An American freight forwarding startup, Flexport Inc., (Flexport) is resizing the current workforce as its key investor, a Japanese conglomerate group, SoftBank Group Corp. (SoftBank) has been sharply weaken its financial position over the last few years. The freight startup has taken the decision in order to meet the increasing expenses and stay competitive in the market.
Flexport, A Startup for Freight Service
The seven years old startup, which deals with freight services globally through the means of air, ocean, rail, and trunk transport, has a record to be working with more than 10,000 clients. The startup helps in the transportation of goods containers between manufacturers and retailers using digital tools.
At present, the company stood relatively low in terms of freight services in the huge shipping industry and was still only the seventh-largest freight forwarder on its top Trans-Pacific Eastbound leg.
Nevertheless, the effective system of the company’s coordinated supply chains and navigation system through the use of advantage software could draw the attention of several investors including SoftBank. The Japanese group led Flexport’s Series D funding by investing $1 billion out of the total fundraising of $1.3 billion in 2019. With the raising of funding, the startup reached its market valuation to $3.2 billion last year.
Likewise, many late-stage startups backed by SoftBank were worried about the source of their round of funding in the future. As Bloomberg reported, “SoftBank had only managed to raise about $2 billion for its Vision Fund 2 despite plans for a total of $108 billion in November 2019.”
Impacts of Weakening SoftBank
With the rapid decline of the big investors, many startups started cutting off its workforce to meet its cost target and stay alive in the competition. Similarly, Flexport is laying off 3% of its global staff citing the action as “correct its course.”
A spokesperson told The Loadstar, “We’ve course-corrected on our path to profitability, restructuring parts of our organization to move faster, and with greater clarity and purpose. With that came the difficult decision to part ways with around 50 employees.”
Citing the needs of restructuring in face of several challenges, the spokesperson stated, “We learned a lot about our business last year. While we doubled shipment volume, our productivity didn’t keep pace. We overhired in some areas of the business, resulting in over-capacity and decision-making… But we are coming out of this as a growth company with a runway to invest.”
The spokesperson further claimed, “We underinvested in areas that help us serve clients efficiently, and we over-invested in scaling our existing process, when we actually needed to be agile and adaptable to best serve our clients, especially in a year of unprecedented volatility in global trade.”
Concerning the weakening of fundraising options in the wake of the WeWork implosion of SoftBank, several late-stage startups which are funded by the Japanese group such as Zume Pizza (80% of staff laid off), Wag (80%+), Fair (40%), Getaround (25%), Rappi (6%), and Oyo (5%) have cut their staffs to slow their burn rate and reduce their funding needs.
I’m Roshan, a journalist, blogger and music lover. I like covering global news related to finance, business, and technology. Focusing on the collection of true and reliable information, I rely on working by conducting interviews with business leaders and talking to the inside sources of companies.
You can reach out to me at: [email protected]