By BRIAN BASKIN, Editor, Wall Street Journal Logistics Report / DB Schenker is taking a $25 million stake in online freight booking platform uShip Inc., deepening the ties between one of the world’s oldest logistics providers and an upstart looking to bring new technology to the tradition-bound shipping business.
DB Schenker, a global logistics company owned by Deutsche Bahn AG, hired uShip to pair shippers with truckers across Europe in an exclusive agreement last summer. Shippers began booking on uShip’s platform via the partnership in January.
The German firm bought its minority stake in a Series D funding round announced Wednesday, with DB Schenker also receiving a seat on uShip’s board. The companies didn’t disclose uShip’s valuation. The Austin, Texas-based technology company raised $25 million in three previous rounds.
The investment is the latest in the logistics world to pair an established company—DB Schenker was founded in 1872—with a technology-focused business. Companies that book freight on trucks, trains and ships still conduct much of their business by phone, relying on armies of brokers to connect shippers with tens of thousands of transportation providers. But uShip and dozens of other technology firms have launched online platforms or developed cloud-based software in recent years they say will make arranging transportation more efficient—and potentially break traditional bonds between shipping middlemen and their customers.
Founded 14 years ago, uShip is older than some of the more recent startups that boast of technology that would disrupt shipping. But the privately-held business also has an established business and claims that its shipping marketplace has handled more than 1 million shipments.
In the last two years, large logistics companies have taken stakes in startups, or acquired them outright. United Parcel Service Inc. bought Coyote Logisticsfor $1.8 billion in 2015, and participated in a $30 million funding round with Optoro Inc., a software firm specializing in retail returns, in December. C.H. Robinson Worldwide Inc., the largest trucking freight broker by revenue, bought Freightquote.com Inc. for $365 million in 2015.
The pace of these deals is picking up as profits have shrunk, particularly in the ocean and airfreight markets, where a glut of capacity has forced forwarders to cut prices. Many companies are hoping new technology can reduce costs internally and win new customers, while startups struggling to turn a profit need regular cash infusions, said Cathy Roberson, an industry consultant.
“They all know they need to improve internally because the margins aren’t good in the forwarding market,” Ms. Roberson said. “They’re looking to move into services such as focusing on pharmaceuticals, but if those don’t pan out, the next thing you do is tweak your operations.”
DB Schenker’s investment will be put toward developing uShip’s technology, marketing and other operations, said Chief Executive Mike Williams. The company is also looking to sign licensing agreements with other logistics providers outside Europe, he said.
While potentially lucrative, these deals often require large amounts of upfront investment to tailor uShip’s platform to the needs of large partners. Forwarders like DB Schenker handle thousands of loads a day, while offering a wide range of services to individual shippers.
Mr. Williams said DB Schenker’s stake will also allow uShip to draw on the German company’s expertise, such as how to make it easier for human dispatchers to connect carriers to shipments.
“Everything we can learn about how to best enable [shippers and trucking companies’] business…will drive a better value for everyone on our platform,” Mr. Williams said. “We’ll win when we make this ecosystem better.”
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