Y Combinator Startup Podcast - #62 - Dan Lewis, CEO of Convoy, on the Future of Freight

Episode Date: February 28, 2018

Dan Lewis is the CEO and Cofounder of Convoy.Convoy matches shippers with freight carriers, which helps the trucking industry run more efficiently because currently, over 40% of the trucks on the road are empty.Anu Hariharan is a Partner at YC Continuity.Read the transcript here.

Hey, how's it going? This is Craig Cannon, and you're listening to Y Combinators podcast. Today's episode is with Dan Lewis and Anu Hariharan. Dan's the CEO of Convoy and Anu's a partner here at YC. So Convoy matches shippers with freight carriers. That helps the trucking industry run more efficiently because currently over 40% of the trucks on the road are empty. And if you'd like to read the transcript to this episode, you can find it on the YC blog. All right, here we go. Thank you so much, Dan, for joining us on the podcast today. So Dan Lewis is the CEO and founder of Convoy. We're really excited to have him here. Dan, I wanted to start with your sort of background, primarily because now you're building a trucking marketplace. And so I was curious, how did, you know, what did you do and how did you arrive at this idea? Yeah, so it really comes back to a combination of, you know, background and supply chain and technology. my family run a mom and pop off supply company,

distributing off supplies all around in the Puget Sound in Washington. And every summer my job was to drive big sprinter vans delivering stuff. So I learned a lot about the idea of warehouse operations and delivering, but it wasn't really something that I thought, man, I'm going to go build a company and do this. You know, I was pretty young. And then after school, I ended up doing a lot of work in transportation and technology. I worked for the Panama Canal for a while. I ended up living in Spain doing management consulting, thinking a lot about outsourcing of maintenance and parts distribution, did similar work with some airlines and companies in the United States, and then shifted over and started working in tech.

Actually, my job in college was building websites for the Yale Athletics Department, which was a great job. It was super flexible. You know, I got 10 bucks an hour and I could work for my dorm room. But that kind of led to an interesting technology. And then after, you know, after college and after doing some consulting, I was at Microsoft for a while and a handful of other technology startups and bigger technology companies. And so then I ended up at Amazon.

And one of the things that I saw at Amazon that kind of inspired me was I realized that, you know, when I was growing up, we used to go to the store to buy stuff. And we would buy it the same day that we wanted it. And that was option value. People call it procrastinating. I call it option value. You can decide the day you wanted it if you want to get it or not. And then online shop.

shopping came around and you had to choose, do I want to go to the store and get it today? Or do I want to buy it seven days in advance? And then it was five days, and then three days, and then two, and then one. And Amazon really took hold and started lowering or, you know, raising the bar for delivery and making it faster and faster. And all of a sudden, with Prime, the decision between do I want it, you know, really soon and do I want to buy it online, wasn't a conflict anymore. And Amazon really started taking it. taking over in retail. And it was really that that caused me to think, okay, so the supply chain's winning. It wasn't, you know, it's not the location of the store. It's not the ambiance, how nice the sale staff is, how easy the parking is, all that stuff. It's the fact that I can get

it really fast. And that was driving massive shift in behavior. And we looked at a lot of different companies out there. I started looking at, I was looking to a startup in general. And I decided to leave Amazon and go pursue this. And when I was looking at transportation, a lot of the companies were last mile. So delivering, you know, Instacart or Postmates or DoorDash or Uber Rush or Google Shopping Express, all these different companies that were doing that, there were not a lot of companies focusing on the middle mile, getting everything in the right place so that you could do that same to delivery. And that was the initial kind of, this is my background, but kind of the inspiration that led to thinking about it, let's go build a logistics company. And one of the things I know, like having talked before, is you actually, worked on even flushing the idea out a lot more before you started building it. Can you talk about

that process and like, you know, what work did you do to really understand, okay, this seems interesting, but is this real? And when did you actually get convinced that you are going to go build this? I was liking what I was doing at my job, but I had this, you know, I really wanted to go start a company and I have two kids and, you know, my wife had home with the kids and everything like that. So I was like, okay, if I'm going to take this risk and walk away from my job, I better know what I'm doing. And so, and I think because I had done consulting, I didn't really know another way to do it. I was like, well, I have to go to a bunch of research. And so I quit Amazon.

And I, and I, before we decided what to build, we spent weeks full time kind of out in the field researching. So what I initially did was a bunch of online research to figure out kind of what the general space looks like. And then I did three things in parallel. I wrote to probably a hundred different people, maybe a third of them from my background, people I knew from previous jobs related to supply chain that I could talk to about trucking. Two-thirds of them people I just found on LinkedIn and just wrote to them or just called them. And all of them in trucking industry? All of them in transportation, trucking.

