MCC: What does your company do?
Stanzione: Our platform, LaneHoney, makes it easy for truck carriers and shippers to transact directly without brokers. We handle everything from onboarding carriers and verifying their insurance and safety credentials to matching, mobile dispatching, tracking of shipments and producing all trip documentation for the carrier and shipper. We also handle the post-shipment settlement process: we produce the carrier’s invoice, eliminating error and fraud from the process, and we handle payment to carriers. All of it happens in real time. LaneHoney is part of a bigger trend of consumer-like applications transforming the enterprise.
MCC: What problems do you solve?
Stanzione: We saw a big need in the trucking marketplace for a new way to transact that was simple and clear. Our platform gets out of the way so that users can focus on what matters to them: moving freight with a reliable carrier at a good price.
The trucking market, $670 billion in size, runs on inefficient craigslist-type bulletin boards and expensive phone brokers who build and conceal a spread, keeping buyers and sellers apart. So connectivity is the first problem we solve. The second is transparency: the pricing on LaneHoney is transparent and user-generated. We take an expensive middleman out of the process, and we find freight for carriers with empty trucks, making better use of their assets. Everybody wins.
MCC: How does it work?
Stanzione: To get started, carriers and shippers come onto the LaneHoney platform. We instantly verify and on-board carriers, making them immediately available for hire. In the offline world, it takes a carrier 4-6 hours to find a load on bulletin boards and then get qualified with a broker and negotiate a rate on a one-to-one basis. Next, a carrier sees immediate matching shipments it can quote, and shippers see immediate matching trucks for their needs – all in a transparent many-to-many environment. We cut time to market from hours to minutes, put the pricing into a context of supply and demand, and make it one-click effortless for a shipment to be dispatched.
MCC: What is the advantage of using LaneHoney over the traditional model of using brokers?
Stanzione: Price, access to carriers, ease of use and 360-degree visibility on shipment progress. There is a carrier shortage right now, so finding a carrier and locking it down fast becomes important competitively. Unlike transportation management software and brokers, our platform supplies real-time visibility into a shipment’s progress, including time-stamped wait times and other frequently contested charges. Ultimately, our vision is to create a transparent, high-velocity spot market for truck capacity, starting with the intermodal container market segment. A typical enterprise customer of ours is doing 10,000 moves per week. We can handle that with a relatively small team.
MCC: How is LaneHoney disrupting the market? How is it different from its competitors?
Stanzione: We disrupt with transparency – of process, of price and of supply and demand. We are different from competitors in a very important way: we don’t set prices, our users do. All of our “Uber for Trucking” competitors are truck brokers. They set the prices and build and conceal a spread. That is the very model we disrupt. Our well-defined niche strategy also sets us apart. And we have a technology advantage in our engineering team: our CTO is the protégé of the head of Google Commerce. He personally invested and serves as our technical advisor.
MCC: What are some of the risk issues that LaneHoney helps shippers and truckers address more easily?
Stanzione: As a former operations risk officer for financial institutions, I see some interesting risk and compliance issues for the enterprise cropping up that I don’t believe the current bar has a handle on, based upon what I know of carrier verification processes.
The first is an operational risk regarding the insurance coverage and safety qualifications of the carrier. The industry is a laggard in this respect. Bad data that forces manual processes at the hiring level leaves enterprises exposed. For example, even at the largest, most sophisticated enterprise, carriers send in a “carrier packet” which consists of a signed contract, a W9 and an insurance certificate. Verifying this intake information is a manual process. That’s a risk hand-off. And the friction of manual processing means that a carrier can’t be used at the moment he’s needed, putting a drag on shipments and, ultimately, on revenue. The demand for carriers is so great that many times old documents are relied upon and risk processes are overlooked in order to tender a shipment.
