CloudTrucks CEO Tobenna Arodiogbu
CloudTrucks
With supply chain problems persisting throughout the country as the holiday shopping season ramps up, the trucking industry is experiencing severe staff shortages, with some 250,000 drivers leaving the industry last year. But truckers are not calling it quits for the reasons you might expect, according to Tobenna Arodiogbu, who has started two companies in the space.
“There is all this data about a truck driver shortage, but if you talk to the drivers, they’re complaining about all these things that don’t have anything to do with driving,” Arodiogbu says. The complaints, he realized, largely came in administrative challenges like finding insurance and maintaining government compliance. In turn, drivers who might want to run their own business were turning to lower paying jobs at large trucking carriers and businesses such as Pepsi, or they were quitting the field altogether. “If we could build a solution for them to help them manage their business, then the job would actually be a lot more desirable.”
Enter CloudTrucks, a startup that makes software for trucking entrepreneurs to manage their operations. Launched in May 2020, the company caters to the “owner-operator” segment of the 3.4 million truck drivers in the United States—small or single-person businesses run by independent truckers. Arodiogbu, the CEO and cofounder, estimates there are as many as 1 million such drivers in the country today. “We found that more and more people want to be independent in the trucking industry, but it’s just really hard to do so,” he says.
CloudTrucks announced Tuesday that it had raised $115 million in a Series B round led by Tiger Global and Menlo Ventures, with additional investment from freight forwarding startup Flexport. The raise brings the San Francisco-based startup’s valuation to $850 million and comes close to one year after the previous funding round, which drew investment from the likes of Khosla Ventures, Caffeinated Capital and David Sacks’ Craft Ventures (all of which made follow-on investments in the new round).
The company is Arodiogbu’s second foray into trucking. Previously, he had worked as a product manager at software companies Zenefits and Opendoor, but an entrepreneurial bug—which he credits to his time working in his family’s soap factory in his native Nigeria—led him and Zenefits colleague Usman Ghani to begin pitching each other on broken industries for which they could try to build tech solutions. They settled on trucking, and started Scotty Labs, which ultimately became a software maker for remotely controlling vehicles before being acquired by DoorDash in 2019. “With Scotty Labs, the idea was that the driving job is really tedious,” Arodiogbu says. But the more time he spent talking to drivers, the more he realized the tediousness came from the administrative components. To tackle the issue, Arodiogbu started CloudTrucks, teaming up with Jin Shieh, another former Zenefits colleague who is now chief technology officer, and George Ezenna, a fellow Nigerian who he hired at Scotty Labs (Ghani went on to become CTO for credit card firm Aven).
CloudTrucks follows a wave of startups bringing digitization to industries historically ignored by venture capitalists. Its app includes a database of potential delivery jobs, a payments system for drivers to receive income instantly instead of waiting weeks and an option to let CloudTrucks take care of insurance. Taken together, it works as a one-stop hub for drivers to manage their business, instead of resorting to a bevy of decentralized tools.
The startup makes money by taking 6% to 15% of a driver’s earnings, depending on how many of its services are being used. Jason Hurley, a Wisconsin-based driver who runs a one-man operation, says that even with CloudTrucks taking a 15% cut, he has been able to keep more of his earnings compared to when he worked as a contractor for trucking firms such as Schneider National.
Arodiogbu says he sought out new funding—which will be focused primarily on building deeper into CloudTrucks’ existing features—because he felt the company had made enough progress in its business performance, pointing to an 9.5-fold increase in revenue since its previous round last December. He declined to provide a concrete figure, though Menlo Ventures partner Steve Sloane confirmed that its investment came as part of a fund which targets companies with $5 million to $15 million in annual recurring revenue.
To Sloane, competition—coming from legacy trucking giants like Schneider and Landstar, smaller regional companies, as well as other nascent startups like TrueNorth and SmartHop—is not much of a concern because of the long tail distribution of the trucking market, which last year generated $730 billion in shipment revenue according to the American Trucking Associations.
“I look at CloudTrucks as enabling a part of the market that was either super fragmented, or just didn’t exist at all because it was too painful for [some truckers] to put all these things together to be an independent professional,” he says.