Could be, you know, brokerages, warehouses, truck drivers. Actually, when my family, my mom's an ESL teacher. And growing up, we always hosted foreign students in Ford. families in our house. And one of them was from the Ukraine. And this guy's name Sasha, he ended up running a trucking business with his family and his brothers out of eastern Washington. So he was actually the first call that I made. And he was talking to me about how he drove a truck delivering, you know, produce from Washington to Florida and some other runs as well. But I started to do a bunch of phone calls. And then I went out in the field. And I was like,

well, I have to go talk to people. Because that's the fastest. this way to learn and to make sure I don't make a big mistake. And I remember, it's kind of funny. I remember two things. I wanted to look professional, but I also wanted to fit in. So I bought a bunch of gift cards. And I went to truck stops. And, you know, I wasn't quite sure how to like engage people at first. So I went and sat in, I went inside and looked around and like went back and sat in my car. I was like, okay, I got to think about how I'm going to do this. And the easiest person to go to talk to was somebody who was like filling the tires with air, you know. So I went over to talk to that person. And then started having more and more conversations.

at these truck stops and learning more and more. I didn't want to, you know, I was kind of like trying to gather as much information as I could. Did the same thing in warehouses, just walked into a bunch of warehouses. Got kicked out of the Whole Foods warehouse. I think the door was not supposed to be open. I just walked me and started talking to people and they were like, what are you doing? But over six or seven weeks, all that research and those phone calls and people just want to talk to you about what they're doing, you know? So we learned a lot of information.

We wrote three or four business plans. I put them together and then had a lot of detail and tons of quotes and anecdotes and real examples to back up kind of the theory that you get from the data that's online. And when we took that to investors, that was different. And I hadn't realized how unique that was until after I did it. I thought that was normal, but then after I did it, I realized not every potential founder goes and does that level of research before they start proposing their idea. And what were some of the two or three big learnings for you, for you, from that research in terms of how you decided to launch Conway and what pain points to solve? Yeah, I think the first thing I learned was, one, people in the industry were super open and interested in talking and interested in proving things. So it was very welcoming in that respect.

A quick aside is that coming from a tech background and, you know, and from a consulting background, I was always used to setting appointments or like, you know, putting something on the calendar. calendar. And in trucking, you just pick up the phone and call. I remember so many times I'd tried to set an appointment with something like, no, no, no, just call me. You know, I'll pick up. So that was different. But a couple of the, probably the biggest insight we had early on was trust. There was a lack of trust between parties in the industry. And, you know, people generally get along, but there wasn't like a deep-seated trust that shippers were confident brokers weren't taking advantage of them. You know, in fact, shippers often felt like brokers and some of their transportation parties weren't reliable.

Or they had had issues or they, you know, didn't trust the pricing. Excuse me. And brokers also felt like, you know, when they were working with trucking companies that, you know, they didn't get the respect they deserved for all the work. The trucking companies felt like they were not necessary. And truck drivers would constantly tell me that they felt like brokers weren't looking out for them. And that, you know, trucking companies, larger trucking companies weren't looking out for

these smaller guys. and they wanted someone they could count on. They wanted someone who would treat them fairly and more transparently. So there was kind of a lack of data, lack of transparency, and just that led to kind of some mistrust between the parties. And honestly, everybody, you know, the shipper's trying to get the best rate possible. The trucking company is trying to get the best rate possible. And the broker or the 3PL in the middle is trying to do the same thing on both sides.

And so everyone is trying to negotiate all the time. So it does breed a little bit of mistrust. So we realized, you know, the first. thing was let's focus on building trust. Let's focus on bringing transparency, consistency, and visibility into pricing, and, you know, visibility into where the trucks are, which answers a lot of questions. One of the areas that raised some lack of trust was that shippers often didn't know where the truck was. And trucking companies and truck drivers wouldn't always honestly report exactly where they were. So there was a trust issue on both sides, not just on the driver,

but also the shippers side. That's right. Well, shippers, yeah, that's right. They weren't, they didn't always feel like they were getting a full straight story. And I think that's pretty normal when you have a big industry and a lot of different parties involved and a lot of negotiating involved every day. And so all the parties were kind of a little bit, a love-hate relationship was how one of them described it to me. Got it. And how is Convoy today, you think, solving that trust issue on both sides? I'll give a couple of examples. So when we have a job that we're going to offer to the truck drivers in our community, and our partners,

you know, we figure out which trucks that this, or which carriers this job is best for, and we offer to them. And we show a price up front.

And that's a guaranteed price. And it's guaranteed that there's a real job behind that. One of the things that was common in the industry is that sometimes

brokers in 3PLs or even big truck companies would post jobs online that weren't actually jobs they had yet. They'd post them to try to get a price,

to figure out what the truck would do it for. And then they can take that price and go back and try to get the actual job. We don't put jobs up that aren't real jobs. And that was important and, you know, a guaranteed upfront price.

We're not going to go back and ask you, you know, to pay you less later. And so there was pricing confidence and real job confidence. And we pay the drivers really quickly. They're also used to being stiff sometimes and worried about not getting paid. And so we paid them very quickly. So they would have confidence the convoy was actually, you know, respecting them. On the other side with shippers, we, you know, all the trains, you know, all the trucks that run loads for convoy use the convoy app.

And so that provides real-time visibility for the shipper to understand where the load is. And when the truck's arriving, it provides, and actually another good example there is if a truck shows up at a facility and it's delayed, typically more than a couple hours in the industry, that truck is going to expect to get what's called detention payment for being delayed. Now, there's often debates around that. When did you actually arrive? You know, and the trucks and say they arrived earlier, and the shipper is going to say, will they arrive later because they don't want to pay.

And so what we can do with that real-time visibility is solve problems like that. We actually built something that's pretty new in the industry. It's sort of automated detention. We just track it and we pay the driver and they can just do it right from the app. So they don't have to go through an arduous process of trying to get that. That's great. Yeah. So on the trucker side, you do it with guaranteed pricing up front and a real job and quick pay.