The second is pure data risk. The hiring enterprise is dependent upon FMCSA insurance and safety data, which is in dispute and is unfairly weighted against smaller carriers. As provided by the insurer, the FMCSA’s data of a carrier’s insurance coverage is a bigger problem because that data is in error 95 percent of the time. The insurer is only required to report that the carrier meets the federal default standard of $750,000 general liability and $5,000 cargo amounts, not the actual amounts. The unreliability of the data forces enterprises to verify the information manually. LaneHoney has been able to solve this verification problem by automating most of the verification process. Regulators could address some of these issues, but tools are needed in the trenches right now.
Next is platform risk. Because on-demand platforms operate outside the cozy firewall of an institution in reaching out to spot-market carriers, an enterprise needs assurance that the platform keeps competitive information confidential. LaneHoney solves for that by generating random reference numbers for shipments and available trucks, and through matching based on a shipper’s precise hiring specification. We also provide carrier performance data across all shippers and, specifically, report if a carrier has already successfully worked for a shipper. We share that information with carriers too. Rating transparency drives performance and compliance.
MCC: It sounds like there’s an assumption that data behind a firewall is safer.
Stanzione: Yes, but that attitude is changing. Trucking is a laggard industry using 10-year-old systems. Many decision makers are contending with a new and rapid pace of change. In order to stay competitive, they face a steep learning curve in embracing both a platform change from enterprise to mobile and a focus change from enterprise demand to users’ experience. Enterprises have to understand and take advantage of new technology that yields price and process efficiency. For their part, the truckers are ready. There is a significant opportunity cost and competitive risk to being off the new game board.
Further, the degree of friction within any process is the new measuring stick in an on-demand world. For us, it’s exciting to offer a new competitive advantage to our customers as first movers in a tight-capacity market. In addressing friction risk, we have made it dead simple to be transactional in minutes, at scale. There is no learning curve. Simple, seamless platforms allow shippers to ditch the expensive, long and ineffective procurement process in a growing spot market. To survive, start-ups need a long sales cycle as enterprise decision makers grapple with a new opportunity. LaneHoney is lucky to have early-adopter customers who get the long-term value proposition and want to provide liquidity so they can see the platform’s effect in their bottom line.
In the current environment, in relying entirely on a broker, the shipper typically knows nothing about the carrier. Broker risk is what keeps the lawyers up at night. In reality, a broker is incentivized to provide the cheapest carrier, not the best, which often leaves the carrier resentful in being underpaid and, therefore, incentivized toward theft. Using any intermediary that forces a shipper or carrier into a one-on-one negotiation without a say on price leaves the shipper open to performance and price risk. Call five brokers and you will get five single quotes all over the map, with no insight into carrier quality. Use LaneHoney and you will get 50 competitive quotes direct from carriers meeting your specifications.
Finally, there is post-trade risk. This is the “Uber”part of the equation. Freight invoices are fraught with error and fraud, which LaneHoney eliminates with a standardized process and time-stamped and GPS-verified data. We produce the carrier’s invoice and pay the carrier on behalf of the shipper, eliminating the need to audit and the need to field and process hundreds of kinds of invoices. The back-office savings alone makes our service free.
MCC: How do you view your competitors?
Stanzione: There are two reasons why we don’t really concern ourselves with the competition. First, they are displacers, not disrupters, and the market is so big that there could be 10 successful exchanges in any segment. Lastly, as I mentioned earlier, we enjoy an unfair technical advantage in our engineering team and technical advisors. So, we feel well positioned to help our users operate more efficiently and earn better margins in this enormous fragmented market.
MCC: Describe your revenue model. What is your value proposition to potential investors?
Stanzione: LaneHoney charges a transaction fee for each trip, from 5 to 20 percent depending on the trip type. An example of a typical fee for us is a full truckload short haul of 40 miles. We earn a $100 fee. For a long haul we earn as much as $700.
At scale that is a significant revenue opportunity, one that represents a substantial return for our investors. With our first few enterprise customers, we have transaction opportunity of more than 40,000 transactions per week. If we can connect a fraction of that opportunity, we project LaneHoney will break even quickly.
Published May 1, 2015.
