobs, so I 1 of them was writing case studies for-

Yeah, so I wrote the first published business school case study about an African company.

So I went to Nigeria and wrote a case study about a tech company in Africa.

And that was paying me like 40 bucks an hour.

So I could work a few hours a day on that.

I also had a job teaching the GMAT, which pays 100 bucks an hour.

And then I had a job, like I started a little SEO consulting firm to help businesses with their search engine presence.

So I had 3 totally flexible on my schedule jobs.

So, okay, so I've been in experiences like this before.

How do you manage your time such that you give your best energy to your business that you want to start rather than like letting all of these other projects consume all of your time and energy?

Well, so I didn't know what business exactly I was gonna do.

And So I just needed to make sure I had some money and then free up, make sure I had.

I'm kind of obsessive, so I'll make time for hacking on things and creating things.

But I had 3 or 4 different businesses going at the same time, ideas, plus my, and they were, what's a business?

It was just a website, and I'm trying to drive traffic and see if anyone signs up.

so that was mostly just like landing pages.

Yeah, that's what I would do is create landing pages and then see if anybody buys.

So 1 of them was an erp for importers that would manage your inventory, and then we'd sell you freight, which is actually kind of what Flexport's becoming.

1 of them was an online customs brokerage and freight forwarder that became Flexport.

Not because I'm embarrassed, but I don't even remember any important ones.

And Flexport, what became Flexport, and actually, by the way, this is years and years.

I still have some random projects, like sockbankruptcy.com.

So if you run out of socks, you just declare sock bankruptcy and we'll send you 50 packs of socks.

That's my form of entertainment is like, create a little landing page and see if anyone comes and buys.

So all the t-shirts I wear, I had custom made, but there's like, I basically tricked the company that made them the first time into ordering me like a test run, and I only ordered like 10 or 20, and I'm gonna eventually wear all of them out.

So I think I'm just gonna do a bulk order and have like medium gray t-shirt.com or something and just like sell them all.

Yeah, so I think there's a misconception that entrepreneurs are just like huge risk takers, but I see myself quite the opposite.

It's like I wanted to see that there's real traction.

People want the thing that I'm going to do.

My first business after business school was called importgenius.com, and it's a search engine for shipping manifests, helping anytime you import something, the shipping manifests as a public record.

It tells you who imported the product, who sold it.

So you can look up any company and see all their factories.

You can look up any factory, see all their customers used by hedge funds, but it's really used by importers, Amazon merchants who are trying to research factories overseas.

Well, isn't that the concern if Amazon starts paying attention to where people are making stuff and they just make their own?

That's how they look at their sales data and then be like, which product should we clone?

And go make an Amazon Basics version of that product.

They have like 400 different brands now that you don't even realize are Amazon.

Competing with your platform, I think platforms should be neutral.

And So the idea that you compete with your vendors, to me, a business needs to keep all of its major stakeholders happy.

And your vendors are 1 of your key stakeholders.

If you don't treat them, you have to be the counterparty of choice for your vendors.

That's the 1 mistake I would say that they make.

It's the company I respect the most in the world, but they don't seem to respect their vendors.

And that, to me, it's not sustainable unless you keep...

Your 6 stakeholders as a business are your customers who pay you money, your vendors, your employees, your investors, your regulators, and then the communities where you operate.

And if you can keep all 6 of those, you've got to be the counterparty of choice for all 6.

You got to get yourself in their head and be like, what do those companies, those partners want?

You keep all 6 happy, that's the definition of winning.

It's like and it's like you're playing poker.

You've got and you know everybody's hand.

If you can see through their eyes, you won't lose.

And so when you see a business that's like failing on 1 of those, whether often it's the regulator, the community, or the employees, et cetera.

But your vendors are too important to alienate them.

So would you bet against Amazon at this point?

Well, I think that they can be, they're already enormously successful.

Now, as for like their stock, whether it's over value and I don't have an opinion.

I sold my Amazon stock 2 years ago when I bought a house and I literally I was crying out, maybe not literally, but I was like this is the dumbest thing I've ever done.

My house is up 10% and my Amazon's up like 4x.

I do think, however, if Amazon wins and they seem to be winning, then there's only 1 global megacorp that makes everything.

You want the black version or the white version of your product.

And that is exactly what a philosopher in Germany in the 1860s predicted would come to be, is that there's 1 global megacorp and the proletarian must overthrow it and take it back.

So I think there's, I see a big part of Flexport's role is enabling, empowering all the other brands in the world, all the other great makers and creators to make products and have the infrastructure to compete and thrive in the Amazon world.

Yeah, I have been seeing a lot of friends start these.

I mean, they're not necessarily small scale companies, but they're all kind of going for that premium angle, right?

They're selling through their own e commerce site.

Are you seeing more of that on flex port like about 10 percent of

our shipments are bound to Amazon and probably more than that are sold via Amazon, because some people do fulfillment not using Amazon's fulfillment, even though they're sold on Amazon.

