The Prof G Pod with Scott Galloway - First Time Founders with Ed Elson – ft. Ryan Petersen of Flexport

Episode Date: December 3, 2023

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

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NMLS 1617539. Scott, what do you think it takes to build a billion-dollar company? A SPAC? No. 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. 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. 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. Hey, my pleasure. Thanks for having me on. 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. Yeah, totally. So, you know, 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. And so we're 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 it, 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,

on a typical transaction door to door, we sit, we tend to see 15 or more companies that do something. Plus the government, you know, multiple governments are involved, a bank, an insurance company. There's a lot of complex coordination that needs to happen. I often joke with our customers that it should be called freight email forwarding because there's so many different people involved. And what Flexport does differently, I think, than everybody else in this industry is 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 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 as they travel around the world. So do you think it's fair to call it like you're the middleman,

you're the software middleman in global trade, basically? Yeah, I think so. 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 middlemen a bad name. And there's other kinds of 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. 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, we're okay with being called a middleman as long as you realize, hey, there is a role for

middlemen to add a lot of value in this world. 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. 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? 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 motor sports 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 we had these motorcycles that we would sell, and so we'd ship them out. Sorry, can I just interrupt? Why motorcycles? How did you guys land on that? Well, we did a lot of different stuff. Motorcycles is kind of our best seller.

We were the first dealer in the United States for Geely, 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 was saying, we automated a lot of the outbound trucking. Like even in 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 just 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 um 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 and it seemed like freight 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. Bill of lading, I was going to ask. It should be bill of loading. It should be loading. We're loading cargo, like not lading. That's old English. 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? Kind of? Yeah. Both my parents are entrepreneurs. My older brother's an entrepreneur. Um, 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, uh, kind of learned from, learn from him. Um, but, uh, yeah, no, I don't have a, my background is entrepreneurship. Um, learning basically was what that means. Try to learn faster than everybody else. I had a job in high school. I made pizza at Domino's. But other than that, I've basically just been building companies my whole life.

So then 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? 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. Flexport, we're the first licensed U.S. customs brokerage built around a modern web application. Customs? Yeah. I did it on stage at their event called Startup School.

I got lucky to be selected to go present it on stage. And it was sort of that. It was kind of turbo tax 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, like fundamentally, and customs has even gotten much more important with all the tariffs that the Trump administration and Biden administration have carried on, you know, 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. 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. 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 a 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? 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 the 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 as it gets too much business, it can split and

keep growing. We call them squads instead because a cell can also be a prison cell and you don't really want your employees thinking thinking of themselves in that fashion but uh but that that team um really leads to you to have like very high quality customer experience even you know you don't get like this call center uh that you might get calling you know like a big company we 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 like an immune system, right? It's just like rapidly solve a problem. Rather, the nervous system, like, you know, you wait for instructions from the brain before

you act. And an immune system, there's no centralized control. It's like, just it sees a virus and it attacks it. 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? We like to think that, you know, people, 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. goods and giving you the ability to connect systems, integrate your software systems,

your factory software systems with our data sets and provide better planning, better control over your cargo as it moves from factory now all the way to customer stores. We bought Shopify logistics earlier this year so we can fulfill packages to people's doors or into retail store. So that's what brings people in. But yeah, it's the people 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 culture that we built.

And we have a big advantage over competition and 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 in another alternative timeline might've gone to work at, you know, a consulting firm or investment banking or like a Google or something like that. We have a lot of tech, not just the tech talent, but the operations, the salespeople, et cetera. Yeah. We talk a lot on this program about about 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, you got to 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 has 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?

Yeah, I think that's fair. I mean, you end up telling the story. If you don't like telling stories, like you shouldn't found a company because you have to do the same. And it's relatively the same pitch, maybe slightly different, but you're pitching the investors,

the customers, the employees. 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 we're 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 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 for the communities where you operate.

Like, why should you want Flexport in your city? Why is Flexport a good actor? So, yeah, that's a huge part of it. 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 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 got to 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 got to be pretty scripted and demo. 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 try 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 in an ideal world 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? Yeah, well, you know what? It 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're still pretty active spender on Google AdWords and other kind of social type digital ads. But that's not really the driver. 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 85, 90% 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 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, with our storytelling, with, uh, you know, showing you how we can solve a problem that once we get people to do a demo, um, it's a demo of the software. It tends to be like that. Actually, you know, 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, oh, 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're a little bit more, we're certainly more famous than we were when we started. And that helps. You know, there's a famous neuroscience paper about the Halle Berry neuron. I've not heard of this. And I use this with our marketing team. Yeah. It's a famous paper in neuroscience that apparently all of us have a specific neuron for Halle Berry. And 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, etc.

