First Time Founders with Ed Elson – ft. Ryan Petersen of Flexport

Ed speaks with Ryan Petersen, the founder and CEO of Flexport, a supply chain management company. They discuss logistics, the company’s $8 billion valuation, finding fame as an entrepreneur, and how Ryan thinks about money. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Scott Galloway?

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• 0:48Speaker 01

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• 1:07Ed Elson?

  Scott, what do you think it takes to build a billion-dollar company?

• 1:10Scott Galloway?

  A SPAC. No.

• 1:13Scott Galloway?

  Okay, well, that's a loaded question. Someone with a vision, someone with incredible grit, determination, perseverance. It's typically reverse-engineered to someone who has an irrational passion for something, surrounds him or herself with really talented people, has an ability to articulate that vision such that they can attract the right human and financial capital. And then it's all about execution and, quite frankly, timing.

• 1:43Ed Elson?

  Welcome to First-Time Founders. I'm Ed Elson. You might remember back in 2021 when a giant container ship got stuck in the Suez Canal, or when lockdowns forced shipping companies to delay their schedules, sending consumer prices through the roof. Over the past three years, the supply chain has become a big theme in business. Specifically, we've all woken up to the fact that it's a lot more vulnerable than we once thought. Now, some of this was a COVID anomaly, but much of it was also structural. Supply chain management is a notoriously antiquated business. It's still heavily reliant on physical paperwork and traditional record keeping, which results in poor data quality and low efficiency. In other words, the stage is set for a disruptor.

• 2:28Ed Elson?

  That's why I'm happy to introduce our next guest, Ryan Peterson, who is the foremost disruptor in the space. In 2013, Ryan founded Flexport, a supply chain management and freight forwarding platform. His thesis was simple: modernize trade with technology. And it worked. By 2021, the company was generating more than $3 billion in revenue. And the following year, the company was valued at $8 billion. You may have seen him on the cover of Forbes, or you may have seen his viral tweets pulling back the curtain on the black box that is the supply chain industry. Today, we're going to discuss all of it. Ryan, thank you so much for coming on.

• 3:05Speaker 03

  Hey, my pleasure. Thanks for having me on.

• 3:07Ed Elson?

  So freight forwarding is kind of an obscure category. And I'm sure many of our listeners have never heard of it. So let's just start with a brief explanation of what Flexport is.

• 3:16Speaker 03

  Yeah, totally. So it's a little obscure, but you have to have to kind of just look around yourself and go, where did all this stuff come from? How did they get here? And, you know, huge, huge amounts of goods are made internationally and shipped internationally. In fact, I think I read recently, global trade is 47% of global GDP. So I mean, it's almost half of everything gets shipped around the world in some format, some form. And so the challenge fundamentally, what freight forwarding is, is that art and now science of getting that cargo moved from wherever it needs to be to wherever it's ending up. And why you need this layer that we call forwarding is because, you know, the ships only go from port to port, or the planes go from airport to airport. But the cargo needs to go from door to door.

• 4:01Speaker 03

  And so we're the sort of the coordinating layer of how do you coordinate the order, actually, going from a company to its vendors, placing a purchase order, to turning that into goods. Well, that's manufacturing, of course. But then, once the goods are ready, the manufacturing company needs to come on and tell the forwarder, okay, these goods are ready. Come pick them up, book it on a plane or a ship, clear it out of customs, clear it into customs in the other country and get it delivered. So there's a, you know, and a typical transaction door to door. We sit, we tend to see 15 or more companies that do something. Plus the government, um, you know, multiple governments are involved. A bank and insurance company, there's a, there's a lot of complex coordination that needs to happen.

• 4:43Speaker 03

  I often joke with our, with our customers that it should be called freight email forwarding because there's so many different people involved. Um, and what, what Flexport does differently, I think than everybody else in this industry is we, we try to bring structured data to this process, connect people through software. Whether that's actually software to talking to software as much as possible through APIs. Um, and through a legacy technology called EDI, which is really predominant in this industry. But also a lot of humans, like, how do you build great web interfaces, mobile interfaces? To allow the people to communicate and allow the data to travel in parallel to those goods, um, as they travel around the world.

• 5:17Ed Elson?

  So do you think it's fair to call it like, uh, you're the middleman, you're the software middleman in global trade, basically?

• 5:23Speaker 03

  Yeah, I think so. Um, now, you know, I think there's two kinds of middlemen in the world. There's some that just buy low and sell high and they don't add a lot of value and they give middleman a bad name. And there's other kinds of middle name, middlemen that like coordinate complexity and simplify the world and allow you not to have to think about all of that, you know, a customer. Comes to Flexport, they don't need to worry about the 15 different vendors, subcontractors, trucking companies, warehouses, airlines. Hope, you know, they have to worry a little bit about customs, but we try to make that really easy for them. Make compliance really kind of like built compliance as a service, build that in. So yeah, that we're okay with being called a middleman as long as you realize, hey, there is a role for middleman to add, to add a lot of value in this world.