Was this on the shipper side you're giving them tracking info and even helping solve for delayed ship. Yeah, that's right. And solving for just, if you know when it's actually there, you can see where it is, you can get time stamps that are real. It answers a lot of the debates. That's great. So let's go back to year one of Convoy, because a lot of our audience are actually early-state startups. And one of the big questions they often have about a marketplace, because yours is a marketplace. You have truck drivers and shippers on the other side. So the first question, you know, most of our viewers often have is how do you bootstrap a marketplace?

And so how did you guys go about doing it? Like, what was year one in Convoy? How did you find your first few truck drivers and your shippers? We thought, you know, we went out and did so much research that I had a pretty good list of truck drivers and a pretty good list of shippers right at the beginning. And so we thought, okay, we'll go talk to a bunch of truck drivers and get them signed up. And then we'll go to shippers and start bringing loads into this marketplace and start developing it as a broker. And truck drivers weren't interested, to be honest. We went out and talked to a bunch of them and they were like, well, do you have any loads yet?

We said, no, we don't have any loads. You know, as much as they love the idea, it's vaporware. For them, it was like this new company, never heard of us before. And they also, as I mentioned, didn't have a lot of trust. So they were kind of skeptical of whose convoy. They aren't going to download an app and start using it. They're busy and they're looking for their next load right now. So we said, okay, got it.

We're going to come back with some loads. So then we switched over and went to shippers and we spent a lot of time again, building their trust. And that's where we could sit down with the companies that ship freight. Some early customers, you know, were print shops, for example. And you go talk to them and figure out, you know, what is it you guys need? Where are your pain points. They'd tell us.

They'd say, okay, we can do this for you. And so we were able to get some shipments from them. And because those loads don't have to pick up for 24, you know, 48 hours. From the time they're offered to us, we had time to take that job and turn around and go find a truck. So we actually used every single job as a market. marketing opportunity. And we use that job to go find a truck, offer them the job. They'd say, yep, want to do this work for you. We'd say, great, download the app and it'll show up inside the app. And it was the right kind of way to get them to start engaging with us through a real job.

And then to get the job and complete it, they would have to use the app. And that was fine for them as long as it was a real job. That then started building some buzz, especially in the kind of the Western Washington community where we got started. And then truck drivers would tell their friends. and we started getting more on, and we built some referral programs early on, once we had a few truck drivers that trusted us. And it was, you know, pretty small initially. But a lot of, honestly, it really came down to getting the job and using that as a marketing opportunity to get a truck to sign up for the marketplace versus trying to get supply before we actually had any action going. Yeah. And most marketplaces say that. Usually it's true for them is the supply always goes to where demand is.

So at least initially and demand is kind of the anchors. Yes. So, you know, you, did you start off in Pacific Northwest? Is that right? Because in Seattle? Yeah. We started off in the Pacific Northwest doing, you know, straight truck work. So box truck deliveries around like Western Washington, as well as some full truckload

deliveries. And honestly, I think we did up to about 150 miles when we first started. So it was pretty tight. Yeah. And the idea was in trucking, you have, you know, you have local truck drivers. They typically don't run more than 250 miles in one way because they want to get home that night. Yeah.

And, you know, they don't have maybe a bed, you know, to sleep in their cab. And you have regional and long haul. So we focused on the local folks initially. And the advantage there was that when you're trying to build a marketplace, you're trying to build density, right? You want to have a dense number of suppliers and buyers in that particular market. So because we focused just on jobs within a couple hundred miles of Seattle, every truck driver that we signed up was available the next day for another job because

they lived in that region and they slept in that region every night. And so therefore, we were able to get a higher density of truck drivers quickly in that region and start seeing the marketplace take shape and start learning how the business worked. Got it. So how many markets are you in today? We are just about nationwide now, to be honest. You know, parts of the south and southeast are where we're starting to expand into now. But we operate out of all the major metros right now.

And, you know, we think of. of the world kind of metro to metro. So we think about it in terms of the shipping lanes that exist. Got it. So let me ask you this, because it's interesting, it's always interesting to see how marketplaces scale. It's very widely established that, you know, Uber and Lyft went city by city, right? Because they're the riders that are requesting for rights within the city.

Airbnb was all about travel. So one of the things they did very early was, you know, they went after all the high tourist cities, right? New York, London. Rather than just doing U.S., they just did global. cities that had a lot of tourist traffic. How do you guys think about scaling? So how did you decide, you know, market number two after Pacific Northwest or even from local to regional? Like how, what lens do you use to sort of expand? That's a great question. So we always thought about what's

the minimum viable footprint to serve our customers. And initially, I mean, we, we serve both trucking companies and shippers. But initially the folks that were giving us jobs and loads that we could take to go get truck drivers on the platform, our shippers. and we had to really understand what they needed. So initially, as I mentioned, we focused just in the Northwest, and we thought about two different ways to expand. One was to take kind of the initial services that we offer, so the types of trucking that we supported,

which at that time was a drive-in, you know, a full-truck load drive-in as well as flatbed, and expand that into more geographies and more lanes or instead stay in the same geography and add more types of trucks. and most of our customers that we had today were much more interested in us to expand to new geographies with them than offering additional types of trucks because most of them we were already servicing the types of trucks that they needed. And so we decided, okay, if that's where our customers are looking for us to expand, that will help us expand because it'll give us more freight and more volume and business as we expand. And so we essentially looked at, you know, where did our existing customers want to run freight next? And that's how we started thinking about expanding.