But 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 heard of you. But then when that email comes in, it's like, there's a sense of familiarity, that neuron is firing. 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. Yeah. So things were going super, super well, 2021, 2022. And last year you actually stepped down as CEO. Why did you decide to leave when things were already going so well? Yeah. Well, to be clear, I never left. I became the executive chairman and kind of stepped up rather than stepped out.

Yeah. Stepped up. 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 is hard.

Our net promoter score before the pandemic was in the mid-70s 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 to the U.S. was like 120 days on average across the industry. And like, by the way, the ship only takes 14 days to cross the ocean. So it's pretty abysmal. The price of freight went to $20,000. There were all these challenges in the operations of the company. And I felt like a lot of that's industry-wide. The whole industry suffered. We're 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 for sure the leader in technology and global freight forwarding, but that's not the bar that we want to clear. 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, 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. And then you decided to come back. Why? We weren't growing enough and not just revenue.

And, you know, you can't really grow revenue when you're, when the price of your service in the market goes down so much. Um, 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. 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, it's like much easier to manage, we realize we're gonna 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. Because it's, you know, genuinely the number one priority is culture. But like, and 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 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 so i'm i'm thrilled to be back like i genuinely i was starting to say i love business i'm a fan of business like the way some people are fans of sports. 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 and I had the best job in the world for that. 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 help them with the product. I'm like a fan, like get in the game somewhat sometimes and help them run a better supply chain. So it's an awesome job. I'm thrilled to be here.

We'll be right back. 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. 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? Wow, I haven't done that. I just focus on running the company. You know, I'm very lucky. I got married four years ago. I have a wonderful wife who's like super supportive

and is in 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 Flexport. 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 Flexport people are kind of the family. Now we'd 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. 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 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. Has there ever been a moment during this journey where you thought that you would fail 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 uh i started

it to i think it's the best way to learn and solve problems um 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 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 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, uh, you know, because you don't need to own the assets. You're the coordinating layer. Um, 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, um, 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 generating lots of profit. You look at yourself and you're like, oh, come on, let's dial in our process on these things. Yeah. What does that feel like? If business is down for you this year in a relatively significant way, does the pressure ever get to you in a significant, meaningful way? The pressure's all, of course we want to get profitable. And so we feel that pressure. And we have built our plan to get profitable again by the end of next year to return to

profitability in Q4 2024 with no miracles, like lots of hard work and good discipline execution. 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 are good, we recognize, hey, capital markets are booming in 2021. Freight markets are booming. Flexport, let's have a very popular name amongst investors. Let's go raise some money and have that Fortress balance sheet. That was strategic. That wasn't luck. We were like, hey, let's... And by the way, we presented at that time

to investors. It was a tough fundraise, the one that we closed in early 2022, because we presented at that time to investors, it was a tough fundraise, the one that we closed in early 2022, because we presented to investors, we're like, here's our revenue projection, it's going to go down. And you were already profitable at that point, right? So it's like, why do you need the money? It was probably the question they're asking as well. We're profitable, we had money in the bank, and we're projecting revenue declines. Literally, investors told us one of the strangest pitches I've ever seen. Like, you guys are, every other pitch, like, the money's, the revenue's always going up. And you guys are projecting a decline.

But we knew that rate markets would kind of normalize, return to normal. Happened faster than we predicted. But we knew that was going to happen. And two, we knew that having a balance sheet would allow us to clean up. And, like, that's kind of played out true with the way we were able to acquire the assets of convoy, like a company that raised $1.1 billion 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. It's not like, oh, it's we're caving under the pressure that's put upon us. Yeah, I mean, you're very clearly like, like 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 love that 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 $8 billion 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, destigmatize it. 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. Yeah. Well, you know, um, one thing that really helped me to become an entrepreneur was that I lived in, I've lived before I turned 25, I lived in like five, five different countries. Um, and mostly poor countries, uh, El Salvador, Chile, Brazil, and China, plus the U S um, and that was on purpose. I didn't have any money and I wanted to live somewhere I could live well. Uh, and, and especially my experience living in China where, you know, I had an apartment that was 120 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 4 million population. 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 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-com stuff like that. So I had a great time. And so I've always known like, Hey, worst case scenario, I'll find a way. I always make money.

