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Ryan Petersen Changed The World
How an online hustler built an $8 billion freight unicorn
Adam Vazquez
June 16, 2023
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"Flexport is one of that small handful of startups that are going to change the world."
Ryan Petersen won’t go away.
From hustling motorcycles overseas, to pissing off Steve Jobs, to founding a freight unicorn, battling COVID and saving the port of Los Angeles from itself; this Freight Founder just keeps showing up.
Today he’s got a multi-billion dollar company to show for it.
Flexport has changed how freight moves around the world and is the result of years of work from an opportunistic little brother who keeps showing up. This is his story.
Early Attempts
There is a trend emerging during this series.
Experiences that founders have in their early years seem to have a profound impact on the work they produce later in life. In our last issue, we saw how Ted Alling’s early experiences watching his father run a dental surgery practice had a direct effect on how Ted eventually conducted business.
Ryan Petersen is another example.
Ryan began his entrepreneurial journey like a lot of people his age: selling trinkets online.
For normies, this looks like selling junk from around the house on craigslist. Some more aggressive types may start flipping items from yard sales or Facebook to eBay or Amazon.
Petersen took this to the next level.
Vandelay Industries
Following his brother David, Ryan flipped items from China to the US Markets. From motorcycles to medical bathtubs, the brothers’ challenge was finding cost-efficient ways to get them from overseas in a timely fashion.
They happened upon George Constanza’s dream job: Importer/Exporter.
The Petersens were early users of a little platform called “Alibaba” to source products and bring them stateside. Today, Alibaba is the 54th-ranked company in the world according to Forbes.
Ok, so...they got lucky? We’ll see.
The business continued to grow, and Ryan eventually moved to China for two years to help grow the company and facilitate relationships with vendors.
“It was my older brother’s company. I was working for him. We were buying and selling them and we hated our freight forwarder….They have all these code words in Viking English. It’s like, ‘What are you talking about? How much is it going to cost? When is it going to arrive? What documents do I need? What do these documents mean?”
The experience would change Ryan forever.
As he and David built their version of Vandelay Industries, they became fascinated with the old crusty methods used to organize, communicate, and eventually deliver goods across the supply chain.
They quickly realized how much public data their small operation was generating, and wondered how that data could be used when gathered from larger organizations that were transporting much bigger volumes of goods.
A lightbulb moment. 💡
Ryan quickly realized he had a gold mine in front of him if he could figure out how to extract the actual gold.
The Steve Jobs Situation
It wasn’t all green lights (insert Matthew McCoughnay voice and whistle), though.
The company, called Import Genius, took advantage of the fact that the data existed, but Ryan needed to find a way to let people know about it. Enter the Steve Jobs saga.
It’s a myth that if you build it, they will come. It took us over a year to get our first customers. So I said, why don’t we try to generate news with our data? We discovered that Apple shipments were in the database. We saw they were importing a new product called “electric computers.” It struck me that must be a code name for something. I did a bunch of research. It was right before the launch of the second iPhone ever made. We published a blog about it on our platform and I sent it to Mac Rumors, who did the rest….One day I got a call from a gentleman at U.S. Customs, who said Steve Jobs had called him and screamed at him. Jobs didn’t understand how things worked. We didn’t have any revenue before we published that post.…We generated $1 million from that post.”
The company would grow to generate over $5 million/year in revenue. A successful small business according to any metric.
Juuuust not quite enough for Ryan, though.
The data was cute, but Petersen wasn’t about that small boi life.
He had an idea he thought would change the way freight worked around the world.
Building Flexport
Photo credit: MaC Venture Capital
“Schlep blindness.”
The phrase - coined by Y Combinator Founder Paul Graham - refers to the Yiddish word for a tedious journey. The idea is that when there is too much obvious friction or “schlep” - innovators tend to turn a blind eye to the core problem.
There isn’t a more obvious version of this than the logistics process.
“Ryan embraced both the literal and figurative schleps necessary to build something new in freight forwarding. Kissing the frog, no matter how unsexy, may end up turning him into a prince.”
Scaling Past Schlep
In 2011, Ryan decided to confront the schlep head-on and begin the process of applying for the proper licensure and certifications to be able to manage the scale of freight his vision required.
It wasn’t easy.
The process required an FBI background check, becoming a licensed customs brokerage, and hiring pricey legal and compliance experts. But there was always light at the end of the tunnel.
