Just because a business solves a problem, starts with huge resources, and gets a lot of publicity does not guarantee success.
In fact, the internet era has been littered with noble good ideas that end up in bankruptcy. Many companies over the past couple of decades have married a genuine business need with and concept that appeals to people looking to do better for the planet.
That's a great marketing strategy especially when the benefit to the planet comes from being more efficient and actually lowering prices. The problem is that having a good idea and an ESG (Environmental, Social, and Governance)-friendly model is only a start.
You still need to win over customers in markets that are often very competitive. Plant-based meat companies like Beyond Meats (BYND) -) and Impossible Foods help the planet by, in theory, cutting down on meat consumption, which has environmental and health benefits, but both companies have struggled.
That's not because they're not good ideas, but because they still have to win consumers over, and even after they do that, they risk losing hard-won customers to later-to-the-party plant-based brands created by the same meat-selling companies they hope to displace.
Succeeding with any startup is a challenge even when the company starts with a good idea, hundreds of millions of dollars, lofty ideals, and the backing of a billionaire. Still, the sudden death of Convoy, a company trying to make the trucking and freight industry more efficient, which had backing from Amazon (AMZN) -) founder Jeff Bezos, was surprising.
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Convoy had noble intentions
While Amazon presents itself as a retailer, it's really a logistics company. The online giant has invested billions in being as efficient as possible. That includes everything from the robots in its fulfillment centers to its fleet of airplanes, its tractor-trailers, and the vans doing much of its last-mile delivery.
Bezos, essentially, has had a front-row seat in seeing the inefficiencies of the freight industry and invested in Convoy, a startup that could help companies be more efficient while also helping the planet by using its technology to end empty miles. In fact, the company shared two major problems on its website that it intended to solve:
- 35% of all miles driven are empty miles, leading to waste
87 million metric tons of CO2-equivalent emissions result from empty miles
Cut down the empty miles and you not only help the planet, you lower costs for shippers and deliver more revenue-producing miles for drivers.
Convoy ran out of money
Despite its noble ideas and deep-pocketed benefactor, Convoy was not able to disrupt what it identified as an $800 billion market. The company, which also counted Bill Gates, Bono and The Edge of U2, Salesforce's Marc Benioff, and former Sen. Bill Bradley as investors, unexpectedly shut down on Oct. 19.
The company has not fully closed. A letter from CEO Dan Lewis to employees said that its core business operations would be shut down immediately while some staff would be retained to wind down operations and for "potential future strategic options' TheLoadstar.com reported.
Lewis blamed the collapse on the freight market contracting and capital being much harder to raise.
“This combination ultimately crushed our progress at the same time that it was crushing our logical strategic acquirer – it was the perfect storm,” he said.
Lewis left open the possibility that parts of the company could be sold or continue in some fashion. He noted that the company did try to sell itself but was not able to.
"Most of (the) logical strategic acquirers of Convoy are also suffering from the freight market collapse, making the deal doing that much harder," he shared.
Convoy has not formally filed for bankruptcy protection.