• 6:00Ed Elson?

  So the title of this program is first time founders, but I should recognize upfront that Flexport was actually not your first company. So we're slightly cheating here. Uh, back in 2006, you and your brother started another logistics shipping company called Import Genius. So take us back to the very beginning. Why did you decide to get into shipping? Of all spaces.

• 6:21Speaker 03

  Yeah, actually, Import Genius is a company that sells data about imports and exports about shipping. So we came at it from that perspective. Before that, we started a business importing products, mostly motorsports products, off-road vehicles, dirt bikes, ATVs and dune buggies. Actually, my brother and Michael started that business. I was an employee. Even in the early 2000s, we had built software that lets you automate the outbound trucking piece. So like when we had these motorcycles that we would sell and so we'd ship them out and.

• 6:53Ed Elson?

  Sorry, can I just enter? How, why motorcycles? How was that? How did you guys land on that?

• 6:58Speaker 03

  Well, we did a lot of different stuff. Motorcycle is kind of our best seller. We were the first dealer in the United States for Jili, which is the Chinese car company that bought Volvo. So we found some good factories overseas. We built kind of e-commerce sites to sell this stuff. And as I say, we automated a lot of the outbound trucking, like even the early 2000s, we could get rates from less than truckload providers, print the bill of lading, place a booking, have a truck show up and ship it out. And we tried to build similar types of systems on the inbound piece and it was like really hopeless. So we felt like the freight forwarding was a very frustrating industry to work with. One was the lack of tech, but like kind of that was 20 years ago. Most people were bad at tech back then. But, but even like getting service out of the forwarding industry, it seemed like they were. George Bernard Shaw says, every profession is a conspiracy against the laity.

• 7:43Speaker 03

  And it seemed like freight forwarding is just a poster child for that. Like, come on, like, like a lot of code words and acronyms and Viking English. You even heard me say it, bill of lading.

• 7:52Ed Elson?

  Bill of lading, I was gonna ask.

• 7:53Speaker 03

  It should be bill of loading. It should be loading. We're loading cargo, like not lading. That's, that's old English.

• 7:59Ed Elson?

  What was your background before that? Because I still, that's, it's, it's a strange business to go into. I assume it was your brother who decided to get into it, but you know, did you always know you were going to be an entrepreneur?

• 8:11Speaker 03

  Kind of, yeah. Both my parents are entrepreneurs. My older brother's an entrepreneur. So it seemed kind of natural, but I started working for my brother. He's a, he's the real entrepreneur of the family and I kind of learned from, learned from him. But, uh, yeah, no, I don't have a, my background's entrepreneurship. Learning basically was what that means. Try to learn as fast, learn faster than everybody else. I had a job in high school. I made pizza at Domino's, but other than that, I basically have just been building companies my whole life.

• 8:38Ed Elson?

  So then in, in 2013. I think you were in the middle of Import Genius, but that's when you went to Y Combinator with this TurboTax for Customs paperwork idea called Flexport. Can you take us through the original pitch for the company?

• 8:52Speaker 03

  Yeah, you know what? Actually, it's pretty interesting. It's on YouTube. I did a pitch with Sam Altman, OpenAI founder, who was at Y Combinator at the time, and Paul Graham. And if you search like Ryan Peterson, Sam Altman, Paul Graham, something like that, you'll see my original pitch.

• 9:07Scott Galloway?

  We're the first licensed US customs brokerage to run a modern web application. Customs broker?

• 9:13Speaker 03

  Yeah. I did it onstage at their event called Startup School. I got lucky to be selected to go present it onstage. And it was sort of that, it was kind of TurboTax for Customs not doing freight, that we actually added that later, a year or two later. We started in Customs because that's where, well, that's where the compliance takes place. This is where the data lives, fundamentally. And Customs has even gotten much more important with all the tariffs that the Trump administration and Biden administration have carried on. But it was already a problem, like a lot of paperwork. I was experienced in importing motorcycles, which is heavily regulated, as you can imagine, Department of Transportation, EPA, some state governments, plus Customs and Border Protection. So yeah, that was the original pitch.

• 9:57Speaker 03

  Like, let's make it easy for people to import stuff, show them how it works, kind of use the internet, use software like a little wizard like TurboTax would do. It is taxes ultimately, right? Customs are taxes. So the TurboTax analogy is pretty good. TurboTax is much more automated because global logistics requires people. And so we always knew we would pair you up with, almost it's like TurboTax plus your accountant kind of thing, right? Like, we'd pair you up with a Customs broker and now a freight forwarding expert operations team that's going to make this whole thing easy for you, hold your hand every step of the way.

• 10:28Ed Elson?