Got it. So sort of, you know, what is the minimum viable footprint for a customer where I can feel like I'm really servicing them as a partner? And that's challenging and freight because I think you're right. In a lot of marketplaces, it's a specific local geography and everybody stays in that geography, whereas in trucking, one company based in Seattle or based in Portland might ship to 100 other cities. Another company might ship to 90 cities with 60 overlapping with that other one, right?

So you kind of have to look and see what are the most popular common freight lanes of your customers and where do they want to start shipping with you next? And that's a really kind of healthy way to start expanding it to new geographies. So that's how we initially started going more broadly was through our customers' desire for us to service them on additional lanes. Got it. When did you first expand out of Pacific Northwest? How long were you in that 150 mile local zone before you said, hey, I think we have product market fit, let's expand? you know, I think we were probably operating in that zone for probably four to five months.

Which is quite normal, actually. Yeah. Yeah. And then we, so, I mean, the exact progression, which I'm happy to share was Western Washington, Washington State. I remember drawing like the zones on the map, you know, like, we're going to allow shipments to work in this zone, like using like a map and trying to draw it because Washington has some really remote areas. Yeah. And then we did Washington, Oregon, Idaho. Mm-hmm.

And then we kind of did the I-5 corridor going down to L.A. Then we started doing the western seven states. So we really started to expand in the same contiguous area. Then we went to Texas. And in each of these different regions that we went into, we thought a lot about different major highways and corridors and the major lanes where freight runs. And that's really the key is to understand sort of where most of the volume is going to be coming and making sure you're building a lot of supply there.

And it has been, honestly, probably one of the things, you know, people that are building marketplaces now, there was the most challenging part of this was our customers were constantly asking us to go to new areas. And, you know, for good reason. They were excited to work with us and they wanted what we were offering in all of their distribution centers around the country, for example. And we had to be really disciplined to push back and say no. And our sales team wanted to sell more broadly because they had saw opportunities.

And their customers would be saying, look, I can give you 50. loads a week coming out of this city that you don't support yet or this region. And we had to initially say no. And that was pretty unique for us. Most brokers would take freight in the lower 48 states wherever it's available and try to market up, you know, and make a profit. Whereas in our case, we were focusing on building density in specific lanes and markets. And so we didn't actually go national. We went kind of lane by lane, metro by metro initially. And then since we've had a bunch of national customers. And so our goal then shifted to, okay, as I mentioned, minimum viable footprint for a marketplace

to really service those customers, they really needed us to be in more geographies around the country. Otherwise, we couldn't really have that partnership with them. And then once we want to service them around the country, well, now we need truck drivers around the country. So we start working with truck drivers that run nationally. And then those truck drivers are looking for their next load in whatever city in the country they're in.

So all of a sudden the footprint to really serve that eco-strivers. system expands pretty quickly. Yeah. And I think that's been, you know, one of the growth areas and challenges for us is figuring out, okay, we have to expand it quickly, but still moderating in the sense that we're not going to do everything for everyone. Humans are infinitely flexible. So if we're, it's all, if it's all manual and it's all driven by people, that person can

make a decision about which geography at what price and they can call somebody and figure it out, whereas if you're trying to automate it and run it through a technology system, you're trying to automate the transactions and the matching in the marketplace, you have to know the scope. It's really hard to train for everything, right? So that's why when you're doing this digital freight matching and taking the approach we're using, you have to limit geography.

Whereas a lot of other folks don't, they just go everywhere. And that really is indicative that they're probably not using a lot of technology. And that's probably not the most optimal because you're not, you know, even though human beings are really flexible, there's only so many permutations and combinations they can do in their head. But a system can do it way better. Especially. So if you learn over time, ultimately, you can do a lot more.

That's right. Now let's shift a little bit to company building. So how was, you know, how big was convoy in year one, like team size? Year one, by the end of year one, I think we were about 30 or 40 people. Wow. Okay. So we grew relatively quickly. I don't think I mentioned to our initial investors that I don't think we had our bank account open when we were trying to take our first seed checks.

Okay. We had, because we had done so much research up front. We didn't worry initially about incorporating or getting the name set up. We didn't, we didn't think about all those things. We simply just thought, what is the right business? How do we get customer data? How do we understand what to go build? And then we had a great story that we put together and we went to raise our seat

around. And it happened relatively quickly. How many people were you in? Was it just you and Grant the co-founder or did you have more when you were raising the seed round? Yeah, it was me and Grant, and then it was five engineers. Okay, so you already had five engineers. Yeah, and they weren't full time yet, but they were all committed to the project,

and they were working on it kind of part-time. Some of them were employed elsewhere. Some of them weren't, but they were working on getting it going. And the thing I learned through that process was that it felt like to me, like angel investors and seed investors look for three things. The first thing they want to see is that they believe in the founders, right? They have a conversation with you and they walk away thinking, I believe this person is going to be capable of going and building something.

