FreightWaves CEO Craig Fuller - why pricing data businesses trade at 30x EBIT despite 4% growth

Craig Fuller is the founder and CEO of FreightWaves, a freight media company, and SONAR, a supply chain data platform. He’s also the founder of Firecrown, which owns more than 50 publications across aviation, marine, and supply chain sectors, and he recently released his first book, Moving the World: How the Supply Chain’s Evolution Affects Us All. In this episode of World of DaaS, Craig and Auren discuss: How FreightWaves predicted the 2022 freight recessionWhy pricing data businesses ...

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

• 0:02Auren Hoffman?

  Hello, fellow data nerds. Welcome to World of DAS. I'm your host, Orin Hoffman, CEO of Incubate and GP of Flex Capital. Discover more episodes, get weekly data as a service news, original content, articles on data and more at worldofdas.com. That's world of das, D-A-A-S, dot com. Hello, fellow data nerds. My guest today is Craig Fuller. Craig is the founder and CEO of Freight Waves, a freight media company, and Sonar, a supply chain data company. So he's got multiple things going on. He previously founded and sold TransCard, a fleet payment processor, and built Express Direct, which was a division of US Express into a $144

• 0:43Auren Hoffman?

  million business. He's also the founder of Firecrown, which owns more than 50 publications across aviation, marine, and supply chain sectors. And he recently released his new book, which I just bought, but I haven't yet read, called Moving the World: How Supply Chains Affect All of Us. That's a long intro, but Craig, welcome to World of DAS.

• 1:01Speaker 01

  I'm very excited to be here.

• 1:03Auren Hoffman?

  Super excited. Now, for our listeners who are not super familiar with the industry, what's going on currently in freight?

• 1:10Speaker 01

  Real interesting time. Obviously, freight is on the front lines of trade policy, blue collar labor, immigration. Freight is all about movement of goods. When we think about the movement of goods, it's the mainstream economy. But because it sits in this really interesting place where we're so dependent upon the movement of cargo, 40% of the global economy is in logistics-dependent industries, anytime there's any major event happening externally, geopolitically, natural disasters, freight plays a central role in that. We've been quite busy this year. The administration has done a lot.

• 1:44Auren Hoffman?

  We've got tariffs, we've got immigration, talking about Mexican truck drivers, there's all these different things that are going on.

• 1:50Speaker 01

  All of that. I think the hottest story right now this week, every week is something different, is certainly the immigration issue. It is significantly changing the way that the freight market works, particularly in trucking. It's something that we're covering extensively. And I think this administration, for better or worse, is moving so quickly. If you run a data and media business that thrives when there's volatile markets, it's actually a good thing, but it's certainly keeping us busy.

• 2:14Auren Hoffman?

  How does one even measure the freight business, trucking and stuff like that? Is it just the amount of miles driven? Or what are the big measurements that people look at it there?

• 2:24Speaker 01

  Volume of transactions of total freight transactions across the market. The currency of freight is in the rate per mile for trucking. What does it cost to go from point A to point B? And that's ultimately the commodity that's in freight. It's not thought of that way, but it really is a commodity because price does determine the outcome of which providers companies do business with. And everything in freight is fungible. A red truck and an orange truck do the same job. What I'm buying is the time it takes to go from point A to point B. That's effectively the commodity that people are concerned about is how long does it take to get something from point A to point B? That's normally in trucking measured in a per mile basis. In air, it's per pound. In ocean, it tends to be per container. And just every nuance in freight has its own currency.

• 3:09Speaker 01

  What our industry is really concerned about is the volume of transactions, which is really a reflection of the physical goods economy. So if I want to know in a real time basis, how is the goods economy doing without the distortions you end up with through credit card spending or same store sales, which gets distorted a lot through inflation and mix of what's being sold? If I want to know what's moving from a volume standpoint through the economy, freight is the most reliable indicator of that because ultimately people are only shipping something if there's demand on the other side. So we get to see the US and global economy for that matter in a near real time basis. At least as it's related to goods consumption in the mainstream economy. What our industry is focused on is what's the volume and then what's the capacity look

• 3:53Speaker 01

  like in terms of the balance of supply and demand?

• 3:56Auren Hoffman?

  The last time I checked, we're seeing like a lower volume of trucking goods right now, but the spot rates are also up. Walk us through the math on that.

• 4:04Speaker 01

  The freight market's collapsed. The goods economy in the United States is giving off great financial crisis vibes, which is so weird because it's such a difference between what you see in the stock market, stock market's regular highs. Federal Reserve is not convinced that the economy is slowing. But if you look at the goods economy, which has a lot of exposure to manufacturing, a lot of exposure to energy, a lot of exposure to auto, a lot of exposure to housing, that's a very difficult market right now. In fact, if you looked at the industrial side of the data, the volume of freight transactions in the industrial segment is down 30% year over year. So the idea that we're re-industrializing and we're bringing manufacturing back is not supported in the data at all. In fact, quite the opposite is happening. In retail segments,

• 4:48Speaker 01

  which is where what most people think of the economy, they think of consumer purchases at retailers and e-commerce, it's flat year over year. It's not bad. It's just flat. But it's that industrial segment that's actually in real deep trouble. And I think what's concerning about that is there's 2 million people who work in the hyperscale AI companies, total Americans, 2 million people. Half of those work for Amazon, by the way. That's what the interesting thing is, you actually have to remove Amazon's warehouse operations and distribution center people. But just for the sake of simplicity, it's 2 million total people work in the hyperscale companies tied to AI and data centers. And 35 million people work in the industrial segments of which we tend to be most exposed

• 5:30Speaker 01

  to, which includes housing, auto, energy, transportation, and logistics and manufacturing. What's really concerning about that is not only do we have a K-shaped economy, we have the lower portion of a K shape, which is the manufacturing segment, and the goods segment is collapsing. And then you have this super high net worth affluent and technology AI that's doing exceptionally well. I think there's a lot of real concerns about what that means for the broader economy, frankly, for the country. That's probably why there's so much emotion and tension right now because of the delta between the has and have-nots.

• 6:05Auren Hoffman?

