Freight Tiger: Reducing carbon emissions in India
Swapnil Shah shares his journey founding Freight Tiger, a software enabled marketplace and transportation management system (TMS) platform in India with over 400 shippers and 1500 transport companies.
An overview of Freight Tiger
Swapnil was motivated to streamline global supply chains after being exposed to the inefficiencies of the logistics industry while working in manufacturing and operations in the U.S.
He noticed similar inefficiencies in India’s logistics sector but on a larger scale as it contributes to 14% of the GDP, whereas in the U.S. it contributes about 8%.
This is why, six years ago, Swapnil decided to launch Freight Tiger, which has grown to be the largest freight platform in India via a software-enabled marketplace. It aims to address the high logistics costs in the country, which impact both domestic consumers with increased price of materials and the country's competitiveness, especially for exporters.
Even the Indian government, via GatiShakti, is committed to reducing logistics costs to enhance competitiveness. Looking ahead, Swapnil believes logistics startups will help drive continued advancements in supply chain technology globally over the next 10 to 15 years.
Freight Tiger now has over 300 employees in Mumbai, Bangalore, and Delhi and has raised about $36 million in funding.
Since you first began implementing your initial solution, what valuable insights have you gained up to this point?
Initially, Swapnil underestimated the immense potential of the opportunity at hand. He realised that during the early stages of a startup, it is important to think big. Although it may not be feasible to tackle everything, aiming for great things can shape the path and decisions you take when establishing your company.
Swapnil highlights the reliance of larger shippers on logistics service providers and supply side brokers to transport goods from point A to B across the country. Typically, a shipper signs contracts with multiple LSPs who have the capacity to fulfil a part of the total requirement.
The shipper has to simultaneously reach out to independent truck owners in the market to complete the rest of their orders, which is facilitated by a supply side broker. This offline process, driven by trust, occurs daily between 11:00 AM and 1:00 PM, via calls and messages and drives the movement of billions of dollars worth of goods.
The central question that arose was: "Could Freight Tiger transform the process of matching supply and demand in the market into an organised and efficient process, enhancing transparency and effectiveness in the value chain?"
The company's initial focus was on taking orders from logistics service providers and finding trucks. However, they realised the need to approach things differently and tackle the larger puzzle at hand.
They started to take a holistic view of the entire supply chain rather than solely focusing on the brokerage aspect. By overly fixating on fulfilling the brokerage role, Swapnil hadn’t adequately mapped out the complete end-to-end value chain. Consequently, Swapnil realised that occupying the position of a broker did not align with the most optimal approach for building the company, as the influence they had was rather limited.
Swapnil and his team started looking at where demand originates and how transactions flow through the entire value chain. They found a better way to perform the brokerage role while still fulfilling it, i.e. by focusing on bringing efficiency, transparency, and visibility into the end-to-end supply chain.
His main takeaway- during the early stages of a startup, it is important to strike a balance between analysis and building the company by exploring various avenues and taking action to gain a better understanding of what needs to be done. Simply brainstorming in a conference room is not enough; being in the field and launching proof of concept helps in grasping the bigger picture.
Could you share how your solution works?
There are three primary challenges being addressed in the supply chain industry in India. Firstly, the lack of visibility throughout the entire chain remains a significant issue, with approximately 80% of industrial goods not being traceable. This calls for a solution that offers comprehensive visibility.
The second challenge lies in the numerous handoffs and manual processes involving paperwork, payments, and communication conducted through various means such as WhatsApp, emails, excel files, and phone calls. This often leads to errors and inefficiencies, highlighting the need for a unified platform to streamline operations.
Lastly, the logistics industry faces the problem of offline demand and supply coordination, especially when finding trucks in the open market. This leads to resorting to local suppliers/supply side brokers, resulting in a cumbersome and inefficient manual process.
Freight Tiger tried to solve the demand-supply problem first. However, they soon realised they needed to accommodate the complexity of the Indian supply chain, which spans across 200 different types of trucks. For this, a large network was required.
So they began to build this network by solving the lack of visibility. This means that any manufacturing company- from order creation to final shipment- has full visibility on their end-to-end supply chain. The platform helps orchestrate every process with integrations and coordination of different parties as there are multiple information sources and stakeholders involved. Customers are now given one common system to track their shipments.
The second step was addressing additional requirements from customers to bring together other manual or siloed processes in logistics on the Freight Tiger platform like planning, proof of delivery, freight invoicing etc. So they built a simple transportation management system (TMS) to automate all the different steps in a freight transaction.
Finally, the visibility and TMS system allowed Freight Tiger to build the network needed as the entire ecosystem was being onboarded to the platform. As they built critical mass on the platform, they were able to build a marketplace for stakeholders to discover demand and supply, while staying neutral. There was no need to disintermediate any stakeholders, as there is enough efficiency for everyone to benefit from a digital, transparent process.
The next step of Freight Tiger is now to automate the payment process between stakeholders.
How did you structure the company?
During the initial stages of developing Freight Tiger, Swapnil and the team prioritized cost efficiency while tackling the identified problems within the logistics industry. They carefully determined which problem to solve first and strategized their role in the ecosystem. Initially, with a small team of about 25 people, they deliberated whether to focus solely on building the software or become a full-fledged logistics service provider.
In early 2017, Freight Tiger secured a seed round of approximately $250,000, followed by a small Series A funding of about $2,500,000 later that year. With the additional resources, they expanded their team and ventured into new strategic territories.