  So let's fast forward, you know, five years to 2019, at which point... Correct me if I'm wrong, I'm pretty sure you were generating around a half billion dollars in revenue. Zero to half a billion in five, six years. I don't think even Zuckerberg can say that. What were some of the key decisions that you made that enabled you to reach that level of scale?

• 10:49Speaker 03

  Probably the most important decision for scaling the business has been our org structure, where we're built like a team of teams and kind of like, we call them squads, but it's a customer, it's a cross-functional team that serves a customer. So that's customs, sales team, kind of account management, operations, people that are coordinating freight. And that cross-functional team gets to kind of be like a little business unit and grow itself. And I actually thought about calling this a cell, you know, like in the biological metaphor, like it, as it gets, as it gets too much business, it can split and keep growing. I didn't, we call them squads instead because a cell can also be a prison cell and you don't really want your employees thinking of themselves in that fashion. But that team

• 11:35Speaker 03

  really leads to you to have like very high quality customer experience. Even, you know, you don't get like this call center that you might get calling, you know, like a big company. We want to make like, hey, this is your team. They're here to take care of you. And that that's made the business quite scalable. And it's also like, kind of, it's made it less tops down, more like bottoms up culturally, where you can kind of serve that customer and the customer's the boss. And I don't have to tell everyone what to do because the customer's telling you what they need you to do. And people are able to kind of, it's a bit like an immune system, right? It's just like rapidly solve a problem. Rather than the nervous system, like, you know, you wait for instructions from the brain before you act. And an immune system, immune system, there's no centralized control. It's like, just it sees a virus and it attacks it.

• 12:19Ed Elson?

  It sort of reminds me of Bezos' customer obsession ethos. But is that, would you say that that's your point of differentiation in the space is, you know, you value the customer where others don't?

• 12:32Speaker 03

  We we like to think that, you know, people, the the narrative, the brand around Flexport and what brings people in is our technology. And it's about user experience, visibility, control, like the data traveling in parallel to the goods. And giving you the ability to connect systems, integrate your software systems, your factory software systems with our data sets and and provide better planning, better control over your cargo as it moves from factory now all the way to customers' doors. We bought Shopify Logistics earlier this year. So we can fulfill packages to people's doors or into retail store. So that's that's what people brings people in. But yeah, it's the people that that the reason that they stay and that's driven by our culture. I would say that's like the foundational competitive advantage for Flexport is the the culture that we built.

• 13:17Speaker 03

  And we have a big advantage over competition that we've and maybe these are related, right? We've kind of like shown that this industry is interesting and attracted people who maybe wouldn't have come into this. And that's part of tech. Like people like to work in technology companies and we empower people, make the jobs more interesting. And so people at Flexport, maybe traditionally, if in another alternative timeline, might have gone to work at, you know, a consulting firm or investment banking or or like a Google or something like that. We have a lot of tap, not just the tech talent, but the operations, the salespeople, et cetera. So.

• 13:48Ed Elson?

  Yeah, we talk a lot on this program about like the the CEO's ability to tell a good story. And you have to tell a story to your investors, you have to tell the story to your shareholders. And like you're pointing out, like you got to tell you tell a story to talent, to recruit employees. And I'm sure there are many times where you have to sort of tell a story to yourself. How how is storytelling played a role in your career? And do you have any insights on how to get better at it as a CEO and a founder?

• 14:16Speaker 03

  Yeah, I think it's fair. I mean, you end up telling the story. If you don't like, you know, telling stories like you're, you shouldn't found a company because you have to do this, the the same, and it's relatively the same pitch, maybe slightly different. But you're pitching the investors, the customers, the employees, you know, in our case, also the vendors, we've got to convince ocean carriers, airlines, warehouses, trucking companies to come and partner with us. We've got to convince regulators. That were not wild cards. This is not like, oh, we're just, there's, you know, in our case, like, obviously, it's heavily regulated industry. We're crossing borders and we got to show these regulators that we're dead serious about compliance and that actually tech gives us the opportunity

• 14:58Speaker 03

  to be better at it than anyone else. So that's another part of the story that you have to tell. And tell a story with, for the communities where you operate, like, why should, why should you want Flexport in your city? Why is Flexport a a good actor? So, yeah, that's, that's a huge part of it. How do you, um, probably how to get better is do it over and over again. You know, I remember my Y Combinator. Not the pitch that you can see on YouTube, but although I was kind of, I was probably kind of nervous in that one, but my demo day pitch. Where I presented to the crowd, I mean, it's pretty high stakes, right? Like, I gotta raise money and there's all these people out there. I was very nervous and I'm not very good at memorizing things. I'm actually just terrible. I can't. And the demo day pitch, you get like two minutes. It is like super tough for me because they're a two minute pitch. Like you gotta be pretty scripted and demo.

• 15:41Speaker 03

  I'm, and that, but I just remember how bad I was. And now like, I don't know, I've gotten done at thousands of 10. I've probably done the Flexport pitch like 20,000 times. So, I, you know, it gets more interesting. Have fun with it. Um, trying to make it relatable. You want to start every presentation you do probably with a story, like make it personal, personable and kind of finish it with make something actionable. Like, how can you use this in your life? Uh, in an ideal world.

