Matrix Partners bet early on Apple and FedEx. Here's why the VC is now investing millions on a trucking startup.

• Los Angeles-based truck-brokerage startup Dray Alliance announced Wednesday that it raised a $10.2 million Series A round.
• Dray Alliance connects truck drivers and shippers in the ports of Long Beach and Los Angeles - where nearly a third of all containerized goods exported to the US arrive.
• Matrix Partners, a venture-capital firm that has $4 billion in assets under management and bet early on Apple and FedEx, led the investment.
• The investment comes as other truck-brokerage startups struggle. Next Trucking, which is Dray Alliance's nearest competitor, laid off 70 last month.
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Trucking startup Dray Alliance, founded in 2018 by three childhood friends, announced on Wednesday that it raised a $10.2 million Series A round.

The lead backer is Matrix Partners - a venture-capital firm with $4 billion in assets under management, which bet early on Apple and Fedex and is currently an investor in companies like Namely and Quora. It's Matrix Partners' first investment into the increasingly buzzy supply-chain startup space, which attracted a whopping $19.3 billion across 534 deals in 2018, according to Pitchbook.

Dray Alliance joins a growing number of startups dedicated to eliminate inefficiencies from truck brokerage, in which truck drivers and retailers are matched to move goods. Convoy, recently valued at $2.75 billion, is among the buzziest in the truck-brokerage space, and Uber and Amazon have both launched their own brokerages.

But Dray Alliance CEO Steve Wen, who is one of the cofounders, is building a business within the $50 billion drayage industry.

Drayage is the short-term movement that takes containers from ocean freighters to trucks and trains - and then to your home or store. The largest space for drayage is the ports of Long Beach and Los Angeles, as nearly a third of all containerized goods exported to the US enter through there.

Dray Alliance said it provides on-time delivery of containers and faster rate quotes for shippers who use its web application, while drivers can use a mobile app that can help up their truck utilization.

Like in many areas of trucking, drayage is stymied by inefficiencies. Wen dropped out of college several years ago to start his own trucking company, which was when he noticed that truckers can wait weeks to get paid, often with a physical check, and drive scores of empty miles every day.

Drayage delays in the logistics industry result in some $348 million in unneeded costs, 15 million in lost work hours, and nine million gallons of wasted diesel annually, according to transportation consultancy Tioga Group.

"We started a company by making an app that helps truckers to easily find jobs in drayage, deliver those containers more efficiently, and get paid in one day," Wen told Business Insider.

Running a logistics startup amid the trucking 'bloodbath'

It's not the most fortuitous time for Matrix's first trucking investment. In the past year, truck drivers have described the recession in the $800 billion industry to Business Insider as a "bloodbath." Experts expect even more bankruptcies to slam trucking, particularly among small companies. Trade volumes declined last year because of the US-China trade war, and imports are set to sink even further because of the coronavirus.

Partially thanks to those headwinds, Dray Alliance's closest competition, Next Trucking, laid off 70 employees last month.

But Wen and Jake Jolis of Matrix Partners said Dray Alliance has one key advantage over its peers: It's just a technology company. That differs from logistics startups like Next and Flexport, which combine their technology with warehouses and other physical assets.

Meanwhile, Uber Freight's buzzy brokerage firm has raised questions from some in the logistics community for being a massive employer of truck brokers - despite positioning itself as the developer of a technology to replace the brokerage process.

"The most important thing is to do everything with technology that we can do to help truckers grow their fleet," Wen said. "So, we don't own any trucks."

Jolis, a partner at Matrix, highlighted that tech advantage as well.

"I think that the reason we got so much excited about the long-term business fundamentals of Dray Alliance is that this is a software company - not in the future, but today," Jolis told Business Insider. "Today, they do all their volume through software, and not third-party software that they've bought from somewhere else.

"It's not some consulting firm. They've built their own proprietary software that makes it so that they have very specific advantages that are completely different from others in this space."

Many investors in and out of the trucking world are moving toward asset-light businesses. The meltdown around WeWork, a real-estate company valued as a technology company, has galvanized companies to prioritize businesses without physical attributes. And spending on enterprise software is set to increase by more than 10% in 2020 and 2021, according to Gartner.

As for the slowdown in trade volumes, Wen said Dray Alliance's growth has kept rolling. The company has picked up partnerships with big players like Mattel and Maersk.

"There was a decline in terms of the monthly containers arriving at the ports," Wen said. "However, because we've grown 600% last year, so we basically kind of outgrown the decline in total container volume, because the technology we offered was so compelling for most of our customers."

As for Matrix's investment, Jolis isn't worried about the long-term outlook for America's seaports, or whether a company like Dray Alliance would be rendered unneeded; more than 90% of global trade is moved by sea.

"We are always going to need to import a lot of things, and that is going to come into our US ports," Jolis said. "It's just a massive, massive market. So, I think anybody that believes that drayage is going to not be needed or will go away, I don't know where we're going to get all our stuff from anymore."