  Where do you see that going over the next 12 months? It sounds like you're pretty bearish.

• 6:11Speaker 01

  I'm very bearish when it comes to the goods economy. It certainly could bounce back. We may be near the low, but we're not seeing it right now. We're seeing things deteriorate. Some of it's related to government stimulus or government funding. 45 million people on SNAP benefits. People on SNAP benefits tend to consume more on a per-product basis. We see this in our data. During COVID, we were able to have this incredible lab because you had all of these government stimulus bills that were happening, and we had the real-time freight data that was reflecting on what was happening. Because people were spending money on goods and not services, we got a really, really awesome lab on how fast money goes into the economy and how fast it drives consumption during COVID. So

• 6:53Speaker 01

  we did this study where we took our data, the freight demand data, every time it looked like freight was about to drop off. Then Congress would do some stimulus bill and bam, we're back off to the races. When you pull 45 million people away from being able to buy food and consume product, they're naturally going to pull back spending and consumption and it's going to show up in goods movement through the economy and it's going to be even more significant than what I'm talking about. And that 30% drop that I talked about in the long haul market or 17% drop across the whole freight market, that's before we've even hit the government programs and potential, the government shutdown. So it's going to get worse before it gets better. It's just something that we watch every day because it impacts our market.

• 7:38Auren Hoffman?

  We're seeing across the economy, there's so many signs where it looks like credit card debts are going up. The Vegas economy has collapsed. People are going to Vegas a lot less. The stock of companies like Caesars is down 50% year over year. You're seeing all these other types of things. So it does seem like the average consumer, maybe not the super high tech consumers we hang out with, but the average consumer is cutting back pretty dramatically year over year.

• 8:05Speaker 01

  And it's having a pretty big impact on things like staffing. UPS, I think laid off 45,000 people this week. Amazon's cutting back 30,000 people. Now some of those jobs are in middle management. There's been so much happening geopolitically and so much happening. I think a lot of it was that the economy was propped up through a combination of monetary stimulus and fiscal stimulus. A lot of these congressional programs, a lot of that money's either been deployed or is not being deployed. And therefore, as we pull back, what we're finding is the underlying economy is much weaker. The question though becomes how much of the economic growth that we've seen is strictly related to government

• 8:47Speaker 01

  money into the economy versus the underlying economy. And I think that's a big question because when you look at freight data, which is a moment of truth in terms of consumption, it's just incredibly weak. It tells us that our economy is in far worse shape than I think a lot of people want to pretend it is.

• 9:05Auren Hoffman?

  And there's so much talk about reshoring now. It doesn't sound like you're seeing it in the data yet. Do you see hints that that might be coming or?

• 9:14Speaker 01

  Going into this year, there was a lot of momentum. That's the irony of Donald Trump's policies. I was enthusiastic.

• 9:21Speaker 01

  I thought what Donald Trump would do would come out with a one and done tariff policy and it would incent businesses to make long-term plans and manufacturing investments. And if you take the period from say, November through even February, we had a lot of announcements of these big investments that were there. The White House loved to parade these CEOs that were going to invest hundreds of billions of dollars in new production. If you've noticed over the last couple of months, we're not getting a lot of those announcements. And I think what's happened is, and we certainly do a lot of work in site selection, where companies are looking at, okay, where do I put my manufacturing plant or my warehouse? They use our data to do those things. We're seeing a lot of companies that had multi-billion dollar projects that just put them on hold. And it's the uncertainty principle. I don't know what is next when it comes to tariffs and policy. That means I'm just going to

• 10:06Speaker 01

  go to the sidelines. And you see this in private equity groups, and I know that you've got a venture fund, particularly in PE, these guys can't model. How do I know what to model? Is it 10%? Is it 50%? Is it 100%? Because of the uncertainty element, which I think Donald Trump would consider a feature, not a bug, it's really causing businesses and business investments to pull back and that ultimately showing up in the data.

• 10:32Auren Hoffman?

  World of DAS isn't just a podcast. World of DAS membership is a private invite-only community for founders and executives of important data and AI businesses. It's a place for off-the-record, high-trust conversations focused on the biggest questions data leaders are facing. The community is about peer learning, curated intros, and access to private events. Everyone in the group is building or leading something meaningful in data. If that sounds like you, apply to join at worldofdas.com. That's world of D-A-A-S dot com.

• 11:13Auren Hoffman?

  Speaking of data, you run a data business. We love talking about data businesses. When you think about the data that you're collecting, there's government data, there's all this other data. What type of government data are you relying on? And then what government data do you wish you had?

• 11:28Speaker 01

  We have government data, but it's not any of our data. We take very little government data. We do have an API from Fred. So we take some of the macroeconomic data that Fred publishes, which is the Federal Reserve's. There's a very rich database that you can learn all sorts of things. It's sort of the central hub for government data as well as third-party data that the government's licensed. We have some data sets we take from Fred, but the vast majority of what we do is not government. It's all proprietary data that we privately sourced that you can't get anywhere else.

• 11:57Auren Hoffman?

  Working directly with trucking companies and there's some give-to-get model there or something.

• 12:03Speaker 01

  The trucking industry is an example, has 400,000 trucking companies.

• 12:07Auren Hoffman?

  Because there's so many individual, you're talking about, just Bob's got his own truck essentially.

• 12:11Speaker 01

  Yeah, Jim Bob or Jose or whatever has one truck and he's one of the motor carriers. The problem is if you take the top 10 trucking companies in the United States, they would only represent 12% of the whole market. If you're going to go and start a data business and you need a large sample set, data set to start, it would be prohibitively expensive to go out and try to source individual participants and individual data sets. Plus, if you go to the largest companies, the question is, why should I give you my data? When I'm not getting anything else in return? What we did was, we said, look, there's all these software businesses and payments and banks and companies that are sort of the connective tissue, whether it's software or API services or telematics services, they have all this data.