• 16:06Ed Elson?

  What was your customer acquisition strategy way back in the early days when you didn't have this massive brand that you could rely on?

• 16:13Speaker 03

  Yeah. Well, you know what? Um, it's still, hasn't changed that much. I think in very, very early days, it was Google AdWords. People searching for customs broker, et cetera. We still, we're still pretty active spender on Google AdWords and other kind of social type, um, digital ads. Um, but that's not, that's not really the driver overall. The driver of our growth has been really outbound marketing. We're pretty good at identifying importers and exporters. I haven't looked at this stat exactly, but it's in the. Probably eighty-five, ninety percent of our sales is outbound, meaning we're calling on customers. And that's a very tough thing to do because every other freight forwarder is out here calling all day too. And these, these customers don't really want another freight forwarder in the mix. Like they'll tell you that, but, um, but we've managed to stand out enough with our tech,

• 16:58Speaker 03

  with our storytelling, with a, you know, showing you how we can solve a problem. Then, once we get people to do a demo, um, it's a demo of the software. It, it tends to be like that, actually, you know, we'll, we'll go in and they're like, really don't want to be here until the software comes up and then they're like, whoa, wait, this is like, and they'll go grab Patty from accounting and be like, look, you can pay your bills like right here without having to email me. You know, it's kind of hitting the pavement. We, we, we're a little bit more, we're certainly more famous than we were when we started and that helps. You know, there's a, uh, there's a famous neuroscience paper about the Halle Berry neuron.

• 17:33Ed Elson?

  I've not heard of this.

• 17:34Speaker 03

  And I, I, I use this with our marketing team. Yeah, it's a famous paper in neuroscience that apparently all of us have neuro, a specific neuron for Halle Berry. Um, then whenever you, whether you see her name in writing, see her picture, whatever, that neuron will fire. We have one for every human. You have one for your grandmother, et cetera, but the, the neuroscience paper is the Halle Berry neuron. And so you want to create kind of flexport neurons that are active and they don't really, they've, they've heard of you. But then when that email comes in, it's like, it, there's a sense of familiarity that neuron is firing. Um, and so that's maybe where the brand helps a little bit, but it's not like people hear, I don't think people necessarily see us in the news and like call us, but it makes them more likely to take the call when we, when we, uh, when we reach out.

• 18:14Ed Elson?

  Yeah. So things were going super, super well, twenty twenty-one, twenty twenty-two. And last year you actually stepped down as CEO. Why did you decide to leave when things were already going so well?

• 18:28Speaker 03

  Yeah. Well, to be clear, I never left. I became the executive chairman and it kind of stepped up rather than stepped out.

• 18:32Ed Elson?

  Yeah. Set up.

• 18:33Speaker 03

  It's fine, it's fine. You know, I think I really wanted Flexport. Well, there was a couple of things. One is actually the pandemic was pretty hard on us. Our operations like is hard, like our, our net promoter score before, before the pandemic was in the mid seventies. Came way down and not just Flexport, the whole industry, like, you know, those ships that were stuck off the coast of Long Beach and the transit time to deliver freight from China, the US was like a hundred and twenty days on average across the industry. And like, by the way, the ship only takes fourteen days to cross the ocean. So it's pretty abysmal. Um, the price of freight went to twenty thousand dollars. There were all these challenges in the operations of the company and I felt like so a lot of that's industry wide.

• 19:16Speaker 03

  You know, the whole industry suffered is certainly not unique in that. But some of it felt like, man, how are we going to drive operational improvement here? We've got to get better. I wanted us to go faster on tech. We're, we're like for sure the leader in technology and global freight forwarding, but like, that's not the bar that we want to clear. Um, I want to be compared to Amazon or Google or the best tech companies in the world. So I felt like I wanted a partner to help me with that and I got introduced to Dave and he's, um, he's a, you know, an outstanding leader, built Amazon supply chain team. It just seemed like a match made in heaven to go, hey, we can go faster and be better at this. So it wasn't, it wasn't so much that like I wanted to step out. I love being the CEO of Flexport.

• 19:54Ed Elson?

  And then you decided to come back. Why?

