Four Reasons Why NFX Invested in Nuvocargo
by James Currier (@JamesCurrier). James is a Managing Partner at NFX, a seed and series A venture firm based in San Francisco.
Nuvocargo is a fast-growing startup applying software and modern communications to one of the world’s largest markets — moving freight from Point A to point B.
Freight forwarding, shipping, and logistics is a multi-trillion dollar business that software will disrupt in the next ten years. It almost seems impossible that such a giant center of economic activity still relies on paper trails, handshakes, and text messages. But it’s true.
There are already many multi-billion dollar companies in this space, but those are typically 20-100+ year old companies mostly operating without software. A few, like Nuvocargo and Flexport, deliver a modern user experience combined to drive a broad marketplace that tackles multiple pain points for both buyers and sellers.
But interestingly, the freight forwarders operate in silos, without competing with each other, separated by unique trade corridors. Each corridor has unique attributes, their own network effects, and each with an enormous size which makes it unnecessary to cross corridors in order to build multi-billion-dollar companies.
We’re very bullish on this team and opportunity. At the same time, as Founders ourselves, we rarely got an inside look at how investors made decisions. That’s why for the benefit of the Founder community we’re making known the four reasons we invested in Nuvocargo.
Every founder has a fascinating story. Few have a story like Deepak Chhugani. Born in Kenya to South Asian parents, his family emigrated to Ecuador when he was young. Deepak then grew up in a household where his father was building his freight forwarding and logistics business. Deepak went to school in Massachusetts and London and then entered the world of investment banking and private equity. He left to start a company — The Lobby — built to provide ways to get smart, ambitious people jobs in finance and tech. It was intended to be a network effects business. It didn’t grow as fast as Deepak wanted, so he pivoted to tech-enabled freight-forwarding in the US-Mexico corridor, something he had an intuitive sense of from his father’s business. Prior to the pivot, he offered to refund his pre-seed investors’ money if they were not interested in his new business idea. Almost all the investors stayed in, and in some cases gave him more.
In businesses like Nuvocargo that straddle borders and rely on cross-cultural communication, having a foot in both cultures is a strong advantage. Deepak and the Nuvocargo team are entirely bi-lingual and rooted in both Mexico and the US. They are also intuitive operators in the Mexico context, as well as the Silicon Valley software context. This unique combination of perspectives helped Nuvocargo build a killer product quickly with fewer iterations and build impressive sales and market traction in less than 12 months.
In 2019, the U.S.-Mexico shipping and logistics market saw over $615 billion in goods flow back and forth across the border, mostly in trucks. It’s one of the largest trade corridors in the world, passing China-US (~$550B) in 2019. These shippers are spending $30-$50 billion on freight expenses and growing. There are already many multi-billion dollar value companies operating in this space without significant technology capabilities and infrastructure.
With a scrappy marketing and sales strategy, Nuvocargo has been growing at a faster rate than most companies we see. This is impressive for any startup, even more so in the B2B space they have chosen where building trust with customers can be a lengthy process.
They have also been able to bring all sides of the freight forwarding equation onto their platform building network effects. These sides include carriers, customers, insurance and finance providers, and others. There will be finance and insurance service offerings on Nuvocargo shortly. Each of these offerings are billion-dollar markets in their own right, with many players. This starts to look like a market network very quickly.
This is a team that makes things happen. You can’t necessarily quantify this but you know it when you see it. Nuvocargo has hustle, and in a large market like this, with multiple players, hustle is particularly critical. You can’t take a shot at this market without it.
A further sign of hustle is that the team is constantly talking to, interviewing, and learning from others who have more experience than they do — both within the realm of transportation and outside. And the team has already embraced outside coaches for themselves. We see this as a sign of great personal strength and maturity in the founders. It’s something that typically develops later in startups. We see that Nuvocargo is ahead of that curve here.
We are very early in the transformation of freight forwarding. Many companies will enter this space. We are here to help Nuvocargo build software and network effects to become the leader in this business.