• 12:56Speaker 01

  And they're not really good at monetizing it because that's pretty much universal of any workflow company. Doesn't know how to monetize data. I think, Arun, you know this. What we found is that we could go to those companies. And what was interesting was we started making these phone calls to these companies. They're kind of like, why would you want it? We're like, we want the exhaust data. At the time we started, we didn't want the individual identifiable information. We wanted what they considered the backwash or the exhaust data. And they're like, yeah, we deleted off our systems in 24 hours and they're going to pay us for this? We got enough of these and we built exclusive relationships over, some of this stuff is a decade-long exclusives. There was no value in it as far as the providers of our data were concerned. And so we built some of these sort of macro market level intelligence data sets. The data had never been seen before.

• 13:41Speaker 01

  Then what we did was we went to the participants and that's where we did the give to get model. And so we said, look, we have this really exclusive data set that you can't get anywhere else that has all this value. At first it had to prove the data had value. There was a lot of skepticism, like, does this work? Is it real? How do I understand it? It's a lot of education evangelism. It helps that we have a media business that serves our industry because that ultimately became the best way to evangelize the data. And now these are the benchmarks of our industry. If you listen to an investor conference call, they'll mention the word tender rejection. Nobody knew what that was seven years ago. And now it's the language of our industry. It's the number one way to determine the balance of supply and demand.

• 14:20Speaker 01

  Once we had this sort of unique data set, then we got the companies to participate because they wanted to train their own models. They wanted to build better intelligence about their business. And that's where we had more leverage over the relationship. Once we had the initial starting data sets, which is how we built the business.

• 14:38Auren Hoffman?

  There's data about truck movements and stuff like that, or their shipping data you can get from the AIS data set. How do you know what goods are moving?

• 14:48Speaker 01

  There are data that we have where we're able to understand what's in those data sets. So AIS data specifically.

• 14:54Auren Hoffman?

  Essentially the manifest of what's being moved.

• 14:56Speaker 01

  No, it's not through manifest data. It's the message flow from companies. So there are a lot of ways that we do the data science behind it. And freight is as big as a market as it is. Knowing what's the specific commodity in the box is hard to do. But knowing the general flow of that cargo is more important. Now, if you're a hedge fund and you're trying to figure out, and we have about 50 plus hedge funds that buy our data. We add about three to five a month. If you're wanting to know, how is Nike's performance versus say Under Armour? We're not a very good source for that. But if you're concerned about macroeconomics, we're as good of a source as you'll find. It's important to know that granularity is very valuable if you can get it. Because it's so valuable, it's also very hard to get.

• 15:42Speaker 01

  And we don't get into the specific commodity moving. We have ways to get answers out of the data.

• 15:48Auren Hoffman?

  You might know broadly what the type of thing that they're moving. If they're moving oil or they're moving frozen goods.

• 15:54Speaker 01

  One of the other data sets that we track are telematics devices. So we know how many trailers go in and out of a warehouse. During COVID, we actually knew which retailers were going to be earnings and which ones were going to miss based on the flow of cargo through their facilities. I don't know what's on those trucks. I know Target has a bunch of trucks going in and out. I don't know if it's produce or shoes. Now I can look at where those trucks originated from, perhaps get an answer, but that's not necessarily what we do. What companies are buying for us is pricing intelligence, the balance of supply and demand and volume, the three major categories.

• 16:28Auren Hoffman?

  And how do you think of the data business in general? It's a tough business because it's an ingredient and then someone has to make use of that. You're basically sending them facts.

• 16:37Speaker 01

  Your data is a service Bible. It's remarkable how you understand you know exactly some of the pain. Ultimately, data businesses are as useful as the data is in terms of the person using it. And I think it's very different versus workflow companies and workflow companies, a piece of software and it does this thing. If it does it well, then I'm going to renew regardless of how much I like it or not because it's doing that thing that I'm paying it for. The more painful that it is to switch, the more valuable I have become to that company. In my world and worlds I've been in where you have these big dominant software businesses, everyone loves to hate on them because they have this monopolistic criteria and they're

• 17:19Speaker 01

  able to squeak every dime and they know that you can't switch. And that's the beauty of some of these software platforms, businesses, data businesses don't work that way. Data businesses are only as useful as taking the data and providing it some use case and outcome for the buyer. We've been on our own journey to learn this and I don't know that we're very good at it to the degree we want to be, but it's really about making sure that the buyer of the data is doing something with it right after they sign the contract. You have this 12 week window that if you don't get them to do something with it and deploy it into some other decision engine and to some other model, to some other outcome. Then you're going to lose them, they're going to churn out.

• 18:02Speaker 01

  That's just our rule. We have 12 weeks from the moment they sign the contract to get it into some outcome and every outcome can be slightly different. There's some universal use cases and there's this long tail of use cases, which is why data businesses are great. Because you have these long tails of things you can do with it. They're also challenging because you have to focus on a couple of wins. But for us, it's the first 12 weeks that really make or break a data business.

• 18:26Auren Hoffman?

  And a lot of times that data just sits on a shelf. So you may have a good seller or somebody thinks they want it, but it's not being used effectively.

• 18:34Speaker 01

  The vast majority of data is that way. I think this is the reason a lot of software companies are really bad at being data businesses is because they are used to selling a piece of software. They have a professional services group that goes in and implements it.

• 18:46Auren Hoffman?

  Do you think data companies should have more professional services?

• 18:49Speaker 01

  Yes, I think so. And I think that's a mistake. We're a venture backed company and I think our board has historically treated us like they would every SaaS business. Dow and malmetrix, NPS scores. And if you're looking at a SaaS business, there's like a model, you can build these predictive models and whether the customer is going to churn or not. Data businesses don't work that way.

• 19:12Auren Hoffman?

  You don't even know necessarily how they're using it.

