Flexport is turning to one of its longtime e-commerce partners to raise more money, reeling in $260 million from Shopify after a year of sluggish performance which resulted in the return of founder Ryan Petersen as CEO and multiple sets of layoffs.
Shopify owned a 17 percent equity stake in Flexport as of June 30, 2023, having sold its logistics arm to the digital freight forwarder for the position a month prior. The sale included its Deliverr e-commerce fulfillment technology and last-mile delivery business, which were used to help Flexport build its end-to-end supply chain service for SMBs, Revolution.
Petersen revealed the funding Friday in a series of posts on X, formerly known as Twitter.
“Since I came back to the role of CEO, our team has made massive progress toward returning Flexport to profitability,” said Petersen. “Further strengthening our cash position with this investment should send a strong message to customers that Flexport is building a long-term sustainable business that will continue to deliver best-in-class technology and services for global businesses. This is an important milestone along our journey to build an end-to-end logistics technology platform to make global commerce so easy that there will be more of it.”
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Petersen identified the company’s “fortress balance sheet” as one of Flexport’s strategic assets as it navigates an uncertain global trade environment in which both the Suez Canal and the Panama Canal are seeing disruptions. Petersen has said as recently as October that the digital freight forwarder has more than $1 billion in net cash.
According to The Information, Shopify also gave Flexport a $40 million cash infusion as part of the deal.
Flexport would not comment further on the matter.
In his post Friday, Petersen thanked Shopify CEO Tobi Lutke and the “tremendous vote of confidence” in the business. The two digital-heavy companies have been close partners in recent years, especially as more businesses required more supply chain digitization initiatives to gain visibility into product movement and inventory management.
The Toronto-headquartered e-commerce giant, which powers online websites for fashion, apparel and footwear brands like Fashion Nova, Gymshark, Allbirds and Chubbies also holds a seat on Flexport’s board of directors.
Shopify has been a previous participant in funding rounds at Flexport, entering a $935 million Series E round in February 2022 that brought the company an $8 billion valuation at the time. And in February 2023, Flexport launched an app on Shopify that helps the online giant’s merchants quote, book, track and ship inbound ocean shipments.
But the move to raise money also raises concerns, especially since Petersen’s message of profitability has been so prominent since his return to the CEO post in September, when former CEO and Petersen’s then-successor Dave Clark exited the firm after a little over a year in the role.
One of Petersen’s criticisms of the business under Clark’s tenure was that the company was spending too much money, with revenue plummeting as much as 70 percent throughout the first half, a September report from The Information said.
In total, Flexport had already raised nearly $2.4 billion in equity and debt before the new Shopify round. Another $260 million in capital suggests that the company needs more outside help to in addition to the the cash pile it currently has on hand.
Seemingly contradicting the short-term need to keep costs down, Flexport spent more money in acquiring the technology of now-defunct digital trucking marketplace Convoy. Petersen called the deal “modest” relative to its value.
Petersen believes that deal will have long-term benefits. When the announcement was officially made in November, he said the acquisition would allow Flexport “to significantly lower our carrier costs on our truckload and eventually our drayage and cartage business.”
Flexport’s relationship with Shopify has come in handy, with the freight forwarder securing the new funding in a time when venture capital firms are holding back on investments.
Through the first nine months of 2023, total venture capital deals for supply chain technology companies declined nearly 29 percent to 591 from the year-ago totals, according to data from Pitchbook. The total deal value as of Sept. 30 was $7.9 billion, down 71.5 percent from the $27.7 billion in venture capital funding provided through the first nine months of 2022.