As Freight Tiger's business model evolved, driven by iterative processes, the team underwent significant changes. Role transitions proved challenging for individuals who had been specialized in specific areas.
Between 2017 and 2019, Freight Tiger concentrated on addressing visibility issues by building a tech and product team, along with customer success and sales teams.
The period between 2019 and 2022 posed significant challenges for Freight Tiger as they shifted their focus from improving visibility within the Indian logistics industry to constructing a transportation management software layer. This represented a more profound involvement in the customer's supply chain.
Finally, Freight Tiger tackled the marketplace aspect of their business. Swapnil highlights the importance of recognizing that building a marketplace requires a distinct set of skills compared to software development. During this period, from 2019 to early 2022, experimentation with team structures and leadership roles was crucial. Swapnil sought insights from companies like Airbnb and DoorDash to gather knowledge and experiences, although the final decisions had to be customized to fit Freight Tiger's specific needs.
Operating over the years, Freight Tiger witnessed advancements in visibility capabilities, growth in the Transport Management System, and the early stages of marketplace development. However, the challenge remained in finding hires who could effectively operate across all stages of the company's growth.
Swapnil's key learning was the importance of hiring individuals who can effectively navigate and adapt to the company's growth.
Could you share how you established your governance structure and management policies?
Swapnil considers himself fortunate to have had the opportunity to welcome exceptional team members to Freight Tiger. Their early recruits, a valuable addition to the HR and finance departments, played a crucial role in establishing a solid foundation. During the initial stages, instead of focusing on a strict governance structure, the trio concentrated on understanding the necessary steps to ensure data integrity.
Hiring a competent finance professional early on to establish a basic framework, along with an HR expert who can efficiently handle personnel matters, can greatly benefit startups. However, raising funds undeniably eases the process. Before securing Series A funding, Swapnil personally handled these responsibilities.
As the company grew, it became challenging for the founder to stay informed about every aspect of the business. Two years ago, Swapnil decided to expand his team by hiring two individuals, one with a finance background and the other skilled in data science. With their support, they constructed various structures, including a comprehensive measurement system for each of the three business areas, encompassing both input and output metrics.
Over time, they developed a framework that prioritized vital aspects of the business, ensuring its health and mitigating risks. This progress was achieved one step at a time. Swapnil now conducts regular reviews with his teams, fostering accountability and productivity. The team follows a predefined template shared via Google Docs a day prior to the review, allowing for a more efficient and fruitful discussion. This approach facilitates the identification and resolution of actionable items arising from the meetings.
They ensure that information is populated and accurate a day before meetings, addressing any clarifying questions in the 24 hours prior. After meetings, they track action items and refer back to previous discussions in the next meeting. Beyond input-output metrics, legal and financial compliance are important as well. Swapnil advises measuring business risks regularly and relying on trusted individuals to help organize information. Sometimes, information may not be in the right format initially, but it can be adjusted as the company evolves.
How has your focus on impact shaped the development of Freight Tiger?
Besides the operational or technical problems Freight Tiger is solving in the logistics industry, there are also multiple stakeholders involved in the business. From a large shipper to a truck owner and driver, the difference in working conditions is staggering.
Swapnil understood that truck owners and drivers are key players to bring into the ecosystem Freight Tiger is building as they are in complete control of the shipment once it leaves the factory or warehouse. If they don’t have the right working conditions or tools needed, they can’t effectively contribute to making the logistics value chain efficient and sustainable. This includes access to facilities at the factory and en-route like clean bathrooms, beds, and drinking water; these are critical to ensure happy, well-rested drivers. Moreover, access to the internet and programs to improve digital literacy are key if we want to create an end-to-end change in the supply chain.
Since Freight Tiger works with shippers and transport companies, Swapnil had built a network with customers who were equally committed to driver empowerment.
Freight Tiger also recognises the significant impact of the commercial vehicle industry on carbon emissions and is addressing it in 2 ways - by helping customers measure their baseline transportation emissions and using the platform and services to provide targeted solutions for reducing their carbon footprint. This is largely accomplished by optimising routes and dispatch plans to reduce unnecessary travel and empty miles and provide access to alternative fuel vehicles. With approximately 10 million vehicles in the country, even small improvements can have a direct impact on carbon reduction.
What have been some of your key learnings about fundraising?
When considering fundraising, it is important to balance the needs of your business and the expectations of investors. For instance, while investors may prioritize measuring marketplace success, building a marketplace requires adequate visibility in TMS accounts. The key is to have a clear understanding of the metrics that matter to both investors and the growth of your business. Start measuring these metrics and adapt as you gain clarity and feedback from investors and customers. The goal is to build a valuable business that aligns with the needs of all stakeholders.
In the early stages, investors often question how better growth projections are formulated. Balancing revenue goals and predictions can be challenging. Financial models evolve over time as the business model progresses. Understanding the valuation of a particular industry or product segment is crucial. Marketplaces focus more on gross merchandise value (GMV) than net revenue. Software businesses emphasize monthly and annual recurring revenue (MRR/ARR). Calculating the amount of capital needed to achieve revenue targets is essential for fundraising.
Check out Freight Tiger and follow their journey:
https://www.freighttiger.com
https://www.linkedin.com/company/freight-tiger/
https://www.facebook.com/FreightTiger
https://twitter.com/freight_tiger