• 19:57Speaker 03

  We weren't growing enough and not just revenue, you know, you can't really grow revenue when you're, when the price of your service in the market goes down so much. Uh, but we weren't growing volumes enough. And as we spent more time with, uh, was I spent, you know, I was still the executive chairman. So as I spent a lot of time with customers learned like, hey, like, you know, you guys aren't listening to this kind of feedback. You're, we, we went away from that squad model that I described earlier. And we pursued like task based efficiency. And we lost a lot of our cultural ethos of like, hey, let's be really customer centric and engaged. And it became pretty clear to the board that like, hey, you know, like the growth engine of this company, the thing that drove the growth isn't there right now. And, you know, going through a downturn,

• 20:40Speaker 03

  it's like much easier to manage. We realized we were going to have to cut some costs. And it's much easier for a founder to come in and say, hey, we want to revive our culture. We want to revive our customer centricity while cutting costs. Like that's an enormously hard challenge that I have right now. Cause it's, you know, genuinely want the number one priority is culture. But like very, and as number two is the quality of our operations. And a close third is cost discipline. And it's like, okay, I'm cutting people. We've had to, we've had to reduce the size of our technology team quite considerably while telling the team, hey, culture is the number one thing. Like that's like something that's much easier for a founder to lead a company through. So the board felt like, you know, that I was the best, best suited to do that job.

• 21:23Speaker 03

  So I'm, I'm, I'm thrilled to be back. Like I genuinely, I, I was starting to say, I, I love business. I'm a fan of business. Like the way some people are fans of sports. Um, I'm like a fan of like, what's going to happen out here? I hope someday I'm old and incapacitated. I'm still going to be like, reading the Wall Street Journal and say, what's going on out there? Um, and we had, I had the best job in the world for that. Like I, we, we serve some of the best companies in the world. We get to not just like see it from the press, but get inside those companies, see how they're run and, and help them with the problem. Like a fan, like get in the game somewhat, uh, sometimes and help them run a better supply chain. So it's, it's awesome job. I'm thrilled to be here.

• 22:01Speaker 03

  We'll be right back.

• 22:12Scott Galloway?

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• 24:40Ed Elson?

  We're back with first time founders. A recurring theme in these founder interviews has been sacrifice. I think everyone knows you have to make sacrifices to be a founder. But you have to make greater and more sacrifices to be a successful one. And I think usually those sacrifices, at least in my conversations, have come in two forms. One is mental health and two is personal relationships. And I'm just wondering, in your experience, what steps have you taken, if any, to maintain a healthy, sustainable personal life while at the same time running a multi-billion dollar company?

• 25:17Speaker 03

  Wow, I haven't, I haven't done that. I just focus on running the company. You know, I'm very lucky. I got married four years ago and I have a wonderful wife who's like super supportive and is my, my main team. And now I've got two young kids and I spend a lot of time with them. And so that's like, everything else has kind of gone by the wayside and focus on my family and flex for it. And if you're one of my friends out there, I love you, but I haven't had enough time to hang. I make a lot of new friends, you know, the flex for people are kind of the family now. We spend a lot of time together in the trenches, serving customers, getting out here. And that's, that's more than enough for me. I mean, of course I try to maintain relationships, but everybody, everybody knows me knows where I'm focused on right now.

• 25:59Speaker 03

  I do have a support network of like other CEOs and a lot of friends, you know, kind of like chat groups and meetup groups and stuff where people going through similar stuff is, it's, can be hard to find. So everyone kind of needs that as a peer group that, that's supportive. So I have a couple of different groups like that that are really helpful for me. But they also know, like they're in the trenches of serving, building their companies. And so it's not like we hang out all the time, but there's a, we have a little bit of a forum kind of to get together and share things and get help.

• 26:31Ed Elson?

  Has there ever been a moment during this journey where you thought that? You would fail.

• 26:36Speaker 03

  I never worried about failure largely because like my whole life's value system is about learning. Start doing, starting, I didn't start a company to make money. I started it to, I think it's the best way to learn and solve problems. And, and learning by solving problems and solving problems by learning. And so that sort of like can't fail when that's your goal is to, to learn. Now, you know, as we've gotten bigger, more people rely on the business, like we have to build a very financially successful operation. But it's kind of like not that freight forwarding is a really profitable industry. And, and Wall Street loves it because it's asset light. It's like a highly fragmented, massive market that's highly fragmented. Where it's not really capital intensive.

• 27:20Speaker 03

  You know, because you don't need to own the assets. You're the coordinating layer. And so you can structure that, a business like that. And, and one where the competition's not really strong and technology and where tech can be a big differentiator. So. I don't want to say it's easy, but it's a relatively straightforward path to making a successful business. In some ways, we're our own worst enemies when we're not, we're not generating lots of profit. You're like, look at yourself and like, oh, like, come on, like, let's dial in our process on these things. So.

• 27:48Ed Elson?

  Yeah. What is, what does that feel like? Like if, if, you know, business is down for you this year in a, in a relatively significant way. Does the pressure ever get to you in, in a significant, meaningful way?

• 28:01Speaker 03

  The pressure's all, you know, we, of course we want to get profitable. And so we feel that pressure. And we'll be, we have built our plan to get profitable again by the end of next year to return to profitability and Q4 2024. With no miracles, you know, like lots of hard work and good discipline execution. It's, to me, it feels amazing because you're kind of like, look, we control our destiny. We have plenty of cash, almost a billion dollars of net, over a billion in net cash in the bank. We're in a really good financial position, largely by the way, because when times were good, we recognized, hey, capital markets are booming in 2021. Freight markets are booming. Flexport, let's, let, we have a very popular like name amongst investors.

