Shipping has long been one of the more antiquated, and least technological, segments in the world of commerce, with its physical aspects — rooted in massive cargo tankers, giant fleets of aircraft and trucks, and trains of linked-up containers — underscoring some of the more obvious analogue attributes of the business.
That has also made it a ripe opportunity for startups, and today, one called PayCargo, which has built a suite of cloud-based payment and financing services for the cargo industry, is announcing $35 million in funding to expand its business in the wake of COVID-19.
The investment is coming from a single, high-profile investor, Insight Partners, which back in April announced a monster $9.5 billon fund that it planned to use not just to support portfolio companies through the global health pandemic, but to seek out new opportunities emerging in the wake of it.
Insight closes $9.5B fund to help support portfolio companies through the pandemic
PayCargo appears to be one of the latter. Eduardo Del Riego, the CEO (PayCargo was co-founded by COO Juan Carlos Dieppa and chairman Sergio Lemme), said that while the cargo industry has faced a lot of turmoil with the pandemic — production in some places ground to a halt, social distancing rules created new challenges for how shippers could work and move physical goods — it also highlighted how solutions like PayCargo’s were essential in getting things working properly again.
“With COVID, there was tremendous uncertainty about the impact of the global supply chain,” he said in an interview, “and like many other industries, the pandemic accelerated the need and demand for a paperless and contactless solution, which in turn accelerated PayCargo’s business.”
And while many of us brace ourselves for more fallout about how the world economy is contracting, PayCargo is profitable and has been from its start, the company said, and it has been growing — which in itself could be a positive signal about how production is indeed picking up again.
PayCargo provides a platform that offers tools for payers to send payments, vendors to receive them, APIs to integrate the tools into an existing IT, and financing services for those who do not want to pay for the shipments up front. All of these, for the majority of those working in this area, still are fixed in paperwork and can take weeks to resolve, making it a prime area to tackle with electronic services.
These days, PayCargo is processing some $4 billion in payments annually from some 12,000 shippers and carriers and a network of 4,000 vendors — customers span land, sea and air and include Kuehne + Nagel, DHL, DB Schenker, BDP, Seko Logistics, UPS, YUSEN Logistics and vendors like Hapag-Lloyd, MSC, Ocean Network Express, Alliance Ground, Swissport and Air France — with transaction volume up 80% over last year. By way of its APIs, PayCargo also works with a number of partners to serve customers, including the International Air Transport Association (IATA), Cargo Network Services (CNS), CHAMP Cargosystems, IBS, Accelya, Unisys and Kale Logistics.
We have written before about the very fragmented and analogue freight industry, which still bases a lot of transactions around faxes, actual paperwork physically exchanged between parties and people transferring not just goods but documents hand to hand. The same goes for the payments infrastructure that underpins it all.
That has spawned a number of other startups looking to tackle the market with tech. Emerge has been building a digital marketplace specifically for the trucking industry, while Cargo.com is targeting air freight; Europe’s Zencargo, FreightHub and Sennder are focusing on bringing cloud-based infrastructure into freight-forwarding (and Sennder is positioning itself as a consolidator in this market, recently acquiring Uber’s European business in this area); and Flexport has positioned itself as one to watch in its own take on shipping SaaS.
How freight master Flexport’s Ryan Petersen learned to CEO
PayCargo itself also has a number of competitors, which might include those building bigger suites of services, of which payments is just one. In addition to all of the ones we’ve covered, there is GlobalTranz, CloudTrade and others. (Del Riego refused to name any competitors directly. “PayCargo is the premier and most robust solution in the marketplace,” he said flatly.)
Overall, CrunchBase estimates that some $5.5 billion has been invested in shipping-related tech companies looking to bring more updated processes to what is, at the end of the day, ultimately a very physical business.
But with the industry significantly bigger than that — one estimate forecasts that the shipping logistics market in the U.S. alone will be worth $1.3 trillion by 2023 — you can see how building and addressing that would be a lucrative opportunity.
“As the cargo industry rapidly shifts to electronic payments, PayCargo has established itself as the market leading platform for doing business by successfully automating the payments process and ensuring efficiency for both payers and vendors,” said Ryan Hinkle, managing director at Insight Partners, in a statement. “We are excited to work with PayCargo to continue to scale its global payments network and through our Insight Onsite team of ScaleUp and operational experts, help bring additional resources to its impressive list of customers.” Hinkle is joining the board with this round.