In 2023, we led the Series A of a freight-forwarding business that most of our peers passed on. The deal memo at several competing funds read roughly as follows: "Commoditised business model, thin margins, dependent on a shipping cycle that was near its peak, too many intermediaries in the chain, easy to disintermediate." We looked at the same data and reached a different conclusion. This is the reasoning we didn't publish at the time, because it was still forming.
The Disintermediation Fallacy
The standard venture framing of freight forwarding is that it is a broker's business — someone who makes money by knowing a shipper who needs to move cargo and a carrier who has space to fill. The margin is the spread between what the forwarder charges the shipper and what they pay the carrier. If you can build a digital platform that aggregates enough shippers or enough carriers, the argument goes, you can disintermediate the forwarder and capture that spread.
This logic is sound for a narrow slice of the market: high-volume, standardised lanes where the shipper has enough cargo to go direct to the carrier and the route is simple enough that specialist handling adds little value. For this slice, digital freight platforms have indeed taken meaningful share. We don't dispute this.
The forwarder's real value is not the transaction. It is the problem-solving that happens before the transaction is even priced — the Customs broker who knows that a particular commodity classification will trigger an FDA hold at a specific port of entry, or the freight manager who has already worked out the inland routing for the exact cargo type before the shipper has even asked.
Where the Logic Breaks Down
The fallacy is applying this model to the full market. The majority of cross-border cargo moves through routes, commodity types, and regulatory environments that are anything but standardised. A shipment of temperature-controlled pharmaceutical products through multiple customs regimes to a landlocked destination requires hands-on expertise that no API can replicate. A project cargo movement — an industrial turbine, a piece of production machinery — requires a level of coordination across carriers, ports, and inland transport providers that is fundamentally a service business, not a product business.
The forwarder's real value in these situations is not the transaction. It is the problem-solving that happens before the transaction is even priced — the Customs broker who knows that a particular commodity classification will trigger an FDA hold at a specific port of entry, or the freight manager who has already worked out the inland routing for the exact cargo type before the shipper has even asked. This expertise is embedded in people, not in software, and it accumulates over decades of doing the work.
The Digital-First Forwarder
The company we invested in understands this. They are not a software business that happens to move cargo. They are a freight-forwarding business that has built software to make their people more effective and their operations more scalable. The technology investment goes into three areas:
- Routing optimisation tools that give their freight managers real-time visibility into cost, transit time, and risk across thousands of lane/variant combinations — augmenting human judgment, not replacing it
- Customer portal that gives shippers transparency into their cargo status, documentation, and cost breakdown — replacing the phone-and-email updates that consume most of a freight manager's day
- Compliance engine that flags regulatory risk at the booking stage, before the cargo is tendered — preventing the expensive problems that come from customs holds, incorrect documentation, or misclassified cargo
The technology makes the freight managers faster, more consistent, and more productive. It does not replace them. This is the critical distinction that most digital-freight competitors miss.
What We Got Right (and What We Are Still Testing)
Our thesis has been validated on the commercial side: the business has grown revenues at a rate that exceeded our initial model, on the strength of a customer retention rate that we believe reflects genuine value creation rather than switching-cost coercion. The team is excellent, which we believe is the single most important variable in a services business.
We are still testing the technology scalability thesis. The question we are asking in our next quarterly review is whether the investment in technology has actually improved the unit economics of individual freight managers at scale, or whether it has primarily improved the customer experience and therefore retention without changing the underlying cost structure. This matters because the freight management function is ultimately labour-intensive, and the leverage in the business model depends on whether the technology investment can break the linear relationship between revenue growth and headcount growth.
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