• 28:42Speaker 03

  Let's go raise some money and have that fortress balance sheet. That was strategic. That wasn't luck. Like we're like, hell, let's. And by the way, we presented at that time to investors, it was a tough fundraise, the one that we, we closed in early 2022. Because we presented to investors, we're like, here's our revenue projection. It's going to go down.

• 28:59Ed Elson?

  And you were already profitable at that point, right? So it's like, why do you, why do you need the money? It was probably the question they're asking as well.

• 29:05Speaker 03

  We're profitable. We had money in the bank, but we, and we're projecting revenue declines. Like literally investors always one of the strangest pitches I've ever seen. Like you guys are every other pitch, like the money's other revenue is always going up and you guys are projecting a decline. But we, we knew that freight markets would kind of normalize, return to normal, happened faster than we predicted, but we knew that was going to happen. And, and two, we knew that having a balance sheet would be allow us to clean up. And like, that's kind of played out true with the way we, um, were able to acquire the assets of convoy, like a company that raised 1.1 billion dollars themselves. And we were in a great place to scoop up amazing tech and bring on the core engineering team from convoy to add to our capabilities. We've been taking market share like crazy. So, but that's a healthy kind of pressure.

• 29:48Speaker 03

  It's not like, oh, it's we're caving under the pressure that's put upon us.

• 29:52Ed Elson?

  Yeah. I mean, you're very clearly like, I like what you said, you're a fan of business. You're like a student of the game and you're playing in the game. And as you said, like, the reason that you started your first business was to learn. And I, I love that for the, from a mental health aspect, because like you said, it sort of lowers the stakes of everything. It's like, well, even if I fail, it's like, well, I learned something and the whole point of this was to learn. Having said that, you've also built an eight billion dollar company. And one of our goals on this podcast is to just sort of get rid of the taboo around money. And for lack of a better buzzword, de-stigmatize it.

• 30:36Ed Elson?

  So I'd love to know how you think about money. I'd love to know what your personal financial goals are and also how they've developed over time since you started this company.

• 30:46Speaker 03

  Yeah. Well, you know, um, one thing that really helped me to become an entrepreneur was that I, I lived in, I've lived before I turned 25, I lived in like five, five different countries. And mostly. Poor countries, El Salvador, Chile, Brazil, and China, plus the US. And that was on purpose. I didn't have any money and I wanted to live somewhere I could live well. And especially my experience living in China where, you know, I had an apartment that was a hundred and twenty bucks a month for a two-bedroom apartment in a nice part of town in like a reasonably modern city called Kunming, which is out by the, there's not a lot of foreigners there, maybe, I estimate about a thousand foreigners out of the four million population.

• 31:31Speaker 03

  But I lived well and like I had, I had a great time. I eat well. I had friends. I was learning Chinese. What were you doing there? Why, why were you in China? I studied Chinese a few hours every day and I managed the supply chain, shipping those products back to someone on the internet and built, you know, built websites and e-comm, stuff like that. So I had a great like time and so I've always known like, hey, worst case scenario, like I'll just, I'll find a way. Like I always make money. Now, those days are long past me. Like now I don't think about like, oh, if it all fails, I'll just go back. Like now I'm like, oh, we're gonna, we're never gonna fail. Like it's, we, we feel like we really know what we're doing and how to grow the business. But yes, how do I think about money? I think money is incredibly a beautiful thing. Like money is great.

• 32:15Speaker 03

  Anyone who says they're like, oh, money is the root of all evil, like has no idea what evil is. And, and there's really evil in the world and like it is not money. And money is, money is kind of a scoreboard. Money is a sign that you've, where does wealth come from, right? And actually it's, it's about trade. It's about doing something for someone else that they value more than the money that they give you for it. And where did they get that money? They must have done something for someone else. Now that could be your time. It could be something that you make, you know, something that you bought from someone else and figured out how to get it to the customer, service that you provide. But you don't, you don't get money. This is not the Middle Ages. You're not getting money by robbing people. Like, I mean, yeah, there's a little bit of that, but

• 32:55Speaker 03

  mostly you got money by doing something for someone else. And that's, that's how civilization advances. That's where, that's what's special. That's what's different about humanity from the other species. You know, you get innovation, you get wealth creation, you get ultimately civilization is emerging from that process. Yeah, I mean.

• 33:13Ed Elson?

  In 2022, that's when you raised your Series E and you raised a billion dollars at an eight billion dollar valuation. And that, to me, felt like sort of the seminal moment for Flexport, partly because it made you one of the most valuable startups in the world. But also, like you're saying, it was sort of this very public validation that people needed you, that like people need tech-enabled logistics companies. Was that sort of a turning point for the company? And was that a sort of like, holy shit, I've made it moment for you and your career?