A simple pre-launch landing page confirmed Petersen’s suspicions of the opportunity.
“Before I ever launched, I had a website that offered the service, to see if people would want it if it existed. One day, Saudi Aramco signed up for my website. It’s the Saudi national oil company, and one of the biggest companies on Earth…I thought, ‘Wait a minute. I thought I was attracting Amazon merchants! If we could do this service, we would make a lot of money. Even the biggest company on Earth wants to use us.’”
The idea quickly shifted from another novel way for the hustler to make money, to an entire reconfiguration of how freight is moved globally.
Ex Machina
According to investors, Ryan’s energy made the vision believable despite the inherent obstacles facing the company.
“‘They’re taking on automating shipping’ Paul Graham extols. ‘Just imagine the potential energy to be released there. It’s 15% of the global economy. And it’s much of the back-pressure constraining the other 85%. The potential energy is all the greater because this domain is currently so backward. And Flexport has it all to itself, because schlep blindness has prevented everyone else in the startup world from even seeing it.’”
Another put it more simply:
“He’s a machine.”
Petersen’s magic seems to be more than smoke and mirrors as a hype man, though. The company employed several savvy strategies to make its vision a reality.
My favorite: selling fast, small doses to get customers addicted to the product.
The Freight Dealer
You see, there is a common error in B2B startups to think that taking big swings is required to scale.
That is true on some level.
Investors certainly expect a return on investment that reflects enterprise-level investment.
But, how you get there is where a hustler like Ryan can strategize circles around a purely technical or b-school founder. Rather than selling a full solution all at once, Petersen dealt with shippers with doses of automated freight management to show them what was possible.
If a company agrees to a trial to manage at least 10 cargo loads through Flexport, Petersen thinks he can prove the company’s value, with Flexport’s software helping optimize each route to prioritize speed, reliability, cost or a combination of the three. That’s how Flexport started to work with sound system maker Sonos, which tested Flexport with one lane of its business, its China to Australia route, in early 2016. Now it’s one of four main logistics partners Sonos uses globally, alongside two multi-billion-dollar-revenue freight forwarding giants and UPS. Sonos was initially skeptical of trusting a startup, says Sonos global operations leader Patrick Stuut. “They’ve showed their value over time,” he says. “My advice is to give them a chance.”
They Laugh, Then You Raise a Billion Dollars
“Senior execs at big companies were making fun of us. One of them compared us to Doc Emett Brown [from Back To The Future] and his ‘flex capacitor’ but we he missed is that Doc invented a time machine and it worked.”
By 2019, the company had doubled its annual revenue year over year to exceed $500 million annually and employed over 1,000 soldiers marching to the Flexport mission.
Still, it wasn’t enough to achieve Ryan’s full vision.
To build the “Operating System for Global Trade,” Flexport would need a warchest.
Enter Masayoshi Son.
photo credit: Softbank
Fans of the show “We Crashed” will be familiar with the famous investor’s name. Son founded the investing giant Softbank, and was deploying the notorious “Vision fund” that boasted assets of $32 billion.
In addition to WeWork, Son had used the fund to invest in unicorns like Uber, Doordash, Bytedance (Tiktok), Slack, FTX, and others.
Son and Softbank led a $1 billion investment into Flexport that pushed the company’s value over $8 billion.
No small boi stuff here.
The investment seemed to have a larger personal impact on Ryan past the obvious. In his post announcing the investment, Petersen said the following about Son:
“Personally, partnering with SoftBank carries even more significance. Like many, I’m inspired by the dedication and vision of the organization’s Chairman and CEO Masayoshi Son, and his commitment to an ambitious vision for using technology to advance human happiness. At Flexport, one of our core values is to “play the long game.” In this respect, we are in awe of the long-term thinking of SoftBank, which champions both a 30-year vision and 300-year growth strategy.”
Working with Son and Softbank allowed Flexport the opportunity to achieve Ryan’s grand vision, but it also brought new questions regarding how they would tactically achieve that vision.
Change was on the horizon for Flexport organizationally and Ryan Petersen personally.
The Bruce Wayne of Freight
2020 brought the same shock to Flexport that the rest of the world encountered from the COVID-19 pandemic.
After an initial 3% reduction in the workforce, Ryan and the Flexport team went into hyper-activity mode.
