Flexport is a company that makes it simpler, faster, and cheaper for American companies to buy products from overseas while remaining compliant with all relevant trade laws. The company was founded by Ryan Petersen, who previously co-founded ImportGenius, the largest provider of business intelligence to the import-export industry. We sat down with Ryan to discuss how his company is trying to bring free trade through technology.
Flexport helps businesses import products from other countries. We are a licensed customs broker and freight forwarder built around an online dashboard. Our mission is to bring the world free trade through technology — not free trade in the sense that you don’t have to pay taxes or follow regulations, but free trade in the sense of those things happen in the background automatically. It’s so simple that anyone can do it.
It’s a big, lifelong undertaking. This isn’t a startup where we give it a go for 12 months and then see what’s the next good idea to work on. This is something we’re going to have to work on really hard for 10 years, at least.
I believe deeply that trade is the best way for human beings to improve their lives and that it’s still way too hard. As we looked at what we were doing, we started to realize that the taxes are actually trivial in global trade these days. Thanks to the World Trade Organization, the tariffs that you pay to import are not that high — less than 5% in most cases. It’s the paperwork and the hassles that are the problem. That’s what Flexport is there for. We never sat down and said, “This is our mission statement.” It just came about.
My whole career has been at this intersection of international trade and the internet. It started when I graduated from undergrad at UC Berkeley. When I graduated, I didn’t really know what I wanted to do. I had spent a lot of time in other countries, travelling in the developing world, Central and South America especially, and had seen how poor some people were. When I graduated I was thinking of going into the nonprofit sector, but I had studied economics and believed deeply that international trade was the answer. More freedom and opportunities are created from trade than any amount of charity, handouts or United Nations development work.
By happy coincidence, while I was in college my older brother had been running a business importing products from China and selling them through the Internet, so I joined them when I graduated. I was sales, customer service, web developer, and jack of all trades at the company. I did that for a couple years and then I moved to China and spent two years there helping to manage the supply chain for the business. The company still exists. It’s grown to doing about $8 million in sales this year.
My job in China was to go to trade shows and find suppliers, identify new products we should be selling, build websites around them and then get them shipped back to the US and sold — sort of end-to-end e-commerce, where you went direct to the source and cut out all the middlemen.
While I was working in China, I discovered that the shipping manifests for all ocean freight shipments entering the United States are a matter of public record. We were able to get our hands on all of those documents—300 million of them so far—digitize them, make them searchable, and began selling subscriptions to access that data.
It quickly became apparent that this was a far more interesting business, so we spun it out. Now it’s called ImportGenius.com and has become one of the more successful companies in Arizona. I was the President of that business from its founding in 2007 until 2013. We grew to about 50 people and 18,000 all-time paying subscribers without ever raising any venture capital.
By 2013, ImportGenius was ready for some fresh blood. My co-founder wanted to come back in and get more active with the company again and I was ready to try some new things as well.
The idea for Flexport felt like the biggest thing I could ever work on, and as I look back, it was something that I wanted to do ever since I was in China shipping things and realized how hard it was. Last spring the timing was right and I stepped aside from ImportGenius to focus full-time on Flexport. I’m still on the board and own shares, but my long-time business partner is running it as CEO.
My brother, who was also my co-founder at ImportGenius, left about two years ago to start a company called BuildZoom.com, which did Y Combinator also. They were in the Y Combinator winter of 2013 batch. He made the connection to get me the on-stage interview at startup school in 2013, which was a bit of a soft-launch for Flexport. I applied to Y Combinator and we went through the winter 2014 batch.
So far, we’ve signed up 700 companies for the service. When we started there were two people in the company: me and one customs broker. We’re now 13 people, including the core of what I think might be Silicon Valley’s best engineering team as well as the best team of customs brokers and freight forwarding experts. No one is ever going to be able to put those two aspects together better than we have. We’ve been just making a tremendous amount of progress.
“I believe deeply that trade is the best way for human beings to improve their lives and that it’s still way too hard.”
We can work with anyone importing products. We save them money and time on their imports and give them better visibility into what’s happening with their shipments. Because it’s an online dashboard, we cut back on phone calls. That saves our customers time and money, because phone calls are expensive.
The ideal customers right now are small, high-potential startups and businesses that import a lot of products, whether it’s components or finished goods from overseas. The ones who are just getting started are the easiest for us because there are no switching costs, because they don’t already have the freight forwarding in place. But if they do, we are pretty successful at convincing people to switch because we’re cheaper than others.
We’re pretty agnostic about the type of products being shipped. We’ll clear any products that are legal to import into the United States. When we do outbound marketing, we love talking to high-potential hardware startups, fashion projects on Kickstarter and anything that might small today but could possibly becoming a very big business some day.
One of our investors connected us to the head of logistics at Lululemon. It was a learning opportunity for us—not a sales pitch—but it was very interesting to learn that they still use the same freight forwarder that they did when they were doing only $1.5 million in revenue. Now, they’re doing $1.6 billion in revenue. That informs our strategy. We think we can get some really high-potential companies, lock them in early and keep their business as long as we do a great job for them.
We’re in a huge industry: $8.3 trillion is spent on logistics every year globally. We are definitely a small fish trying to change a very big industry. This industry is very old school — there’s almost no use of technology. It’s still pieces of paper being pushed around the planet to accompany all these shipments. It’s pretty much the same system that’s been in place since the age of mercantilism.