• 19:14Speaker 01

  That's often the problem. And one of the things I found was pretty interesting was we grew really quickly very early on in our life. The freight market has been challenging for the last couple of years. We're in this freight recession and growth naturally slows because at some point you become a discretionary item when you're a data business. If you're not embedded into the company's workflow or decision system, you're at that point a screen. And one of the things that happens if you're not embedded into our workflow, which is the ultimate go for us. If you're a desktop screen product and the person gets laid off or quits or whatever and churns, there's only one person in the company that knows how to use your data. When you go to renew them, they're like, yeah, but Johnny left and we don't even know

• 19:57Speaker 01

  how to do it and we're operating our business and Johnny's the entire success of your data business, you're going to end up losing that relationship. We often also find that the buyer of our data is not the person that actually is responsible for executing it into the organization. The need of professional services is absolutely paramount. At least our board was very against professional services because it was not booked as ARR and they wanted all of the investments going to drive retention metrics and top of funnel versus driving success. And I think what we've found is the more embedded we can be as a resource for these companies, because again, we're doing market level data. We have a group called market experts, which are basically, think of them as analysts

• 20:41Speaker 01

  or economists almost. And their job is to work with the client to basically take our data and make it actionable in their business. That's super successful. When we do that, there was a period of time where a board did not want any more investments in my market experts because they thought it was just non-value additive. Because again, they're used to selling software services. They're not used to selling data services. We found that that's a really important element for what we do.

• 21:09Auren Hoffman?

  You split FreightWaves into two businesses. One is the data business, Sonar, and the second is the media business, FreightWaves. I imagine just because they have very different profiles, different types of buyers in the end, but there does seem like there's a lot of synergies between the two.

• 21:26Speaker 01

  This is a financial engineering element. If it were my business and I had 100% ownership or even the vast majority ownership and I wasn't looking at for an exit for my investors, then I'm going to keep these businesses together. Because naturally, the media business still drives top of funnel. The problem is, successful data business trade at, in some cases, better than SaaS like multiples if you are the benchmark data service for that industry. So think of like S and P. And you've seen particularly pricing data businesses, PRAs as we recall them, price reporting agencies, there's businesses that grow at like 4% a year and are trading at 10x ARR. They just throw off an enormous amount of cash, but they're also these businesses that don't grow.

• 22:08Auren Hoffman?

  Insane. But even there, they're trading at 30x EBIT.

• 22:12Speaker 01

  Correct. For a business growing at 4%, trading at 30x EBIT is absolutely nuts. And there's been a bunch of these deals that have been done, Dow Jones, but I hope this.

• 22:21Auren Hoffman?

  Why are they trading so high? It just doesn't make any sense.

• 22:24Speaker 01

  I think it does. There's all these derivative products.

• 22:27Auren Hoffman?

  You think that will help you sell other products or something?

• 22:31Speaker 01

  Well, it's derivative. So it's Wall Street that does this. And if you look at S and P's, one of my board members was president of S and P. They've been one of the most acquisitive companies in buying data businesses. And he spent a lot of time in financial services around the Bloomberg, the Reuters or Refinitiv's and people like that. And what you find in financial services is that the data itself, once you add derivative products off of it, pricing specifically, you can build billions upon billions of dollars of value. Once you're the pricing index and the benchmark of an industry, the value of that business is related to all of the derivative products that trade off that pricing intelligence. It's where you see things like the S and P 500 index.

• 23:16Speaker 01

  All they do is publish an index and it's a $70 million business for standard importers. Like it's a piece of data. It's a model to license it. They generate $70 million because every ETF, every mutual fund that ties itself to the S and P has to go buy the data.

• 23:34Auren Hoffman?

  If you have a business that is growing at 4% a year and people think it's going to continue to grow at 4% a year, it just doesn't make sense that it trades at 30x earnings unless they think the earnings are going to grow much faster than the revenues.

• 23:47Speaker 01

  Well, this is all within the last 15 years. These financial data, PRA businesses, price reporting agency businesses have really sort of caught wind in the last decade. And the reason is because Wall Street, the value of being a benchmark in an industry means that I am able to go create derivative products and derivative source of income that has nothing to do with the underlying subscription to the data product.

• 24:11Auren Hoffman?

  I'm in the wrong business, by the way. All my data companies trade at, let's say, four to 12x earnings.

• 24:18Speaker 01

  Well, we see a lot of data businesses in our space where someone has marketing intelligence or lead generation, things like this. Those are trading at very different multiples. The most valuable buyers of data businesses are on Wall Street. Prequinn sold, I think, for $3.8 billion. Blackstone bought it.

• 24:35Auren Hoffman?

  But that was growing fast.

• 24:37Speaker 01

  I don't know the metrics of the business. Opus, which was the oil price reporting service that Dow Jones bought, it was growing 6% a year.

• 24:46Auren Hoffman?

  6%?

• 24:47Speaker 01

  They paid, I think, 15x ARR. It was 120 million in revenue. They paid 1.8 billion. Again, this is three years ago.

• 24:55Auren Hoffman?

  What? This is insane.

• 24:59Speaker 01

  Yeah, Lloyd's List, which is the oldest data business in the world, growing at 4%, growing at inflation levels at 4%, and it traded at 9x ARR. It's because of Wall Street. Because Lloyd's List has this ship registry that could sell it to insurance companies and they could sell it to Wall Street firms. And that's where all the money's at.

• 25:19Auren Hoffman?

  But maybe the buyer just believes they could grow it much faster. S and P, they often buy things and then it does grow much faster because they can stuff the channel.

• 25:27Speaker 01

  Well, that's the whole thing. We sell a lot into hedge funds. Our pricing data is sold into big financial institutions. If you took our business and you plopped it inside of Bloomberg, again, I'm not suggesting that we're selling to Bloomberg. Although if they're listening to this call, they should definitely call me.

• 25:43Auren Hoffman?

  Totally. We literally have hundreds of people from Bloomberg who listen to this every week.

