Shipping and freight services is one of the more fragmented and analogous industries in the industrial world, with hundreds of thousands of companies involved in a variety of aspects of a process that is physical (rather than digital) in nature. A company called today PayCargowhich has built a platform to bring a key aspect of how shipping companies, and consumer goods in particular, pay each other – into the modern and digital age, announces $130 million in funding to power its platform to expand.
The funding, a Series C, comes from a single investor, Blackstone Growth, and PayCargo — based in Coral Gables, FL — said it will be used to expand into more geographies and more products around financial and business data , and possibly for M&A as well, as the shipping industry services space is as fragmented as the shipping industry itself.
PayCargo doesn’t disclose its valuation, but specifically, the company is an example of one of the types of startups that don’t currently find it difficult to raise money: it’s profitable, and has been since its inception in 2009; it operates in an enterprise industry that still has a long way to go before it is saturated with competing services serving the same needs as PayCargo; and this business industry itself represents an enormous opportunity given the continued growth and globalization of e-commerce as a whole.
“Last year we moved over $10 billion in payments, and we’re now on our way to $20 billion in 2022,” PayCargo CEO Eduardo Del Riego said in an interview.
The company now integrates with around 50 of the larger freight management systems, transportation management systems, ERP and terminal operating systems used by shipping and freight companies – and again, the fact that there are 50 “major” platforms in this broader category of operating software, how fragmented is all of this – and the 40,000+ customers using PayCargo (the list includes Kuehne + Nagel, DHL, DB Schenker, BDP, Seko Logistics, UPS, YUSEN Logistics and providers such as Hapag-Lloyd, MSC, Ocean Network Express, Alliance Ground , Swissport and Air France) can currently source and pay for more than 5,000 global logistics providers and counting.
For a perspective on this number when we covered a more modest Series A investment of $35 million Acquired by Insight Partners in 2020, it had integrations with 4,000 vendors and worked with 12,000 customers. Between then and now, it’s also raised a $125 million Series B, noting that there may be as many as 40,000 integration vendors in the years to come. In fact, Del Riego noted to me that PayCargo’s current size still represents a tiny fraction — less than 2% — of the overall market.
The core of the PayCargo platform is a set of cloud-based tools for those who order shipping services by land, sea or air to send payments and for providers to receive them, a set of APIs to integrate the tools with a company’s existing FMS and other IT and financing services for those who do not wish to prepay for shipments.
E-commerce saw a huge surge in activity during Covid-19 – as consumers who didn’t have many places to spend money bought significantly more goods online.
Cargo market growth may have slowed since this peak – not just because we are moving back into the physical world as a whole; but arguably other factors around the world like wars and embargoes are changing the way things move — but Del Riego cautioned me that this doesn’t represent a drop for the company in terms of its own revenue given its cut is made as a Flat fee for each transactionnot the size of the transactions themselves.
As with others developing IT services for the freight and shipping industry — these include Zencargo, FreightHub, Sennder, Flexport, and Cargo.com — the opportunity is to build more cloud-based services that are frictionless, secure, and shared with others business cooperation puzzle; but in many cases it’s still just a matter of providing tools to replace paper and fax machines.
While this means that a good percentage of PayCargo’s customers have yet to truly embrace or even double down on “digital transformation,” there’s an opportunity for the company to become a partner and provider of more data-driven services for its users to fill as well this gap: The company, because of its way of driving transactions between different companies in the ecosystem, becomes the owner of a huge amount of data about how the industry works: how different products are shipped, schedules and prices, most active geographies and more. Businesses would like to have this information in order to develop their own strategies and know how others are performing in the market, but in many cases the customers PayCargo works with lack the tools to extract this information themselves, analyze it and gain insights to win.
Again, that’s another reason why Blackstone was interested and why PayCargo has an opportunity here to make a bigger fintech game.
“I think today’s opportunity is to provide the data in a digestible and synthesized way, take it and produce it for these clients,” said Vini Letteri, senior MD and head of financial services at Blackstone Growth. “Yes, in the future this can also be a data transfer. But when supply chains are disrupted, there will be greater demand for that data, so products that can be accessed will be valuable.”
PayCargo, a fintech for the freight industry, raises $130M – TechCrunch Source link PayCargo, a fintech for the freight industry, raises $130M – TechCrunch