Those systems do work; they’ve been around for hundreds of years. Our system is brand new; we’re starting from scratch. We’re reinventing everything around the digital document record and transfer of data that goes in parallel with the shipments. The software is very good, and our team is very good, but our processes are brand new so we still have a learning curve. I think we probably do some things less efficiently than our old school competitors because we’re so new and we’re still learning.
That’s our biggest challenge right now: figuring out the ideal process. A lot of it comes down to interacting with other companies. We’re probably never going to be big enough to do everything ourselves. In fact, we don’t want to ever own the ships and the planes and the trucks. We’re a software layer that sits on top of and connects the people who deliver those services and integrates them into a single unified dashboard. Interacting with those companies is very hard. They don’t have APIs. They don’t even use software in many cases. They’re still doing everything with pen and paper. We even have job applicants from competitors who say they want to work for us because they are sick of using a typewriter at work. I’m not making that up.
It’s a challenge because we don’t have the luxury of just ignoring those companies. We have to interact with them. There is no way for our software to talk to their software. We have to create ways to get their people to talk to our people or, hopefully, get their people to talk to our software.
From an engineering standpoint, it’s very interesting because it’s not just hardcore cutting-edge technology that we’re doing, although we do have some of that going on too. The more important problems we’re solving involve human-machine interaction: How do we get people to take actions that we want, using our software, whether it’s our customers or our partners? Those are some of the problems that we face and require us to be really empathetic as we design our systems.
“It’s okay with having ideas about more than six months out, but I don’t write them down—that’s my general rule—because you look stupid in hindsight.”
Some of it is timing. Customs changed the rules. It used to be that, as a customs broker, you could only clear shipments at your local port or your local airport. You had two types of customs worker: mom-and-pops, who served just their local region, and national ones that had an office in every region. With the rule change, now customs workers can clear shipments at any port or airport remotely and electronically. That’s what paved the way for a startup like Flexport. For the first time, a startup can serve a national market through the web.
At the same time, the cloud has become ubiquitous, and it’s so easy. We’re not solving new technological problems — we’re building a simple web application that coordinates it. It’s not that it’s easy, but from a technology standpoint, it’s largely things that have been done before: document management, messaging, a few things like that.
Those two forces paved the way for us. And then, it’s not a cheap business. We needed to raise money. It took a founder with a track record and at least some credibility with investors to get it going. My experience running ImportGenius helped a lot for fundraising. Although I had never fundraised before, we were very successful doing so.
I don’t like to plan more than six months ahead. It’s okay with having ideas about more than six months out, but I don’t write them down—that’s my general rule—because you look stupid in hindsight.
What we’re building right now, you could call it an Expedia for global freight. The ability for anyone to book air or ocean freight through the Web, from any port or airport in the world to any destination in the United States: that should be live by the end of this year. That’s the game changer. You’ve never been able to book global freight through the internet. I was a little bit shocked that this opportunity was still out there. It’s so big.
When that’s live and our marketing engine is running at full speed, I think the business is going to be unstoppable. I don’t see anything stopping us from becoming one of these enormous global franchises. We will certainly encounter problems I’m not yet imagining. I’m sure that it won’t be easy sailing, so I don’t like to make forecasts. But if all goes according to plan, I don’t see anything stopping us from being a public company within three to five years.
What’s your current state of mind?
I'm having the time of my life.
When and where were you happiest?
Happiness is an ephemeral state. I try not to get too attached to it.
What is your idea of misery?
Doing things that you don’t want to do.
What is your greatest fear?
What is your greatest extravagance?
My house in Lake Tahoe.
Which talent would you most like to have?
My brother’s level of discipline and focus.
Which entrepreneur do you most admire?
What’s your favorite quote?
“Do the thing you fear and the death of fear is certain.” -Ralph Waldo Emerson
What book are you reading right now?
Arguably by Christopher Hitchens.
What’s one thing you’d do if you knew you couldn’t fail?
I'd have to ask out like a Victoria's Secret model.
I have way too many. A lot of our customers are in that space, so we end up buying their products to support them and to learn more about them, and we’re really interested in this stuff. I probably own eight.
The space is going to be so interesting. A lot of the applications are gimmicky and trivial, and yet, that’s how most interesting things start. If it wasn’t being called gimmicky and trivial, it probably wouldn’t be an interesting space. But when you look at products like that fork that makes sure you don’t overeat — that sounds trivial, but actually I need that.
There will be a few standard platforms emerging to connect all these things to each other and give you a unified view into quantifying more things and giving you more data. Hopefully it leads towards people living healthier, happier lives with less stress. As we get wealthier as a civilization, I think it would be nice to not just make more money, but reduce stress. I think that’s one of the big promises of the Internet of Things. Once the technology is mature, a lot of routine jobs can get automated and not have to be a source of anxiety to the owner. Even something that feeds your dog for you: that’s a stress reliever. That’s my hope for it: that it reduces stress. But I think in the shorter term it’s probably going to fail at that because the devices will break and fail and cause you more anxiety and stress.
What question would you pose to another founder or influencer?
What do you think about intellectual property when working with manufacturers?