Trucking compliance solutions startup LogRock announced Thursday it has raised $3.5 million in seed funding led by Dynamo Ventures with participation from QED and 9Yards Capital to continue growing its team and platform to automate carriers’ compliance processes.
“Ensuring companies stay compliant certainly isn’t the sexiest venture, but in the trucking industry, it’s one of the most important aspects to get right,” said Jon Bradford, managing partner of Dynamo Ventures. “At Dynamo, we get excited by visionary founders that understand the importance of bringing powerful technology solutions to overlooked opportunities like this, which is why we’re thrilled to back LogRock.”
This is LogRock’s first raise and values the company at $13.5 million, according to Pitchbook.
The company was started by two former Loadsmart employees, Hunter Yaw and Joao Bosco, who quickly learned the vast amount of automation that could be applied to the supply chain industry, including freight matching, pricing, scheduling and back-office management.
“I think we found that the experience of Loadsmart, more than anything else, gave us a sense of how extraordinarily large the opportunity space is to add value to folks in supply chain, shippers and trucking companies through technology,” Yaw told FreightWaves. “But at the same time, it also made us conscious of the limits of trying to do too much at once. … What we wanted to do was focus on a more narrow problem space, something which we felt that we could tackle with a single product.”
The duo reached out to Pavel Botev, the owner of Chicago-based Logiflex, a trucking company with about 150 trucks.
“It often feels like trucking companies are underserved in terms of investment in solving very specific problems for them,” said Yaw. “So we asked Pavel what keeps him up at night.”
From that conversation the co-founders of LogRock learned that there are a lot of problems that keep trucking company owners up all night, many circling the overall issue of compliance.
“First of all, compliance is a data problem and second, it’s a real money problem for trucking companies,” said Yaw. “Compliance is a trucking company’s bottom line, but the really tricky thing is that a lot of trucking company owners don’t fully appreciate compliance because it can be mind-boggling.”
Compliance issues can include vehicle maintenance, hours-of-service records, drug and alcohol testing standards, and driver qualification files.
If authorities find out about any recurring issues, the carrier could potentially be put out of service, limiting the amount of revenue that trucking company can make. It also could damage its reputation, affecting a trucking company’s broker and shipper relationships.
“As the freight markets are predicted to cool over the coming months, motor carriers will also need to maximize their competitive advantage when competing for premium freight from shippers and brokers,” said Bosco, LogRock’s COO. “Carriers who can prove they have a strong safety record and are fully compliant will have an edge in this battle.”
Even more discouraging, if an accident occurs and the carrier is brought to court, it could more easily than ever before find itself in a nuclear verdict situation, which occurs when a verdict awards more than $1 million to a victim.
While historically it has been difficult to sway jurys to be empathic toward a truck driver, being able to present years of data showcasing proactive problem-solving and good behavior could help with the carrier’s legal defense.
Combining legal risk and reputation problems that come with compliance issues have also contributed to the rising insurance costs carriers struggle to afford.
“In the last 10 years, insurance costs have gone from about 6 cents a mile to 9 cents a mile and all that is going straight to the trucking company’s bottom line,” said Yaw. “The combination of these situations — insurance litigation and the risk of losing access to freight due to safety scores going down — makes it essential for trucking companies to be on top of compliance.”
With LogRock’s compliance automation technology, Botev of Logiflex can finally get that sleep he deserves.
“LogRock treats compliance as a data problem, checking every detail in real time, giving us insight on where we need to take action to be 100% compliant and helping me understand how we are performing compared to our peers. I sleep better knowing that, because of LogRock, when the FMCSA comes to inspect me or documents are subpoenaed, there are no gaps in our armor,” said Botev.
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