Check box one, right? Box two is the idea seems reasonable. For some investors, for some angel investors, that means they understand the space and they don't invest in things they don't understand. For others, it's they can think through it and they ask them around and they feel compelled that the idea could be reasonable. And most, you know, entrepreneurs that want to start a new business can check those two boxes. You're going to come across as a compelling individual because they're passionate about

this and they put a lot of time to it. and the idea is maybe reasonable. The space is reasonable. The hardest part is when that angel investors ask themselves, can this person go deliver on that vision quickly? And that usually comes down to, do they have the engineering talent available or the specific skills available to them

to go build the company right away? And I had learned that over time. So one thing we thought was critical from moving to angel investors was we wanted to have already working with us a group of engineers that were willing to go and it had already said they want to start. And I found when I talked to folks, that was one of the most compelling parts of it was, yeah, they were excited about the idea and us, but then they said, okay, you know, but can you build it? I'm not, I mean, I wasn't going to build a build

on myself. So, and my co-founder is a great engineer, but again, you need a team to do some of this stuff. And so that was really the question was, could we pull the people together? and already having a few people working on it made it much easier to raise the angeling. And where did your first five hires come from? Was it from your network or how did you recruit them? Yeah. I was part of another startup called Wavy that Google had purchased a few years back. And a couple of the folks had been part of that company, that startup in Seattle. I had been at Google for a little while. I think one of them had already moved back to Seattle. But they were interested in coming back to Seattle. And so those are two of the engineers.

A couple of them were from Amazon, had left actually Amazon a little bit before around the time that I had. We're working on their own projects. Actually, we were sitting at a table working at – my co-friend and I kind of had a table we were working at it. We invited other friends and engineers in Seattle that were working on their own projects to come join us. And then as they were sitting next to us, we were kind of like, hey, you want to help us with this little thing? And we got them kind of excited about it. And we actually recruited two of the people to help us just by inviting them to come sit next to us, you know, to work on their projects. So those were both folks who had been in Amazon before.

And then a fifth person I met through a friend who was also previously at Amazon. So it was pretty tight. And I knew, you know, four of the people, four of the engineers well before going into this. And so by the end of the first year, you had 30 to 40 people, right? And how big, you know, what were sort of the, how much was engineering versus the rest? At that point, product and engineering was probably 40%. 40%. Yeah, about 40%.

And the company quickly shifted. As we started getting into more of an operational mode, we started shifting more towards sales and operations and customer success and customer support. And those roles ended up growing faster than product engineering, just proportionally. All is grown. and we have a great product engineering team. We brought a lot of great data science talent in recently.

But proportionally, it's more sales and marketing operations. That's actually common. I mean, most people find it counterintuitive, but it's actually common for most marketplaces in the early days where their ops team and maybe the sales team starts scaling much faster than the engineering team. But there's obviously a point at which, you know, you start turning that dial. But for growth, like it's pretty, it was true for Airbnb to.

It was true for Uber. Lyft as well. So it's actually quite common. So how big is the company now? How many people? We are just over 200 people now. Just over 200. And in less than three years? Less than three years. Okay. So one of the faster scaling companies, how has your job shifted as a CEO from, you know, year one when you were managing 20 to 30, which is today? Like, what has been the big changes you've had to do? Yeah. I mean, I think that my role is constantly changing, and I'm always thinking about that too. because I do worry that I won't see a change that needs to happen and do it well.

So I think when I first started, I was, you know, I was visionary recruiter. I was out trying to convince customers, convince, you know, other employees to join us. I had a diagram I drew. And I think I said, okay, I need people with marketplace experience and with transportation experience. and, you know, had a few different dimensions to this. It's like, I'm going to go find those people. So I was pretty aggressive about going out and trying to recruit and find the right people for the company.

And then we kind of got in. Then I switched my hat. We had maybe 10, 15 people. And I really switched to product and kind of like business development mode. So then I was thinking, okay, what is the one? And Convoy was founded April 1, 2015. And we launched to customers at the end of office. August. So it was very fast in terms of that run-up. And so all summer, you know, it was a core

group of folks cranking when building the first version of the product. So I really shifted into like designer, product manager, and thinking about kind of our go-to-market for that initial launch. We usually call that the doer-in-chief. Yeah, it was the doer in chief. And then we announced and we launched. And then I shifted into a fundraiser. You know, and we went and we were like, okay, now we have something that we feel like it's working well. It's out in the market. We've built a great V1. We built a good solid initial team. Let's go raise our Series A. And so we went and raised around from Greylock that fall, so the fall of 2015 and kind of closed it right at the end of that year. And that was my first time having gone and done around like that. Yeah. And so that, you know,

again, it's a different type of job and I had to learn how to be, how to do that and how to think about it from that perspective and really think about what do we do next and adding a little bit more structure around the business and around the plans. And then I shifted back. And then I shifted back into like salesman in chief or chief salesman. And I remember, you know, going and spending a lot of time with customers over, you know, throughout 2016, building relationships. Unilever had called us actually, a really forward-thinking shipper. And they had asked us, you know, if we were just participating in a pilot that they were running with different sort of digital freight companies. and we ended up becoming their partner out of that.

And so I spent a lot of time learning about their business, spent time with them, and then spent time thinking about who are other kind of similar types of companies we can go and build a relationship with. And that was really where we started to expand more down the West Coast. We started working with them in Southern California and Texas, and we were looking for more businesses there as well.

So that year was really, again, focusing on initial sales. And it kind of kept evolving from there. Yeah, a couple other other habits. We did a lot of really strategic business development in early 2017 thinking about, okay, now we have some real customers. How do we get deep partnerships, right? Because if you want to go accelerate and disrupt an industry, it's great to have other companies in that industry, in that business that want to support you doing that and

are going to make an investment in you doing that. So we've kind of shifted our, and so I became more of a strategy focused, strategy and business development focused in 2017. And I think my role will continue to evolve as I step back. and help the leaders at Convoy and, you know, working, become, you know, stronger, bring in, bring in, the right people, develop people at the company and really start building the culture, thinking about culture, vision, and sort of executive leadership development at the company.