• 25:48Speaker 01

  Well, call me up. So I'm happy to have a conversation. Well, let's say that I was to sell FreightWaves or Sonar, my data product, to Bloomberg. What Bloomberg would be able to do is I had 50 some odd hedge funds. Like I said, we're signing three to five up a month. The hardest part of being a point solution or a very niche data product is getting through corporate procurement and financial institutions. It's getting through security compliance, backtesting, all the stuff that it takes to get a $100 billion fund to buy your data that you've got to prove that there's value and there's procurement and all this. Bloomberg already has done all that work. For them, they could take my 50 logos in financial services,

• 26:30Speaker 01

  would go to potentially 5,000 almost overnight because they've already done the work. And they say, hey, we have this new data product that you can subscribe to it. 50 to $100,000 in ARR and boom, you're off to the races. And I think it's the same thing with S and P. They already sell into something like 40,000 corporates. For them, adding another data product, just adding another revenue stream that doesn't require them to actually build anything. And the great thing about financial data products specifically is there's nothing to be done. If you're reporting benchmark prices every single day. You've already trained the model to do that. You may have a small team cleansing the data, but these businesses can get to very high margins if you're not growing them. If you're putting it inside the S and P or Bloomberg ecosystem,

• 27:14Speaker 01

  you can get our business to 75, 80% contribution margins and never have a direct sales force that you have to contend with because you're already in the distribution chain.

• 27:23Auren Hoffman?

  To me, that does make sense. If you're taking a business that is profit of X and you think you're going to get it to a profit of 2X and it's growth of Y and you think you can get it to growth of 5Y, it makes sense to pay a very high multiple on it because you're confident you can go do that. When the private equity firm buys it, then it makes no sense.

• 27:45Speaker 01

  PE firms are bad buyers of these data businesses. Now, a company like Fast Markets, which was a media publisher up until 2017, has created a price reporting agency for minerals and metals, really sort of bespoke like lithium and cobalt, things like that. That business, I think, the last it transacted, it was 120 million top line or ARR. They could transact it at 1.8 billion, growing at mid teens growth, 15, 20%.

• 28:11Auren Hoffman?

  I definitely have the wrong business here.

• 28:13Speaker 01

  It's price reporting. The price reporting stuff is incredibly valuable because of all the derivative products you can offer to it.

• 28:19Auren Hoffman?

  You're right. Price is the most valuable thing of data.

• 28:22Speaker 01

  Absolutely.

• 28:23Auren Hoffman?

  You need data that's temporal. Otherwise, it's not valuable. And you need data ideally that has a dollar sign next to it. That is what I've learned in the data business.

• 28:32Speaker 01

  If you're a benchmark service, if you are the benchmark index in a space, then that means that you are irreplaceable because physical contracts, pricing contracts are sold against your data. Derivative products on Wall Street are sold against your data. People have to have this subscription or they effectively are out of business. So there's all these derivative values and you could build software. It sure its products out of it. The great thing about pricing data businesses is there's a universally addressable opportunity market. You don't have to go very far in history to actually see Dow Jones bought Opus. I believe 65% of their revenue is now data businesses and it's the fastest growing

• 29:14Speaker 01

  component. Go look at Hearst. Hearst is a big media conglomerate. I believe the majority of their revenue comes from their data businesses with Fitch Ratings being the biggest. When you have companies that have very large distribution in a market, selling financial services, products, they will pay a very large multiple for these data businesses.

• 29:36Auren Hoffman?

  It makes sense. The biggest data company built in the last 30 years is CoStar and they have great data on leases and all those types of things. And those things change quite often.

• 29:47Speaker 01

  Everybody hates them that's in the industry. They're universally low.

• 29:51Auren Hoffman?

  Everyone hates a lot of these big companies. There are always haters out there.

• 29:55Speaker 01

  If you talk to somebody that's ever competed against CoStar, they're really legit, just they're protected.

• 30:00Auren Hoffman?

  They're a tough competitor. They use lawyers. They use everything at their disposal. But gosh, that stock's been awesome.

• 30:07Speaker 01

  To own it is a different thing, but everyone loves to hate them that's in the business, but they can't do anything about it. They're so dependent upon it. And that's where you want to be as a data business. You want to be indispensable. The customer's business cannot exist without you. And that's where you want to be. And that's when you can secrete as much value from your data as possible. Unfortunately, there's not a lot of businesses that actually work that way. Pricing is one of those.

• 30:29Auren Hoffman?

  All right, let's go back to the trucking world. You published some data showing that 4% of truck drivers don't have commercial driver's license. That seemed pretty low. I would have thought it'd been way higher. Is that a surprise?

• 30:42Speaker 01

  That's 120,000 people that don't have commercial driver's license. That's just the ones that don't have it.

• 30:46Auren Hoffman?

  I just presume like lots of people are driving these things like on the sly and stuff like that.

• 30:52Speaker 01

  You would hope not, but there's also the non-domiciled CDLs, which are basically people who don't have work permits that are given commercial driver's license by the states. So there's about 600,000 truck drivers that are probably going to be put out of business as the administration goes through this enforcement regime to really stamp down on some of what they view as some of the more egregious actions. And that's a positive thing because a lot of what we've seen over the last decade is this constant movement to deregulation, which meant you and I could open up a CDL school tomorrow. We just go into the government registry and say that we're a CDL school, advertise online for $500 to get your CDL. Person could watch a video, never actually driven a truck. This is insane. Never driven a truck.

• 31:36Speaker 01

  They come to our, we call them CDL mills. Never been in a truck. And as long as they can go past the CDL test, and in some cases it wasn't even required, because we could actually, in certain states, give a CDL as the school. We could say, hey, you paid us 500 bucks. We want you to be successful. Here's your CDL. It's a bunch of fraud.

• 31:56Auren Hoffman?

  I could have a CDL by next week if I want to.

• 31:59Speaker 01

  You could have a CDL the next hour if you wanted. It's so ridiculous.

• 32:03Auren Hoffman?

  I kind of want to have a commercial driver's license. That'd be cool. Drive around one of those trucks every once in a while.

• 32:08Speaker 01

  Well, as long as you're not hauling 80,000 pounds down the highway.

• 32:11Auren Hoffman?

  I would do it in the right way. I would be a little scared to drive one of those trucks.

• 32:15Speaker 01

  Then you should take about six weeks to get your CDL. But what's happened is the last five years is the industry has pushed to allow more people to become truck drivers. And what's interesting about it, it was actually pushed by all the large trucking companies wanted a bunch of truck drivers to come in. So this whole supply and demand thing, we're trying to educate them what they did to themselves. So they put these rules in place that they thought they could make it more difficult for small carriers to grow. But then they opened the door for truck drivers to come in. But then these entrepreneurs, a lot of them are new immigrants who had problems finding work, ended up realizing that there is no checks. You and I could start a trucking company, the next five minutes we could go register a trucking company. We don't even have to prove to the government who we are.

