There are few markets more fascinating — and from an investment perspective, more compelling — than commercial trucking. The “I’m sorry, can you say that again?” stats associated with the industry speak for themselves:
- It's big. Trucking represents ~80% of the $1Tn US freight market.
- It's essential. US truckers moved more than 11.8 billion tons of goods in 2019, or approximately 200 pounds of goods per US citizen per day.
- It’s inefficient. Approximately 20% of miles driven on US highways are considered “deadhead”, or miles driven by trucks with no loads.
- It’s fragmented. There are 580K for-hire trucking carriers, representing ~3.6M trucks, but over 95% of carriers operate fleets with fewer than 20 trucks and 84% operate fleets with fewer than 6 trucks.
- It’s competitive. Trucking’s low barriers to entry result in intense competition among carriers. Operating margins for carriers are typically below 10%.
In addition, and somewhat counterintuitively, trucking is becoming even more critical in our increasingly digital world. Thanks to the rise of ecommerce and on-demand everything, there is unprecedented demand for trucking capacity thanks to its unique blend of flexibility, cost, and speed relative to alternative transportation modes. At the same time, however, the industry is dealing with driver shortages resulting from increased turnover, an aging population of drivers, and safety challenges. Put simply: demand shock, meet supply constraints.
Given these dynamics, it’s hard not to conclude that the way the industry has traditionally operated is not only suboptimal, but unsustainable. However, just as it has increased productivity and efficiency in other industries, technology offers a potential path forward for the trucking industry. Today, carriers are more willing than ever to explore, adopt, and invest in modern software solutions that can enable them to run better, more efficient businesses in an increasingly challenging and uncertain environment. As a result, the industry has reached an inflection point with respect to software adoption. The trucking industry, to some extent driven by COVID, has taken a massive leap forward on the technology adoption curve.
This represents a significant opportunity for any company that is able to serve this market effectively. But the bar for doing so is excruciatingly high — any solution must be easy to use, minimally disruptive to existing workflows, integrate seamlessly with existing legacy systems, and be capable of handling the complex technological and regulatory requirements innate to the industry. That’s why trucking, an industry with a strong preference for maintaining the status quo, has been largely underpenetrated by software until now. Said another way: software may be eating the world, but there are a lot of good reasons it left trucking for last.
That’s why we’re so excited to announce our investment in KeepTruckin, the modern operating system for commercial fleet management. KeepTruckin’s integrated hardware and software platform is deployed on more than 350K commercial vehicles, enabling more than 90K carriers and fleet managers to achieve compliance, track assets, increase utilization, and improve fleet safety. KeepTruckin has emerged as the market leader in efficient and automated fleet management, which is a critical capability that its customers need to remain competitive in a rapidly evolving industry.
Founding Story
Typically, starting a company is some combination of research, lived experience, intuition, and, of course, assumptions. For KeepTruckin’s founder and CEO, Shoaib Maokani, who launched the company after studying the freight and logistics industries for several years while working in venture capital, it was perhaps a bit more of a theoretical exercise than most.
In 2013, Shoaib founded KeepTruckin based on two key insights. First, he realized that there was a substantial opportunity to improve efficiency in the commercial trucking industry by replacing manual and paper-based workflows with automation and software. From day one, the company employed a bottoms-up go-to-market model, offering a freemium mobile app to truckers that enabled them to digitize previously analog workflows. During this period, KeepTruckin prioritized market adoption over monetization, allowing them to maximize market awareness and their install base.
Which brings us to the second insight. Shoaib anticipated that the market was on the cusp of an important regulatory change that, if enacted, would create a unique opportunity to drive digital change in the industry. And, as expected, that change came in 2015, only two years after KeepTruckin was founded. Specifically, the Federal Motor Carrier Safety Administration passed a mandate that required all trucks to install an electronic logging device (ELD) in their vehicles to digitally record their hours of service. This led to a dramatic surge in demand for these types of devices, which KeepTruckin was perfectly positioned to meet with its first hardware product, the KeepTruckin ELD. Over the next two years, KeepTruckin installed its ELD on an incredible number of vehicles, growing at an almost unprecedented rate as a result. Importantly, this growth was not only driven by offering a best-in-class product, but also by leveraging the company’s widely adopted, freemium mobile app as a distribution channel.
It’s been said that “few plans survive contact with reality.” But we’d argue that KeepTruckin offers a pretty compelling counterexample.
The Next Stage of Growth
While the company’s initial growth was unique, in our view, what really impressed us about KeepTruckin is everything that’s happened since. While the freemium app and ELD products were the wedges that initially drove adoption, the vision has always been far more ambitious: to build the modern operating system for all commercial fleets.
And that’s a strategy that they have executed on beautifully. Today, the company offers a leading suite of fully integrated hardware and software products. For example, the company has successfully launched and scaled an AI-enabled dashcam to monitor fleet safety in real-time. In addition, the rate of innovation on the software side has been remarkable, with valuable new modules such as vehicle dispatch and routing that customers have rapidly adopted. As a result, the company’s total revenue over time resembles a “layer cake” when viewed by product, a common pattern among leading software companies where growth is amplified through the successful introduction of new products and services.
In addition, the hardware component of KeepTruckin’s business is a key competitive advantage — these embedded products enable the company to provide a better overall customer experience and to capture critical data that feeds directly into their integrated software platform, both of which dramatically increase the stickiness of their platform, lower their acquisition costs, and increase the lifetime value of a customer. As a result, the company is growing faster today than they were immediately following the regulatory change (and off a much larger base).
What happens next?
To take a step back, fleet management — the ability to answer key questions like: Where are my assets? How safely are they moving? How can I increase the efficiency of my vehicles? — is an operational necessity for nearly every business that operates in the physical world. Given that, it’s no surprise that KeepTruckin has already experienced tremendous pull from market segments beyond commercial trucking, such as oil and gas, construction, delivery, and field services, and other geographies, such as Canada, Europe, and Japan. What started as a free app has grown into a leading technology platform spanning multiple products, serving fleets of all sizes, and selling into many industries around the globe.
Fleet management alone represents a massive market opportunity that will provide the company a tremendous runway for growth. In addition, the company also has the potential to leverage its unique distribution advantage and data assets to extend into a number of highly valuable adjacent markets. For example, the company’s freight marketplace offering (the Smart Load Board) is uniquely positioned to match loads between shippers and carriers more efficiently than ever before. Despite launching less than a year ago, the company has already partnered with major brokerages, including Uber Freight, Convoy, and JB Hunt, all of which currently list loads on the Smart Load Board.
That’s why we believe that KeepTruckin is just getting started. And why we’re thrilled to be included on the next stage of the journey.
Also, if you’re as excited about KeepTruckin’s future as we are, the company is hiring across the board here.