I have a pretty solid background in pricing. I'd be happy to discuss it. But, in the Forwarding industry the only metrics to me that matter are NPS, Rev, Growth, and of course gross margin! I don't buy into the whole but we are growing 1000% and our net margin is minimal.
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It’s pretty clear that isn’t the case here. Flexport has talked about revenue, margin, and growth publicly. If your company can replace what they’re doing so quickly then they won’t keep growing at the rate they are
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Austen you have no clue what you are talking about. Their revenue is based on buying freight from a carrier and reselling to a customer. We are a software company not a forwarder like flexport.
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Or maybe I’m friends with the founder and have information you don’t
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Ryan has done an excellent job capitalizing on an industry that keeps tripping on their own feet. Thats the real and only story.
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You have no idea
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No idea is probably inaccurate. But, I'm sure there's tons of stuff I don't know about Flexport. They are a private company after all. I'm simply stating that taking growth as a leading factor for valuation without understanding the industry = dangerous and irresponsible.
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Austin just to clue you in on the process here. I probably talked to 50 people (if not more) for this story. I know Flexport’s model well, talked to a half dozen knowledgeable VCs and other financial watchers in the space. Probably had two dozen phone/email interactions w/ Ryan.
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It was definitely very well researched
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Valuations of companies are based on how much people want to buy the shares though? And apparently, lots of people want to buy this stock/invest. Makes sense unless you view the market cap as related to the value a company produces, and nothing else.
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Investors are betting on what the company will be worth in the future Say Flexport is doubling revenue every year and is valued at 5x revenue The other forwarder is growing 10% per year valued at 1x revenue Flexport’s effective price in 3 yrs will be <1x revenue. Amazing deal
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I think my bad: I read your first tweet as a complaint the valuation is too high.
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In fact, he's almost making a counter point to his own point. The company is ONLY 5 years old, and is already making more money than an old school operator was sold for.
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My company and Kontainers can turn any of the forwarders in the world into a "digital" forwarder in weeks.
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Eric's point is exactly what investors get wrong in many cases. Growth does not equate to an amazing deal and that's the exact point where some investors get this totally wrong. Lack of an understanding of an industry is dangerous and is malpractice in fiduciary responsibilities
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Growth is important. However, I am curious after seeing your re-post of the JOC article as to what those comments actually mean? There are 8,000 Forwarders/NVOs alone in the US. It's highly fragmented. And, the tech that differentiates them is all widely available.
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Especially when it's growth of revenue. Lol.
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Which brings up another salient point, which is that when operating in a market in which high growth can be achieved simply by winning a small number of customers, those projections aren't always crazy.
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