• 32:59Speaker 01

  Literally go online, fill out a form, boom, we have a trucking company. And then I'm going to issue a CDL to you, my brother, or, or we're going to do it here online. You've never driven a truck. You don't even know who I am. And now we have a trucking company. And that's what's happened to the trucking industry.

• 33:15Auren Hoffman?

  And we've seen like a lot of accidents?

• 33:17Speaker 01

  Absolutely. There's more than 5,000 fatal accidents for American trucks in the United States a year. That's up 40% since 2014. 5,000 fatal accidents.

• 33:28Auren Hoffman?

  That means we have at least 10x more serious accidents.

• 33:32Speaker 01

  That's right. We're in the couple hundred thousand, but it is a travesty what has happened. It's been pushed upon by the largest trucking companies, what they thought was regulatory capture. We're trying to make it harder for small guys to open trucking companies. But then what they also did was try to make it easier to hire truck drivers. But it totally backfired and it's destroyed the economics of the entire industry. The biggest trucking companies, this is the worst quarter in their history. A lot of big trucking companies are at risk of going bankrupt. They have no pricing power and it's become a commodity. And that's what the Trump administration is trying to get a handle on is get rid of a lot of the bad practices and we don't know who's in our trucks and whether they actually knew what they're doing.

• 34:16Auren Hoffman?

  When I've talked to people that either own their own trucks or own a small trucking company, it still seems so backward, like the way they get orders and a lot of times it's someone calling them up and there's no like good app for it or anything. And then they have to like make a determination, does it really make sense for me to drive from Pittsburgh to Dallas?

• 34:35Speaker 01

  There are marketplaces and venture capitalists have burned more money than they know what to do with chasing this dream.

• 34:42Auren Hoffman?

  All these guys convoy and raised billions of dollars that went under.

• 34:45Speaker 01

  Dan Lewis is a good friend of mine. If you looked at Convoy's cap table and its investors, it had a dream roster of investors.

• 34:55Auren Hoffman?

  Of course, that everybody. Reid Hoffman was involved even. That amazing people.

• 34:59Speaker 01

  Reid Hoffman was in there. Jeff Bezos was in there. Bill Gates, Bono from U2 is cool.

• 35:04Auren Hoffman?

  If he's invested, it must be good.

• 35:06Speaker 01

  Henry Kravitz was in it. It was the roster upon rosters upon rosters. And even major funds like Fidelity were in it and T. Rowe Price. The problem is that those investors did not understand the trucking industry. And I have a rule, basically, of any successful freight and logistics company. Now, a lot of investors have their own rules and a lot of investors will say, I need a technical co-founder. I need someone that I can vouch for their technical co-founders. I have my own rule, which is, and this has been true in every single case. In fact, Convoy, Dan Lewis was the only counter example to this exception, was one of the founders must have four years of industry experience. That is what makes a unicorn in freight. And without it, that company is unlikely to survive.

• 35:49Auren Hoffman?

  But there's so many amazing companies in so many industries, including freight. The founder of FedEx.

• 35:56Speaker 01

  Well, but this is also the 1960s. Founder of FedEx, I mean, his grandfather founded Greyhound. So the founder of FedEx understood the hub and spoke of transportation networks.

• 36:05Auren Hoffman?

  Or like Ryan Peterson from Flexport.

• 36:08Speaker 01

  Ryan Peterson owned a company called Import Genius, which is a data business that tracks imports.

• 36:13Auren Hoffman?

  Okay, you're proving me wrong.

• 36:15Speaker 01

  We can go through the list. Kamal, the founder of Project 44, worked at Yello, worked at the Walmart account at Yello. Eight years, he built the $4 billion market. We can go through the list. It's nuanced.

• 36:26Auren Hoffman?

  If you're talking about logistics in general, Uber would be like the logistics business with no experience.

• 36:31Speaker 01

  But Uber, even though they poured billions of dollars in freight, is an unsuccessful player.

• 36:37Auren Hoffman?

  In freight?

• 36:38Speaker 01

  They've spent billions of dollars building out Uber Freight. And the only thing that really drives the Uber Freight business isn't Uber. Even though it's called Uber Freight, they bought a business called Transplace, which managed about $15 billion of freight. Roll that into Uber Freight, and that's the predominance of the Uber Freight business is a business that they bought. Freight's a hard business.

• 36:58Auren Hoffman?

  If I want to back a founder in freight, they should have at least four years of experience in freight.

• 37:03Speaker 01

  Or they need to go find a co-founder. And I think you'll find that it's universally true. I've done about 30 seed investments a year in freight. I'm probably one of the more active investors, seed investors in freight and logistics supply chain.

• 37:14Auren Hoffman?

  Clearly, if you do 30 in freight a year, you are the most active in freight.

• 37:20Speaker 01

  They're small checks. I'm not writing 10 million dollar checks.

• 37:23Auren Hoffman?

  We're still number one. I mean, there's no one more active in freight if you're doing 30 a year.

• 37:27Speaker 01

  And I get a lot of inbound, probably 10 a week. And they find me because I sit on all sides of the world. I'm from the industry. My father started what became one of the largest trucking companies. My uncle also started a different company. It was my dad's crosstown rival that became also one of the largest. I'm a traditional trucker. I have diesel in my blood, as I like to say. I come from big trucking. But then I also sit in a world of venture and then I have a large media presence. So oftentimes founders, industry people that want to go start a business know very little about starting a tech business. So they end up coming to me because they're trying to figure out how to enter the tech ecosystem. Or I get outsiders that know nothing about logistics and I'm sort of their first stop. And I always tell them like, look, if you don't have a co-founder that understands logistics, you need to go find one.