It's really where I think it goes next. Yeah, we actually say the role changes from do it in chief to company, build it in chief. So, you know, that means you wear multiple hats at different points in time. So, you know, one of the things I know you spend a lot of time on is mission statement and building core company values and really reinforcing that within the company for culture. So talk a little bit about when did you sort of define a mission statement? Did you have it even before you started the company or at what point? And also at what stage of the company did you actually list out the core values?

Yeah. So our mission statement, I'll just say it up front is to transport the world with endless capacity and zero waste. And we actually didn't codify that. was sort of how we thought about it. We knew that 40% of the time trucks are running empty. There was an incredible amount of waste. By reducing waste, we could improve the economics, improve service. You know, everything gets better. It's a win, win, win. So that was kind of the vision. And we codified that just a month ago. So almost a little bit over two years in, we said, let's write this down. Let's really formalize around this.

What prompted you to think about, to quantify this one month ago like? Yeah, it's interesting. They're kind of, as we were thinking about, how is our company growing? there are different sort of sizes of company where the culture starts to change. And you need new mechanisms and you need new ways for people to kind of stay connected and in touch and kind of share information, right? So when we passed 150 people, which I think is referred to as the Dunbar number because it kind of refers to the number of people that this researcher believed you could kind of have direct social interactions with and relationships with or direct relationships with. we felt like we wanted to kind of take some of the things that we all like talked about and believed to make them more like constructs of the business that everybody knew coming in would learn about and think about and then we kind of represent who we were

as we started to get bigger. And then to the values, so, you know, to be, you know, we have a set of company values. We use them all the time. We use them for every recruiting, you know, every time we interview somebody. Let me put, how did you guys come up with the values? Yeah. So I came from Amazon, and I've gone back to that a couple times, but Amazon has a set of leadership principles. And that construct we liked.

So we said, okay, it's an interesting concept. Let's look at that. And actually, I had a chance to chat with, so Jeff is one of our investors. He had talked about how they formed their values, which was, I think it was about a year in, or maybe 100 people, they had decided at that point they would codify their beliefs and what they thought worked. And we had had similar ideas. we'd actually kind of before we even raised money, right around that time, me and the engineers I mentioned and my co-founder had sat around and said, what are the values of the company going to be? And we decided way too early to decide. We wrote down some things. We don't really know who we are

yet. We can't just say who we're going to be. Let's be that and then let's write it down. And so it actually came about a year into the company. In early 2016, we decided okay, we're getting a little bit bigger. We're about 30, 40 people, you know, at that point. And we wanted to have consistency as we started to scale. I would, you know, not, you know, new people were coming in to do interviews. We were trying to scale sort of a little bit on management and review process and things like that and, and kind of remember who we were. And so we said, okay, what do we like about ourselves? What are the qualities that we think? One of them is no why. That was really important because if you don't know why, you can't act independently. You can't,

You also have to go back and ask for the next step if you don't have all that context up front. Or love problems and not solutions. We saw too often teams being named after the solution. Like, you know, it could be the reviews team or could be the search team, whatever. The solution is that. But the problem is, you know, I need customer confidence or I need to find something. So we always want to think about how do we reorient around the problem so we don't forget the original problem we were trying to solve and fixate too much on the solution we came up with. And so we created these values that kind of help steer some of the way we think.

and that we thought were really valuable. That happened about a year in, and that was from input, from probably, you know, at least half, maybe more of the company at that point, thinking about what this could be. And then over three months,

we kind of wrote them down, debated them. I think we all, we sat in a tire restaurant for like four hours at the end and basically we're not leaving until we're all, we all agree that like this is V1, you know. Got it.

And we wrote them down. And it's a living document. And it's something that, you know, we've actually evolved. We actually just added a new value about a month ago, which is bring out the best in others. And that's one that kind of represents a lot about where the culture is developing. But it has been a pretty core part of what we've done in terms of trying to build a consistent

values throughout the company. And how do you test for that in your interviews? Like, how do you make sure that the next person walking into the door is, you know, is the person that you want both from, not just from skill set and competence, but also from a cultural fit? Yeah. So we have, you know, pretty thorough interview process, both on, you know, in person and we do some offline stuff. And we, we actually up front assign, we assign people that are doing interviews, different values to learn about. And then we have different questions. Either they can make up their own questions or we have, you know, banks of questions we've thought of that kind of represent, uh, those values. And so we actually make sure that we ask and we make sure we're a little bit comprehensive in terms of, um, this. And we have, um, types of questions we ask to really understand, you know, if somebody, if we believe someone represents those values. Often, you know, look, with any interview process, it's going to come

down to someone's personal opinion as well that always, that always weighs in. But this is one way to think about being consistent there. And we almost always have somebody from outside the group that's part of the interview process as well who's really looking at the values and saying, you know, I'm not personally going to benefit, you know, from this person joining, but I want to make, you know, in terms of my team, but I want to make sure that they're the right for the company. And does that person's input get any higher importance all over or is it the same as the rest? The person who comes from outside the group.

Yeah. Yeah, that person actually has to be bought in. Has to be bought in. So that's your test for the culture. That's the one of the way we test, yeah. Got it. Okay. And then now you're almost at 200 people.

Do you still interview every candidate? What point did you stop and what, you know, I'm sure you're still interviewing quite a few of them. But how do you decide and how involved do you get in the process? Yeah. I'm no longer interviewing everybody, sadly. I really enjoyed that. I talked to a lot of our, you know, other entrepreneurs that I knew or who had invested in in Convoy about how they did that.

