This document discusses challenges and opportunities for logistics startups. There are two main ways for logistics startups to make money: 1) reducing friction through automation and modern customer acquisition techniques, and 2) pooling volume to get bulk discounts from carriers by combining shipments. When evaluating logistics startups, it's important to assess whether they can succeed through friction reduction alone or if they rely on volume pooling by moving existing customers to discounted rates. Signs that a startup focuses on friction reduction include software automation, online dashboards, API integrations, and modern marketing techniques.

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LOGISTICS STARTUPS:
Challenges and Opportunities
BY: RYAN PETERSEN
Flexport.com, CEO and Founder

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Only two ways for logistics startups
to make money
1. Reducing friction 2. Pooling volume

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1. Reducing Friction
Software-driven
automation
Modern customer
acquisition

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2. Pooling Volume
Bulk discounts from carriers
Combining parcels into
LTL shipments
Combining LTL into FTL
LTL + FTL

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Carrier Economics
$
Size of Customer
Fixed Costs
Large Medium Small

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Questions to ask in evaluating a
startup logistics business
Is this business reducing friction enough that
it could work if they never achieved volume
discounts from carrier partners?
Is this business pooling volume by bringing
new customers onto a carriers’ platform, or
are they just moving people who are shipping
on more expensive rates onto their own
discounted rates?

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Signs of a logistics startup that is
reducing friction:
Software-driven automation
Online dashboards that cut back on phone calls/emails from your customers
API integrations that reduce calls/emails to and from partner firms
Document uploaders that replacing faxes and physical paperwork
Sensors: Real-time track & trace replacing phone calls throughout the value chain
Bitcoin and ACH payments that reduce the need for overnight checks

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Signs of a logistics startup that is
reducing friction:
Modern customer acquisition
Online signups (what a concept)
SEO, SEM, Conversion Rate Optimization
Content marketing
Email campaigns

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Startups To Watch