• 38:11Speaker 01

  Because it's going to be incredibly painful. The things that you naively think that you can change through whatever your technology is or services. What you think is happening is oftentimes not the reason something happens. Oftentimes, venture capitalists look at the logistics market, particularly trucking. These guys are a bunch of hillbillies. How they not centralized all the transactions? And then they get into it and they spend, just like Convoy did, a couple hundred million dollars. The guys at Convoy are good friends, the founders were, the team. But they made some boneheaded decisions. They bought 5,000 trailers. These are boxes thinking that they could automate them. What they should have done is bought a trucking company that knows how to manage assets.

• 38:53Speaker 01

  Because they would have spent a lot less money buying a broken trucking company with a couple thousand assets than trying to do it themselves. And I think what happens is they realize when you're moving physical products, it's very different than moving data. Moving information, which is ultimately financial services and payments. That's moving information at the end of the day. Yeah, you're moving money. You're trading information across whatever landscape it is. When you're moving the physical product and trying to digitize the physical world, the three dimensional world. That is a very different world that doesn't live inside of a data or a digital universe. You have the analog world that you have to contend with. And oftentimes, there are a bunch of rules in place that exist because. That's the way the industry operates. And I think oftentimes these founders that know

• 39:38Speaker 01

  nothing about supply chain or freight think that they do, and they just get absolutely clobbered.

• 39:43Auren Hoffman?

  I love to talk about the media business. If I want to get into the media business, what advice would you give me? Or would your advice be like, stay away?

• 39:53Speaker 01

  I didn't set out to be a media entrepreneur. When I was starting FreightWaves, we started to build a futures market based on trucking. That was the original concept. And then we said, okay, there's every commodity market, every commodity contract, futures market that's been built has two components. They have a news business and they have a data business. If you look at oil, every liquid financial contract is a whole news business, even in crypto, which really wasn't a big thing when we were starting out in 17. There's a whole news business to it, and there's a whole data business to it. That didn't exist. And when we started our business, we actually tried to get press because I needed to evangelize it. I got turned down by a bunch of PR agencies, which is like getting turned down by lawyers. And I remember I called up Convoy. I figured

• 40:38Speaker 01

  if anyone could make Convoy look like a futuristic venture capital-backed tech disruptor, whoever Convoy's PR department was, I needed them because they made this thing look like absolutely awesome technology. And the industry knew it as another freight broker. And the guy quoted me $40,000 a month to take me on in a retainer. And I'd only raised $2 million at this point. He's like, your concept is really hard to explain. You should hire your own social media writer to write content. So we posted this job and an editor at a trucking publication applied for the job. And I hired him and I told him, his name was Brian. I said, Brian, I want you to write about trucking, but you can't write about futures that often because nobody will read it if it's all about that. So write

• 41:20Speaker 01

  about stuff that's happening in the market. And he did, and it was moderately successful. But then he went on vacation and a hurricane hit Houston. And I had just in my prior life had ran FEMA's disaster logistics, which is a disaster. But I ran disaster logistics for FEMA. And this was the hurricanes that hit Houston. He was on vacation. I didn't want to bother him because I knew what to expect when the hurricane hit. I wrote this article, what to expect when expecting a hurricane.

• 41:50Speaker 01

  And there hadn't been a big storm in like a decade that hit the United States like a big storm in a major city and the site exploded, absolutely exploded to traffic. Now, everyone thinks they're reading Brian Strate's content, but they're actually reading mine. He was pissed, by the way. I was writing in his name and I'm sure there was a ton of spelling and grammatic. I got Cs and Fs in English, man. I didn't think I could ever write. At that moment, I realized that there was this huge opportunity to sort of lean into this media business to basically use our data. And a friend of mine gave me Bloomberg's biography, Bloomberg. He's like, hey, I think you should read in a Reddit. I could take

• 42:31Speaker 01

  what Bloomberg did in financial services and I could just apply it into trucking. And that's really been the case ever since, as we took the biography of a guy who started out in the eighties where the data was hard to get, it was disparate. A lot of people don't realize this, but Bloomberg didn't have a lot of data when it started out. It had some very hard to get data that was pretty valuable, but incredibly hard to get to. And they built it out over time. And that's exactly how Bloomberg built their business. And that's really what we've done at Freeways. We got to 10 million of ARR without even understanding that you could go buy leads and do traditional top of funnel marketing. I didn't even have a marketing department until we got to 10 million of ARR. By the way, Bloomberg didn't have a marketing department until they got to eight billion of ARR. They

• 43:14Speaker 01

  made my case story look like a joke. That's the great thing about media businesses.

• 43:18Auren Hoffman?

  At what point you bought Flying Magazine, you bought it for two and a half million dollars. Why did you do that? And walk us through that playbook?

• 43:26Speaker 01

  So, Aron, I was born. It was middle COVID 2021 and I started flying airplanes again because I had been a pilot and I'd stopped flying. Life takes over and I started reading all of the aviation media businesses and flying was like the Sports Illustrated back in my day. And I was like, man, they don't do a very good job. I could do a better job. As a media entrepreneur, I'm thinking, I wonder if I could buy this and this will be like my pet trophy asset that I'll like keep. And so I reached out to them and there was a guy named Craig Fuller who ran the Aircraft Owners and Pilots Association. It had the same exact name. So they thought they were talking to Craig Fuller, the other Craig Fuller. And so they agreed to have a conversation. They said, hey, it's not for sale, but we'll consider selling it to you.

• 44:08Auren Hoffman?

  It's funny. Whenever I reach out to people, I always reach out with my other email address, which says LeBron James.

• 44:14Speaker 01

  Very similar. So I get on this call and I think they're shot because the other Craig Fuller, which we actually had the fun, we did a panel about two years ago, it was Craig Fuller and Craig Fuller. They're shot because I'm like half the age. So I'm on this call and they agreed to sell it to me. So I did it. I bought it as a side hustle. Call it hubris, call it ego, call it entrepreneurial, whatever you want to, madness. I wanted to see if the same idea of taking a media business could drive top of funnel, the same way I built Freight Waves to buy top of funnel, the data business. I also wanted to build a headquarters. This is COVID madness, we'll call it. I was gonna build a community that had a landing strip and we're gonna basically build a bunch of homes in a residential neighborhood. I

• 44:57Speaker 01

  bought 1,500 acres outside of Chatty, Tennessee. And in our own magazines, we started advertising that we're gonna build this community. I think in the first three months, we got to $28 million of reservation contracts. It wasn't $28 million, but reservations, I think deposits were $10,000 a quarter acre or $40,000 acre or something like that. And we had sold. And what I realized at that moment was this power of having media wasn't just applied to my data business, but it applied to any other kind of business. And so we coined the term negative CAC, which is the idea of basically I have a media business which makes profits, but his primary goal is to provide top of funnel for some other product services.