If anything, Amazon's taking more and more market share from the world of e-commerce.

Let's do an MBA question before we go further into Flexport.

So Matt Susk asked, what are your important takeaways from Columbia Business School?

And would you encourage other entrepreneurs to do the same?

Yeah, and so I think here in Silicon Valley, we have a bias.

We've hired a lot of great people with MBAs.

But there's a bias, certainly in the founding, venture community against founders.

And you think MBAs don't make great founders or something.

And it's probably true, but it's a sample bias.

Like the average person going to MBA to do a business school degree is not a great founder.

But if you take someone who's a good founder and they spent 2 years studying business full time, surely that would make you better at business.

But it's that the average person going in is not cut out for that.

But that doesn't mean that that has nothing to do with the business school degree.

I think if you, having a business school degree has helped me immensely in understanding the principles of accounting and revenue recognition and all, you know like real basic fundamentals, finance, cap tables, discount rating, discounted cashflow.

These are like core principles of a modern business person to let you thrive and help me tremendously.

Not worth the hundred 40 K in debt that I graduated with probably not.

So I tend to recommend business school to people who are rich, and like your family's gonna pay for it.

But like, if you're gonna graduate with 140K in debt, it's pretty brutal.

It'll really limit your future opportunities.

And I hate to see people make life choices because they're in debt and they need to make, you know, it's like kind of, I don't like to live with permission from other people, much less like some bank that I have to decide what job I'm going to get based on some anonymous financial institution who lent me money.

Yeah, I mean if you need to kick in 2 or 3 grand a month, like a lot of people can't start companies.

So I think it's, I think it's very important for people to have a pretty good plan.

Like I didn't have a great plan, but I worked 1 out.

If you Google like MBA debt, Ryan Peterson, it's on the internet somewhere, about how to, what I did, which was find these part-time jobs and generate some income while I was, so that I could, I don't know timeframes, like even Flexport.

I don't know what timeframe will be successful, but I know that if we stay in the fight, we'll win.

And you just want to make sure you set yourself up in a way that you can't lose because you're in the fight in perpetuity.

And like, you'll just keep finding new hacks.

So I didn't know what business I was gonna make successful, but I knew that I would do it.

And as long as I could make those debt payments, make my rent, and afford some food, then I'd buy myself an indefinite period of time to experiment.

Right, And so what was the point at which, because the idea of Flexport kind of was in a holding pattern for like 3 years, I think you said, until you were approved for a certain license.

At what point did you commit to doing Flexport?

So March 31st of 2013 is when we were granted the license by US Department of Homeland Security, Customs and Border Protection.

And so I started working on the idea in like 2010.

Flexport, there was 3 years there waiting for the government to approve FBI background check.

Any income at that point, no revenue, and were

I was still working on my previous business.

And then after 3 years, finally got granted the license and made it full-time job basically the next day.

So there is a question then about your first, so this is from Tyler Hoge.

He asks, how did you get your first 3 clients?

The earliest customers for Flexport we got via Google AdWords and SEO and just signups.

People just finding us on the internet signing up for the service.

In fact, pre-launch, so when I was still experimenting and I built the landing page that is now for the service that is now Flexport, and we had not yet launched anything.

I was just figuring out, would people buy this service if it existed?

And we got Foxconn signed up, makes the iPhone.

Cargill signed up, like 1 of the biggest ad companies in the world and then 1 day Saudi Aramco signed up the the national oil company of Saudi Arabia signed up for my fake website.

Did you jump the gun and just start emailing them?

Like I don't know, I didn't know how to do the business.

I was just seeing would people buy this service if it existed?

Again, I don't think I'm not a big risk taker.

It's just like, I don't want to start this hard business unless I know people are going to want it.

And so how did you, how did you verify that people actually wanted it?

I mean, they're, they're giving you their email, but that doesn't necessarily mean they're going to

Well, I knew so I Flexport emerged out of, yeah, I had this business selling shipping manifest data, but that actually evolved and emerged out of a business that my brother and I and our same business partner, Michael Kanko, ran buying scooters and buying products in China, and so I had felt the pain firsthand of freight forwarding.

Yeah, that there's this information asymmetry and the forwarder global trades kind of a black box and the freight forwarder knows how it works and you don't And they use that against you.

And so I had felt the pain firsthand of this whole industry back in early 2000s when I was still selling stuff on eBay and Amazon and stuff.

And So I knew from first principles from having experience that it was a good idea.

I didn't know that big companies had the same problem.

So when they started signing up, I was like, oh, this is even bigger than I thought.

But I already kind of knew just from first-hand experience that this was an ugly industry and that software could make it better.

It was kind of like the only real principle that I had.

I didn't know that much about the underlying problems.

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Ryan Petersen on Building Flexport, a Modern Freight Forwarder