And I thought one thing that was consistent with a lot of the ones that seemed to be really successful was they had actually interviewed for a long period of time, as many people as they could. So I probably stopped interviewing everyone after about 150 employees. So you almost interviewed everyone until 150? Yeah, or I would do a phone screen or I do some sort of, you know, different level, different stages of the interview, but I would get involved and have a conversation. And honestly, it wasn't, so the thing that's important to me was it wasn't just about me evaluating that person. It was that I wanted them to evaluate me. Yeah. Because when you're joining an early stage startup,

the CEO has a pretty outsized impact on your career and the company you're joining. And I wanted them to come in saying, I believe in the company. I believe in the leader of this company. You know, I'm not going to be, I don't want them to meet me three months later and be like, man, if only I'd met Dan before, would have never joined. So it was actually important to me that they had, that they had a chance to meet me. And so what I do still is with everybody that joins convoy, I do, you know, try to get a one-on-one with them within a couple months of them joining or sooner and really just sit down and listen to how they're thinking about it and what they want to do. And we get to know each other a little bit because it's important to me that they have a chance

to learn more about me because they're making a bet. And I, you know, am honored and feel like a lot of responsibility for the people that decide to join Convoy. Now, there are many founders we see even at YC, and often one of the things they talk about is hiring mistakes and, you know, it's inevitable. But are there things that you went through at Convoy, which were great learnings, that you think everybody should have in their interview toolkit? Yeah, I think a couple things. One is trust your instincts.

it's all you know it depends on you know the the type of hire but almost every hire has a significant impact on a lot of people and if a couple people in that interview loop have instincts that where they feel like something's wrong where there's something off culturally or there's some sort of um that person uh there was some some issue related to those things you really need to trust that um when we have ignored that that hasn't always resulted in the right outcome um or we had you know maybe when we didn't listen as much in certain times. And we were like, oh, but this person seems just right for all these other things, you know.

And so early on, we learned a couple of things there. The second is we have a written component to almost all of our interviews. And a lot of them, we've even done little quantitative tests and things like that, because you can learn, we're trying to learn about, we're speed dating, right? We're trying to learn a lot about each other quickly. An interview in person with someone is going to show you one side of that person, but their ability to write and structure their thoughts on paper, or to do an exercise is also going to show you a lot more about them as well.

And so for different types of roles, thinking about other exercises, helps you learn much more about that person in the same amount of time. And we found that, you know, some people will be great in an in-person discussion and not as great on the other components, and we're vice versa. And then we need to consider that. Can you give an example of a written exercise or something? Yeah, yeah. So one example would be we might ask a couple of strategic questions.

or one strategic question, one very tactical question, and then ask the person that's interviewing to put together a written response to that. And then we'll read that written response and try to ask them about it during the interview. So not only do we learn, you know, how do they write, which is an incredibly important skill for most jobs, but also, you know, how do they structure information, how thorough are they? How seriously do they take it? Yeah. I ask a couple questions that are a little bit almost out of the ordinary sometimes.

And I found that those are really important for a startup. I'll even ask them to someone interviewing for like a C-level position. And I don't want to say it exactly because I actually want to keep using it. Okay. So that's why we're not giving the question. I'm kidding. Yes. No, but it can be something that's totally out of the ordinary.

It's like, hey, work on this kind of exercise. Not expected. The guarantee they didn't think about that coming in. And I'm half interested in the response because it teaches me I can learn a lot from that. But I'm also interested in how do they handle that question? Yeah. Do they actually act a little bit? Are they a little entitled?

They're like, yeah, I don't think I should answer that. That's a question. Why would I have to answer that question? Right. So putting somebody in a position where you're asking them to do something that maybe they think is extra work or is a little bit off topic from what they expect to be the discussion about is a great way to learn their attitude. Yeah. That's true. Are they entitled?

Are they not? Those sorts of qualities you really want to understand during an interview process. And now that you have 200 people and you're probably hiring a large portion of your leadership team as well, how do you assess if someone can scale to the next level or the next role? How do you sort of do that? Yeah, that's, I think, extremely important question and really challenging. And I know that's something that a lot of different CEOs that I've spoken with have had challenges with. Here's how I think about it. the most important indicator is hiring.

So if someone wants to get to the next level and they're saying, well, how do I, how do I get to the next level of this company? How do I scale with the company as the company gets bigger? I mean, the thing I think about, what I'll say is, well, can you hire the person that's doing your job right now that's as good or better than you at that job? You know, can you convince that person to come join convoy and work for you. And if you can, that's how you scale. You bring in the people that can help you scale by building a team that helps you kind of step up to the next level. If you can't hire those people, if you can't recruit and attract them and they're not ready to work for you, then maybe that's an indication that you're not at that next level yet because you can't recruit the person to work for you that would help you get to next level or that is at that level today.