The Flexport Foundation
The founder quickly switched his focus from Flexport.com to its non-profit sibling Flexport.org and raised over $7 million dollars for pandemic aid. He didn’t stop at raising money, though.
Petersen took his responsibility as a global freight leader seriously and began brainstorming how Flexport could best assist the world during the shut down. The results were massive.
Photo Credit: TechCrunch
In addition to the money raised, Flexport Foundation delivered over 6.9 million masks, 240,000 gowns, 1,000 ventilators, 155,000 gloves, and 250,000 meals for vulnerable populations.
Something clicked for Ryan during this process.
For the first time, Petersen found himself focusing less on the private sector (let alone Flexport’s performance) and instead found himself pouring his limitless energy into the “greater good.”
“In the absence of proper federal crisis management, Petersen has become a de facto general in the war against coronavirus. ‘Given the scale of the problem and the complexity of the market failures outlined above, there’s no way for the US government to solve this on its own. But it can and must provide leadership, breaking down obstacles and coordinating the response of the private sector.’”
The feeling wouldn’t be shaken quickly.
Saving the Port of LA
Photo credit: TechCrunch
In 2021, a new disaster was unfolding in the freight markets. The 2020 hysteria of shipping had begun to have negative effects on the supply chain, and there seemed to be no answers to the overcrowding and inefficiency facing ports - especially in Los Angeles.
Bah golly, that’s Ryan Petersen’s music!
Following his instincts, Petersen took a boat into the actual Port to see the damages for himself. I’ll let the L.A. Times tell the story from here:
On his cruise around San Pedro Bay, Petersen got a firsthand look at the more than 70 hulking container ships idling at anchor, their $64 billion in cargo waiting to be unloaded, and the mountains of steel boxes stacked up on the docks, waiting days on end to get picked up and shipped out. He learned the docks were too crowded to accept returns of empty containers, which meant that truckers couldn’t pick up a new full container, since they were stuck with an empty one on their trailer chassis.
The following morning, Petersen tweeted this all out — and his thread became a rare viral sensation about logistics. Big thinkers from the worlds of business, politics and media shared his tweets…then Governor Gavin Newsom called him up.”
The Governor listened to Petersen’s advice and put several recommendations into action immediately.
Although the policy makers ended up diverting from all of Ryan’s recommendations, the effects were clear: Ryan Petersen’s actions had moved the government faster than they ever would have on their own.
It was now the second time that Petersen had put aside his company’s interest for the pursuit of public good. In fact, he went as far as to offer to fix the problem entirely:
…he offered in one tweet “to lead this effort for federal or state government if asked,” it would have meant walking away from his own rapidly growing logistics business: Flexport revenues are on track to hit $3.2 billion in 2021, more than double the previous year’s bookings, according to the company.
Stepping Down as CEO
The previous two years of behavior should have painted a picture of a Founder who was torn between growing the company he loved, and potentially contributing to newer, bigger problems the world was facing.
Still, it was a shock when, in 2022, Ryan Petersen announced he was stepping down as the CEO of Flexport.
His reasoning was humble and optimistic.
The company had grown massively. New challenges lay ahead. Different leadership would be required to help Flexport arrive at their final destination.
The founder seemed to realize that much of the culture and decision making that had brought the company this far, would only keep them from reaching further.
“Over the years, he learned that when a company is growing extremely fast, it's unreasonable to expect humans--and their abilities--to grow at the same pace. He wished when hiring people, he'd sat down with them, shown them the growth curve Flexport was on, and explained: "Here's the company growth that we want to do, and here's likely what's possible for a human to grow. It's unlikely to be at the same slope. You probably can't grow your own capabilities a hundred percent in one year. What are the odds?
Unlike many leaders, Petersen applied this logic to his own status at the company.
Yes he had grown, but not necessarily in the ways the company would need to scale.
Ryan is a problem solver. A super-thinker with the ability to throw on a cape and change the outcomes for people on a global scale.
He isn’t necessarily enthused about creating managing structures that will allow the company to progress at a predictable and sustainable pace.
The scrappy, startup, hyper-growth days are likely behind Flexport.
New challenges await.
For me, its refreshing to see a Founder who seems so in touch with his strengths and weaknesses that he can make a decision like this one. While I’m sure its not easy, it seems to be for the benefit of both the company, the world, and Ryan himself.
We should probably invest in an “RP” sky light to shine when the next Freight disaster presents itself. Just to be safe.
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