• 45:40Auren Hoffman?

  By the way, that's what influencers do. If you have a big X following or Instagram following or whatever, that's how they monetize often.

• 45:47Speaker 01

  That's exactly what it is. And I've done this for Freight Waves, but you could say I'm a freight influencer. It's not very sexy. It's not gonna win me a lot of dates if I were single, which I'm not, but it certainly wouldn't win me a lot of attention. The difference here is I'm buying these old school legacy magazines that have been around for 50 to 100 years. What I found with that is it's basically the influencer halo in these communities because people love Flying Magazine, or if you're into trains, you love trains. They just have such great brand affinity for these connections. And you'll hear these older people that talk about, "I have every issue that you guys have made since 1960." And what you find is you get this massively important audience in that community.

• 46:31Speaker 01

  The difference between, say, a traditional influencer and the types of businesses that we buy is we're not paying the kind of valuation that a Mr. Beast would want. He's in his own world, but it's the same fundamentals. If I have an audience that can drive top of funnel, we're paying three to five times EBITDA.

• 46:47Auren Hoffman?

  These brands, Flying Magazine, Trains, they're enduring. People still talk about the Time Person of the Year. I don't know anyone who's read Time Magazine in the last 20 years.

• 46:57Speaker 01

  No, but it's an important thing. There's actually this thing called the Lindy Effect. It's the idea that if something's been around for 50 years, they'll be around for another 50 years. When we're buying a media asset like Flying, or Trains, or Gotti Magazine in 1907, if these things have survived multiple world wars, and multiple pandemics, and recessions, and even waves of the internet, and they still have subscribers and advertising, chances are it's going to live on another 100 years.

• 47:24Auren Hoffman?

  And there's often a conference associated with it, and there's a community around it.

• 47:29Speaker 01

  They buy merch with it because they want to be a part of that community. And what's interesting about it is a lot of times, they haven't digitized these assets very well, but sort of stuck at the print world. So I bring a lot of young people into the business, and there's some crisis, and every business has a crisis. And you can just see a kid who was a new manager, never had more than maybe two people reporting to them, and now got 20 people reporting to them, and they just panic. They're like, "Oh, my God, this is going to kill us." Something happens, somebody leaves, or a hater writes an article, or it's like, "Oh, my God, they panic because they think this is the end of the world." And I remind them that if these businesses have been around as long as they had, it's really hard to screw it up. What you also find is the audiences want you to be successful.

• 48:15Speaker 01

  There's an element of a legacy media business that I think doesn't exist in a lot of other communities, probably comparable to like a sports team, maybe like a museum or some type of something very traditional. You don't get it in a lot of businesses, but you do get it in traditional media where they almost feel like they have ownership of the product. It's their community and they hold you accountable as the owner to making sure that you're preserving that asset for them, for their use. But what's great about it is if you make a mistake and you screw up, they want to be on that journey along with you. There's something to be said for that because I think oftentimes as entrepreneurs, we're running businesses or buying businesses and we're sort of on our own. Nobody cares about whether we're successful. And I always

• 49:00Speaker 01

  tell people, because I grew up in sort of the cable TV of age things. Remember you had a TV show that you cared a lot about and all of a sudden ABC cancels it or something? And you're just like, why do they do this? You can't wait to just have it come back and maybe occasionally they'll drop a special and you're like, oh, I want that so much. Traditional media, particularly magazines, print magazines have that same audience connection that's just unbeatable.

• 49:24Auren Hoffman?

  A couple of personal questions that we ask all of our guests. First one is what conspiracy theory do you believe?

• 49:31Speaker 01

  I didn't used to be a conspirator. I have a bunch of them now, which is really unfortunate. I certainly believe in UFOs and I believe that we're probably being visited in the consciousness that we have is not the world. And so therefore metaphysical, I'll say, almost religious in some ways. I'm a big fan of quantum theory. And so I believe that we've actually lived down our life before, and these are just reflections in time. It's a hologram effect.

• 49:57Auren Hoffman?

  That's awesome. Last question we ask all of our guests. What conventional wisdom or advice do you think is generally bad advice?

• 50:04Speaker 01

  I have a problem with breakfast. I know that's like a real boring one, but growing up as a kid in the eighties, I was told I had to have breakfast. That was sort of the universal truth that you had to have three meals a day. And obviously that's not true. So big cereal, that's my conspiracy too.

• 50:19Auren Hoffman?

  Big cereal. I rarely ever eat breakfast. I usually just have some black coffee, but that's just really because I'm not that hungry when I wake up.

• 50:27Speaker 01

  Breakfast is such a sham. Now, I could say, don't follow your dreams. What's the old, I think Jeff Bezos says, don't get into a business because you love it. Don't follow what you love, but follow where you can make money or something like that. But I don't know that anyone's wants to hear me expel cliche wisdoms.

• 50:43Auren Hoffman?

  All right. Well, this has been awesome. Thank you, Craig Fuller, the other Craig Fuller, for joining us on World of DAS. I follow you at Freight Alley on X. You have great content there. I definitely encourage our listeners to engage you there. This has been a ton of fun. I really appreciate your time.

• 50:58Speaker 01

  Appreciate it, Aron. Take care. Thanks for having me.

• 51:03Auren Hoffman?

  Thanks for listening. If you haven't already done so, please subscribe to World of DAS wherever you consume your podcasts, YouTube, Apple, Spotify, and more. And please help us get discovered by leaving a review and check out worldofdas.com. That's worldofdas, D-A-A-S, dot com. And of course, connect with me on Twitter, at Auren. That's A-U-R-E-N. Would absolutely love to hear from you.