The digital-focused freight forwarder Flexport was driving excessive in early 2022. Its unicorn startup standing had simply been reconfirmed after elevating practically $1 billion at an $8 billion valuation. And the corporate was seen as an business disrupter, having gained the backing of big-name traders together with the VC agency Andreessen Horowitz and the e-commerce big Shopify with its formidable goal to “make global trade easier for everybody.”
A yr later, although—after comparatively weak transport demand, rising rates of interest, and a few intermittent CEO drama—the scenario has modified.
Flexport reportedly plans to put off one other 20% of its workers within the coming weeks, The Info reported Friday, citing unnamed sources throughout the firm. Flexport didn’t deal with Fortune’s request for touch upon The Info’s reporting in emailed correspondence. In an interview with Fortune the day earlier than, Flexport founder and CEO Ryan Petersen stated he had “nothing to report” on additional job cuts, whereas noting that he’s “always streamlining costs.”
Flexport final minimize 20% of its workforce in October 2023. Previous to that, it slashed 20% of its staff in January 2023, blaming “lower volumes” and “improved efficiencies.” If confirmed, the newest spherical of cuts could be the third in only a yr.
‘We spent too much money’
Petersen describes the workers cuts as a push for effectivity and profitability after an period of extra below the administration of Dave Clark, former CEO of Amazon’s worldwide client division, who helped construct the e-commerce big’s logistics juggernaut.
Clark was hired in June 2022 when Flexport was in the midst of a severe development spurt. Throughout his tenure, the Amazon veteran employed aggressively, invested closely in growing proprietary expertise, and made a number of acquisitions—all in hopes of building out a logistics community to rival Amazon’s achievement operations. However as Petersen defined, Clark could have been too aggressive.
“When Clark was CEO, we weren’t that disciplined,” Petersen advised Fortune. “We were very focused on growth, very aggressive in hiring, building amazing technology, scaling like crazy, and we spent too much money. We’ve been kind of open about that.”
The spending spree was a minimum of one of many causes Clark didn’t final lengthy at Flexport, resigning his CEO place in September 2023 after simply over a yr on the helm. Petersen, taking again the reins of the corporate he based, then started specializing in profitability.
That’s one purpose why the newest job cuts at Flexport, whereas substantial, aren’t solely surprising. Petersen described how his mindset was a lot completely different than Clark’s when he retook the CEO job again in September 2023. “We’re gonna go hard-core towards profitability, be much more disciplined, much more focused, and we’re gonna let some people go,” he advised Fortune this week, recalling his considering.
Giving confidence to nervous clients
Flexport has made huge strides towards profitability since Petersen took over and started specializing in “controlling costs,” the CEO advised Fortune this week, and it’s additionally appeared to bolster its stability sheet.
On Jan. 22, Petersen and his crew introduced that they’d raised $260 million from Shopify to proceed constructing out their end-to-end logistics platform. After occurring a hiring spree and giving up a 13% fairness stake to accumulate Shopify logistics throughout Dave Clark’s tenure, Petersen stated he wished to make sure Flexport could be in place even amid volatility within the transport enterprise.
“From a strategy standpoint, we’ve always believed in having a really strong balance sheet, because global trade is very uncertain,” he advised Fortune. “Having that balance sheet lets you invest through the cycle, regardless of what happens. So we’re lucky to have good partners like Shopify investing on good terms. And so we saw it like, not necessary, but kind of important.”
There was additionally one other main concern, Petersen stated—and it needed to do with Flexport’s buyer confidence. Flexport has been within the information for all of the fallacious causes over the previous yr, from job cuts to the CEO drama surrounding Clark, so Petersen wished to indicate that his firm is regaining its footing, and has the backers to show it.
“There was also some nervousness from customers. And we felt like it’d be great to show we have a really strong ally in Shopify—a great strategic partner, a major investor in Flexport,” he advised Fortune. “We wanted to be able to show our customers, ‘Hey, we’re open for business; this is a safe place to do business. So we felt like it was a really important message to send to our customer base more than anything else.”
