$8M to Cargomatic: the Uber-like shipping startup is turning extra capacity into extra cash

by Garrett Reim
January 29, 2015
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Pictured above: Cargomatic co-founders, Brett Parker, COO, and Jonathan Kessler, CEO
 
Cargomatic, an Uber-like shipping startup based in Venice, has just raised an $8 million Series A investment. The investment round was led by Canaan Partners and included former seed round investors Volvo Group Venture Capital, Morado Venture Partners, SV Angel, Sherpa Ventures, Structure Capital, Winklevoss Capital, Rob Estes, Nicolas Berggruen, Scott Banister, Fritz Lanman, and Hank Vigil.
 
Cargomatic is targeting a part of the shipping industry that is often overlooked. While there is plenty of competition amongst Postmates, Instacart, Uber, Google and Amazon to deliver goods on-demand, and lots of competition amongst companies like BNSF and Maersk Shipping Line to deliver containers of goods to warehouses, the in-between part of the process, positioning goods at nearby grocery stores, retailers and restaurants, remains underserved. This middle part of the shipping process is where Cargomatic aims.
 
“It’s just been a forgotten part of the market,” said Jonathan Kessler, CEO and co-founder. “The big tickets are on the long haul side. It’s been left to the smaller carriers to fulfill the needs in the marketplace.”
 
And finding a good local carrier can be a chore. For shippers to organize their local shipping logistics it requires a lot of legwork. They have to vet carriers, make sure they have proper insurance, and negotiate rates. 
 
And “larger guys like to have multiple carriers. If they have one they will never have enough capacity to meet their needs, especially during times where there is high peak of shipments, [when] it is hard to get capacity,” said Kessler.
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Cargomatic aims to take the fragmented local shipping industry and inject order and on-demand efficiency into it.
 
For shippers, the app eliminates differing paperwork, rates and insurance coverage coming from multiple independent carriers. It puts the shipping process all under one roof.
 
For independent trucking businesses, Cargomatic can be a nice supplement to their shipping routes. If a trucker has to drive across a city he or she can use the app to see if there are any orders available for pickup along the way.
 
“The business model is to take advantage of unused capacity in the marketplace,” said Kessler.
 
Pricing on the app is also uniform across carriers. That pricing is set by hand, but in the future will automatically adjust prices upward or downward based on an algorithm considering market demands, much like Uber’s surge pricing.
 
“Definitely in the future we will be working with more dynamic pricing based on market needs,” said Kessler. 
 
But before that Cargomatic is aiming for greater adoption in Los Angeles and New York where it is currently operating, and eventually expansion into other large cities. The company said it will be using its new capital to ramp up hiring for that expansion.
 
Big cities, like Los Angeles and New York, offer a treasure trove of shipping inefficiency for companies like Cargomatic. With their highly dense population bases, congested traffic and never-ending logistics needs, there is strong demand for more efficient shipping in urban areas.
 
Beyond Cargomatic’s focus on shipping dry goods the startup may eventually expand to freight, produce and refrigerated goods. 
 
However before that, “we want to make sure we provide great service on what we are offering currently,” said Kessler. “There are a lot of problems that are in this space and it is exciting to start using technology to solve those problems.” 
 
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