Now, those days are long past me. Now I don't think about like, oh, if it all fails, I'll just go back. Now I'm like, oh, we're never going to fail. 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. Money is great. Anyone who says they're like, oh, money is the root of all evil, like has no idea what evil is.

And there's real evil in the world. And like, it is not money. And 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've done something for someone else. Now that could be your time. It can 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 mostly you got money by doing something for someone else. And that's how civilization advances. 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, in 2022,

that's when you raised your Series E and, you know, you raised a billion dollars at an $8 billion 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? No, I don't think so. I think for us, every fundraiser is kind of just like another milestone. And certainly the balance sheet is like a big part of a strategy. In fact, we've raised a billion dollars in 2019 and again, 984 million again in 2022. So we've kind of done it twice.

Yeah. I guess it's just the valuation aspect. The valuations, you know, even the very next day I gave a speech to my company saying, hey, this is not our valuation. Oh, wow. Because the way that valuations work is, well, I mean, 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 so it's inherently unknowable because it's about the future cash flows, which 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 8 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 problem it'll be worth eight and some probability it'll only be worth 800 million. And you collapse all those probabilities and, you know, and they determine that you get to an $8 billion valuation. That's, that's, that's how valuations are determined fundamentally. Um, 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 we, that's why I give that talk every time we raise money is like, this is not our valuation. Our, it's a public, 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. That's the future we want to live in. And so please don't get distracted. This is a problem at public companies. I think it's crazy that some public companies put their stock price on display everywhere, but it does get kind of distracting. There is a secondary market for Flexport stock. People are always trying to

discuss it. And, um, it's not, it's not, it's mostly our like investors buying and selling stock in Flexport, 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 the case. So yeah, I wouldn't call it a landmark milestone for us by any means. It's really interesting, this idea of getting distracted by valuations and getting distracted by how other people's opinions of you, that $8 billion 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, I guess, bought into other people's hype of yourself and gotten, I guess, bought into other people's hype of you and bought into your own hype? I'm definitely a human being, so I have an ego, and I'm subject to all of that downside of humanity. So, yeah, I definitely have.

I'm a little embarrassed sometimes, like, oh, cover up Forbes. I mean, we have someone on our team put it in the lobby of the office when you walk in. And I was like, it's a little embarrassing. I don't want to be out here showing off, right? But it's kind of nice as well. I mean, that month, I posted a video of myself buying a copy of the magazine, and the guy didn't recognize me. I'm trying to just troll. It's not like I needed to buy a copy. I already had copies.. I'm trying to just troll. I'm not like I needed to buy a copy.

I already had copies. I was just trying to have fun. So, yeah. So, you know, I think at the end of the day, I'm not out here trying to be famous. Like if it helps Flexport succeed, and I think it does. I think overall, like if I get more famous,

it's probably good for the company. So I'm 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, you're like, not everything's perfect. What the heck? The document said everything was perfect. 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.

You know, if you talk to Flexport employees, they'll say like, I'm a regular guy that's out there trying to, you know, live with them and learn from them as much as I'm trying to tell them what to do. So I try to stay grounded for sure. 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?

One is just trying 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 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 used to be we also 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, that I just answer all the questions almost usually I stay all the way until they're all done. I try to do that. And like, I also would like to, when people ask really hard questions, even if 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's kind of a guardrail, I guess. Like 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. 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 probably a good, healthy aspect of building trust within a culture. 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? 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 the up and coming talent at your company so you

can promote from within and build that culture of the customer obsession and leadership development. You're now a partner of Founders Fund and you've figured out exactly what works for you as a founder for this business. Now you're investing 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? Well, first of all, I'm not looking just necessarily

for young founders. We will invest in any age. Fair enough. There's some actually a lot. Age discrimination. No, but I mean, I don't even mean that from like a legal compliance standpoint. A lot of times experience is super valuable. So yeah, you know, it's, it's kind of, 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 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 i would have thought like technical aptitude is everything and actually it 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 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 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. You're 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 I deserve to make money. Like no one deserves to make money

unless you solve problems for other people. 100%. 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.

My pleasure. Thank you, everybody. This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our executive producers are Jason Stavis 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 Profit Markets and Wednesday for Office Hours.