• 33:47Speaker 03

  No, I don't think so. I think for us, you know, every fundraise is kind of just like another milestone. And certainly the balance sheet is like a big part of the strategy. In fact, that was the same. We've raised a billion dollars in 2019 and again, 984 million again in 2022. So we've kind of done it twice.

• 34:02Ed Elson?

  Yeah, I guess it's just the valuation aspect of.

• 34:05Speaker 03

  The valuations, you know, even the very next day, I gave a speech to my company saying, hey, this is not our valuation. Because the way that valuations work is, well, I mean, you know, the theory of it, but also the practice is it's a view of the future. And it's kind of like, what do they call it? Net present value of the future cash flows from this company. And like, so it's inherently unknowable because it's about the future cash flows, which like, who knows what they are? It's an opinion from a series of investors where they believe, and they don't even believe it's worth eight billion. They believe there's some probability that in the future it'll be worth 80 billion. And some probability it'll be worth 18 and some probability it'll be worth eight and some probability it'll only be worth 800 million.

• 34:48Speaker 03

  And you collapse all those probabilities and you know, and they determine that you get to an eight billion dollar valuation. That's how valuations are determined fundamentally. And that's not even to mention the fact that it's preferred stock and there's a liquidation preference and they get paid back first. So there's a lot of complexity to that. And like, our employees, like, you know, naturally people are like, oh, great, my stock is worth this much. And it's easy to get distracted by that. And that's why I give that talk every time we raise money is like, this is not our valuation. There's a possibility that we're worth way more than this and a possibility we're worth less. And our job, running this business every day. Is to go increase that probability that we're worth way, way more than this. Like that's the future we want to live in. And so please like, don't get distracted. This is a problem at public companies, right?

• 35:31Speaker 03

  I think it's crazy that some public companies like put their stock price on display everywhere. But it does get kind of distracting. There is a secondary market for flex board stock. People are always trying to discuss it and um it it's not, it's not, it's mostly our like investors buying and selling stock in flex port, not employees. But um, but yeah, I think that's it's really you want to keep everybody focused on the job at hand, which is increase the probability of very high future cash flows. And let's go make that, make that the case. So yeah, that I wouldn't call it a landmark milestone for us by any means.

• 36:02Ed Elson?

  It's really interesting, this idea of getting distracted by valuations and getting distracted by how other people's opinions of you. That eight billion dollar number is someone else's opinion of your company. Have you ever personally gotten distracted by other people's opinions of you? I mean, you were big cover of Forbes, which must have done a huge number on your ego. Like, how have you maintained composure and not sort of gotten ahead of yourself and gotten?

• 36:34Ed Elson?

  I guess bought into other people's hype of you and bought into your own hype?

• 36:38Speaker 03

  I'm definitely a human being, so I have an ego and I'm subject to all of that, that, you know, that downside of humanity. Um, so yeah, I definitely have. I I'm a little embarrassed, you know, I'm a little embarrassed sometimes like a cover of Forbes. So it's like, not like, I mean, we, we have like the someone in our team like put it in the lobby of the office when you walk in. And I was like, I don't want to be out here like showing off, right?

• 37:03Ed Elson?

  But it's kind of nice as well.

• 37:04Speaker 03

  I mean, that month I went, I you probably I posted the video of myself buying the copy of the magazine and the guy didn't recognize me.

• 37:13Speaker 03

  I'm trying to just trolling, not like I needed to buy a copy. I already had copies, I was just trying to have fun. So uh, yeah, so you know, I, I think at the end of the day, I'm not trying, I'm not, not out here trying to be famous. Like if it helps like sport succeed, and I think it does, like I think it overall, like if I get more famous, it's probably good for the company. So I'm willing, willing to do it for the company, but it's not a goal in and of itself. And it becomes harder actually as a leader of a company. The more you're revered and less, it's like, how do you get truth? You know, it's really hard for like leaders to live in reality because people want to show only their best side and only like, oh, everything's amazing. And you know, you read these six page documents and like, man, everything's perfect. You go talk to the customer like,

• 37:57Speaker 03

  not everything's perfect. What the heck? The documents said everything was perfect. Um, so I think, you know, you have to stay grounded. Talking to customers a lot really helps. Spending a lot of time with the frontline employees. Um, you know, if you talk to Flexport employees, they'll say like, I'm regular guy that's out there trying to, you know, live with them and learn from them as much as I'm, uh, I'm trying to tell them what to do. So I, I try to stay grounded for sure.

• 38:19Ed Elson?

  What about within the company? Like something that we always talk about on this podcast is the idea of guardrails, just as you say that you need people who are willing to disagree with you, who can sort of save you from yourself. Have you built in any sort of in company guardrails to help you accomplish that as a CEO?

