SoftBank-Backed Flock Freight Raises $215 Million

The startup uses AI to pool goods from shippers with less-than-truckload carriers and skip freight hubs. The new funding round values the company at $1.3 billion

SoftBank-backed Flock Freight raised $215 million in a new funding round supporting its load-matching technology to help shippers pool their goods on trucks to bypass freight hubs.

The new funding, to be announced Wednesday, will help the six-year-old company hire 300 more employees next year and invest in its shipment-pooling algorithm and machine-learning technology, upping the number of shipments it can process per minute.

SoftBank Group Corp.’s Vision Fund 2, an earlier investor in Flock Freight, led the new round. The Japanese firm, which has made a series of bets in the digital freight arena, also led Flock’s $113.5 million Series C funding round in late 2020, which valued the company at $500 million. The latest round values the startup at $1.3 billion and brings total funding for the company to $399 million.

Also investing in the new round were existing investors Alphabet Inc.’s GV investment arm, GLP Capital Partners LP and venture-capital firm SignalFire. This round also includes Susquehanna Private Equity Investments LLLP and Eden Global Partners LLC.

The Encinitas, Calif.-based business is competing for shipper customers in a crowded market, where startups are coming under pressure to show profits in a freight-brokerage sector dominated by established players building out their own digital services.

Flock Freight is targeting the less-than-truckload segment, a piece of the broader commercial trucking market in which truckers carry shipments from multiple customers on the same vehicle.

The company is focused on avoiding transshipment through hubs, where less-than-truckload carriers consolidate and redirect shipments. Flock Freight claims its technology reduces potential damage to cargo, cuts carbon emissions and is faster than its established competitors.

“For us, it’s always about trying to get the truck to 100%,” said Oren Zaslansky, the company’s  founder and chief executive. “That’s where the shippers save the most money. It’s where carriers make the most money. It’s where we make the most money.”

Flock Freight offers its customers carbon offsets through the Carbonfund.org Foundation at no added charge, based on the idea that trucks that move fully loaded are more efficient than vehicles running partly empty. The company is a Certified B corporation because of the service aimed at environmental benefits, giving it greater leeway to balance profits against broader social purposes.

The company plans to go public within three years, and be profitable in two to three years, Mr. Zaslansky said in an interview.

The company has more than a thousand customers, according to a spokeswoman, including Volvo Group North America. Volvo AB’s investment arm also took part in the 2020 Series C funding round.

Flock Freight’s new round is the latest in a string of deals by digital freight startups that suggest operators are looking for clearer paths to profitability. Venture-capital and private-equity firms invested just over $2 billion in digital freight startups in the U.S. from 2011 through 2020, according to transportation market-research firm Armstrong & Associates Inc., more than three-quarters of that between 2018 and 2020.

In July, Uber Technologies Inc.’s Freight unit said it would acquire technology-focused logistics firm Transplace to extend its services beyond nuts-and-bolts freight brokerage into higher-margin transportation management. Digital freight broker Transfix Inc. said last month it plans to go public through a special-purpose acquisition company.

But to show staying power, Flock Freight will have to prove that its technology beats the transportation-management systems that shippers use and the capabilities that freight brokers have been scaling up to match the digital startups, said Evan Armstrong, president of Armstrong & Associates.

“They are applying proprietary technology to a problem which third-party logistics companies have been solving on a fairly large scale since the early 1990s,” Mr. Armstrong said.

Satellite images show the scale of the backlog at ports in California, as ongoing supply chain issues now threaten the holiday shopping season. WSJ’s Jennifer Smith explains what’s causing the holdups for ships and cargo. Photo: Planet Labs Inc

C.H. Robinson Worldwide Inc., the largest freight broker in North America, said on Tuesday it was connecting truckers to a booking service from supply-chain software provider SPS Commerce that automates parts of the process for retailer suppliers. The linkup, which targets the less-than-truckload segment, follows C.H. Robinson’s 2019 announcement that it would invest $1 billion in technology.

Flock Freight is operating “in a very small segment of the overall services any one of us provides,” said Jeff Tucker, chief executive at Tucker Co. Worldwide, a freight-services provider based in Haddonfield, N.J. “If it’s something new or novel, it takes almost no effort to replicate that within your own system.”

Write to Lydia O’Neal