That's a very interesting test. Yeah. Yeah. And I've found because oftentimes what you're really deciding is, you know, if someone's at a certain level, level, well, are you going to hire that person's boss? Let's say the company gets 10 times bigger and you have a much bigger organization, any more senior leaders. Will you hire the person's manager? Or does that person step up into that role and hire their replacement? And you certainly can't say, you don't want to lower that, but you don't want to say, well, because you are a

little more, you can, you're replacing can be even more, maybe more less experienced than you. Yeah. I'd say, no, no, that person has to be, you have to pick somebody that raises your bar. You know, it's better than you. Can you hire that person in? If you can, and they're excited to come work for you, then that's a path to the next level. And that's interesting because, you know, I've heard two schools of debate on that, meaning some people think that anyone who doesn't have the title of a CEO makes it harder for them to attract any candidates. Because, you know, people outside associate title with sort of authority or decision-making power. And the other school of thought is more like, hey, let's just, you know, put them in that role and test them as to whether they are able to scale.

because if they are drowning in water, you'll probably know that pretty quickly. So what's your sort of reaction, especially to the first pushback, which I've heard, which is like, hey, but title, to some extent, gives some level of authority, and that automatically allows some, you know, more experienced candidates to talk to them. Because if you look at it, most CEOs haven't, you know, especially CEOs of startups, haven't done any of the jobs of the senior execs that they're hiring for. They've never been a CMO or a CFO or a CRO, yet they have to be really good at attracting candidates who have 20 years of experience being a CMO.

And one school of thought that it just really comes down to, okay, who's the CEO and how compelling the vision is. Yeah. You know, whenever I'm hiring somebody for a role like that, like a senior executive role, and we're talking to people right now, half the job is doing the job. Half the job is building the company in the culture, right? And I think that that is extremely important to me. And that's when I think about somebody coming and joining whatever title, but sort of in that senior role, you know, that's what a lot of people are looking for.

Like they want to join a startup because they want to help build something and they want to develop something that doesn't exist today. And so I think that other, you know, leaders in the company can do the same thing, which is you're bringing someone to help you build that organization. And it's really about selling and telling the story that you're empowering that hire to do. something bigger than they've been doing that they're going to be excited about, and that you're not hiring them to fill a niche and a slot on your team. You're hiring them to do your job in some ways so that you can step up and do more. So when I think about a leader on my team hiring somebody, if that person approaches it as I'm going to hire the person and I want them to take over a big part of my job.

I'm going to give them a big part of my job. It's really hard to make that mentally, but doing that, that's really what the next thing is about. If you want to hire someone to fill a slot, that secures your job, then you're probably not ready for that next level. Yeah, that's fair. That's very good assessment. One last question is, you know, one of the things, another question we get from a lot of our founders is, as you scale, right, from year one to year three and now you're at 200 people, there is some tension about, you know, what happens

to the team, the first 20 or 30 employees. And there's usually tension as you scale in terms of, you know, it's more probably psychological than real, but how much influence do they still have in decision making across many areas, which they would have had in year one, but now obviously you have various leaders and various functions. How did you sort of manage that? Like in terms of, you know, especially when your company, when the company went from 30 people in year one to 200 now, and did you A, see that tension from the first 10 or 20 hires? And if so, how did you sort of manage that? To make sure, I want to make sure I understand correctly, you're saying, you know, really early hires, how do they evolve with the companies that grows in scales?

Yeah, and I think more is like, how do you empower them to feel they're still as involved in critical in addition making versus them fearing that, you know, they're now just one silo in the company. Yeah, that makes sense. And, you know, I think, so first off, obviously, people are going to go into different roles over time. And so I think it's really within whatever role that they are doing, how do they recognize that their job is to do more than their job?

it's to represent the company culture. It's to represent the history of the company. It's to represent the mission of the company and that they have the responsibility and also the ability to do it based on being there very early to really have the, I should say, the credibility to go do that. So one is just really positioning it that way and talking to them and about them and getting them involved in a lot of things outside of their own day job. Yeah.

You know, I think another one is that one of the things that happens, and I actually think I learned this, I'm trying to remember. I want to give credit for creditors you. I first met you at a YC and Grayla kind of growth event in San Francisco. And I believe I heard somebody at that event. I don't remember exactly who talking about how one of the biggest challenges as a company scales is the early employees feeling like the company's less transparent, right? That there's less information flow to them. And I think it's completely true. And it's not that there's necessarily less transparency overall. It's that they're just not going to see as much because they're not there. So I think

again, a big part of it is actually creating a way to share more information. And that's part of the no-why value that we have a convoy, which is people really need to know why they're doing something and have that context. And so we have actually, we want to make sure that people are involved in things that go beyond their job and have more visibility into the strategy of the company. We share a lot of that with the whole company every week. And that I think keeps it so that folks that are there early feel like they're, they have visibility where the company's going. Yeah. And they can make a lot of sense of it. And they're the ones that their peers or other people of the company are going to grab and say, hey, what does it? What did they mean by this?

What's this really mean? And they can help explain that and share that more broadly across the company because they have all that context and history to really know where everything's coming from. So big part of us just continuing to share a lot and empowering them to kind of be the champions of the company beyond their job. That's what that's what I found. And obviously, I actually, when I talk to a company today, and I still believe it's 100% true. I remember saying this at 50, 100, 150, 200. Everyone in that room. is going to be that person for the next 200, next 500 people that are at Convoy.

And so it's important that they're viewing their job, not just about completing the tasks of the day, but understanding the mission and the culture of the company so that they can represent that and push that forward and pass that forward the next week. So we actually explicitly talk about that in our company meetings a lot, but I think that's, it just has to be something that's ground up. It can't be like top down from me.

Yeah. Awesome. Well, thank you so much, Dan. Thanks for the time. All right. Thanks for listening. So as always, you can find the transcript and the video at blog. dot ycombinator.com.

And if you have a second, it would be awesome to give us a rating and review wherever you find your podcast. See you next time.