• 38:39Speaker 03

  One is just try to promote people. Like I don't want to be surrounded by people who are just always telling me what I want to hear. So I, I like people tell me the truth. Uh, and that's the kind of people that will get ahead at Flexport. Um, I, we have a few things that we've done that are like, kind of pretty public. Like we have a Slack channel. We use Slack as like an internal messaging tool and we have a Slack channel called Ask Exec Team, where anybody can just ask a question and encourage, uh, encourage that kind of like openness. Um, we also, I do a weekly town hall. These we, we also, we, we've done that monthly for a long time, but I've made it weekly since I came back, uh, where there's a a voting system. Anybody can post a question and we upvote, you know, and I just answer all the questions almost. Usually I stay all the way until they're all done. I, I try to do that in

• 39:23Speaker 03

  like, I also would like to, when people ask really hard questions, even I hate to question. Like I like the question asker. I like people who are courageous and you know, it takes a lot of courage to like, kind of put the CEO on blast and tell him, you know, you disagree with this thing and ask why they did it or something. So that, that's kind of a guardrail, I guess. Like mo- mostly I do that because if you don't do it, then like those questions are still going to get asked. And I mean, they're going to be answered with no standard of truth by like the black market of rumors and gossip and stuff. So I'd rather just put it out there and, you know, address things head on, even if I don't have a great answer. Or sometimes I agree with them. Like, you know what? You're right. I did make a mistake, or I didn't know about that or something. So it's, yeah, it's probably a good, healthy aspect of building trust within a culture.

• 40:08Ed Elson?

  If you could go back in time to 2013, when you started the company, what is one piece of advice that, the one piece of advice that you would have given your younger self?

• 40:19Speaker 03

  Talk to at least one customer every single day. And, and make sure you're living in reality with those customers and make sure you always bring a team member. So you're getting to know your team much better. So, you know, who are the people that are serving these customers and watch the team shine as, as you get feedback or you learn from the customer, see that they're following up and executing. And so you're not only doing a better job engaging with customers and solving their problems, but you're identifying who's this, who's the up and coming talent at your company. So you can promote from within and build, you know, build that culture of the customer obsession and, and leadership development.

• 40:50Ed Elson?

  You're now a partner of Founder's Fund and you've figured out exactly what works for you as a founder for this business. Now you're investing in, in other founders. What are you looking for in a young founder? And what would be your advice to young founders who are listening to this podcast?

• 41:07Speaker 03

  Well, first of all, I'm not looking just necessarily for young founders. We will invest in any, any age. Got some, actually a lot.

• 41:14Ed Elson?

  Age discrimination.

• 41:15Speaker 03

  No, but I mean, I don't even mean that from like a legal compliance standpoint. A lot of times experience is super valuable. And so, um, yeah, you know, it's, it's kind of, it, well, one, we talked about earlier, storytelling is super important. If you, and a lot of people overrate kind of technical aptitude and, um, really high, great engineers are not as rare as a great idea.

• 41:39Speaker 03

  And as someone who can tell a compelling story about why that idea's time has come and build a team around it. And so you'll, I think that's something I didn't quite appreciate 15 years ago, where I would have thought like, technical aptitude is everything. And actually, it's like, hey, the ability to attract talent to a problem, you know, have a great idea and attract talent to it is probably more important. But yeah, you know what, one of the deals that I was, I didn't lead this deal by any means, but I was part of was the investment at Founders Fund led in Neuralink was the first deal that I participated in. That's Elon Musk, like brain computer interface technology. When you see something like that, and that is a power of an idea and a founder who can rally a team and attract talent. And it's just like, you look at that and go, wow, I mean, they're going to be, keep an eye on that company. They're going to be

• 42:24Speaker 03

  enabling people with spinal cord injuries and other like kind of paraplegics to control computers. That's so powerful. So finding like a real problem that people, that anyone who listens to that will go, man, I want to go work for this company. I want to go solve these actual problems that exist in the world. That's like, you know, I don't, maybe it's a little cliche, but that's the whole thing. Like, that's what, that's what life is about, right? Solving problems for other people. And that's where you make money. Talking about where does money come from? It's like, well, you solve problems that are real problems, not just, oh, I invented this technology. Now, now I deserve to make money. Like, no one, you don't, no one deserves to make money unless you solve problems for other people.

• 43:04Ed Elson?

  Hundred percent. Well, thank you so much. Ryan Peterson is the founder and CEO of Flexport, a supply chain management and freight forwarding platform. He's also a partner at Founders Fund. Ryan, thanks for coming on. This was great.

• 43:15Speaker 03

  My pleasure. Thank you, everybody.

• 43:21Ed Elson?

  This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our executive producers are Jason Stavers and Catherine Dillon, and Drew Burrows is our technical director. Thank you for listening to First Time Founders from the Vox Media Podcast Network. Join us on Monday for Prof G Markets and Wednesday for Office Hours.

• 43:57Speaker 04

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• 44:28Speaker 05

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