One of the world’s top venture capitalists is spearheading a US$25-million venture capital investment into a Toronto startup that has set out to transform the software business for transportation companies.
Rose Rocket Inc. said Wednesday the financing was led by New York-based Addition Capital, whose founder Lee Fixel has made Forbes’ Midas list of the world’s 100 best venture capitalists for the past nine years.
New York-based Mr. Fixel, a former partner with private capital giant Tiger Global, made his name backing a string of tech winners including Peloton, Roblox, FlipKart, Stripe, Spotify and Coinbase. He launched Addition in 2019. Also backing Rose Rocket are ex-Spark Capital general partner Mo Koyfman through his New York-based Shine Capital and past backers Ripple Ventures, ScaleUp Ventures, venture capitalist Kevin Mahaffey, FundersClub and Y Combinator.
Rose Rocket is a fast-growing provider of a cloud-based software platform used by trucking and transportation companies to manage logistics and operations, including automated order entry, sending quotes, dispatching and tracking drivers and instantly sharing digital documents as loads are picked up and delivered. “We’re like the operating system of a trucking company,” said chief executive officer Justin Sky.
Although the company offers both free and paid versions of its software, most of its 600-plus clients – up ninefold in the past year – pay, including United Van Lines, Mayflower Transit and Trimac Transportation. Rose Rocket revenues are growing by 100 to 200 per cent a year and running in the high single-digit millions of dollars on an annualized basis.
Rose Rocket was co-founded in 2015 by Mr. Sky and fellow serial entrepreneurs Justin Bailie and Alexander Luksidadi, two of whom had previously worked in transportation logistics. They were keen to build a software platform for the transportation industry on par with offerings that were popping up to serve other industries – sold by subscription, hosted on the cloud, offered online, and easy to use.
By contrast, traditional software for the sector typically came from long-established vendors that specialized in serving specific types of companies, such as brokers, logistics providers, long-haul transporters, or last-mile delivery providers. Many of the offerings were dated, used only on company premises and not available online nor sold by subscriptions (many trucking companies used little more than spreadsheets).
“The market is big, and when we looked at it, underserved and forgotten from an innovation standpoint,” said ScaleUp general partner Kevin Kimsa, who first invested in 2017.
The established programs that were available at the time typically didn’t talk to or connect with one another, even though companies in the sector increasingly worked with one another to specialize in the parts of the process that they handled best. “A trucking company in Calgary might use a final-mile delivery company in Toronto and instead of opening a terminal in Toronto they just work together,” Mr. Sky said in an interview.
Rose Rocket built a modern, streamlined cloud-based system that also integrated with existing software used by transportation companies. They further adopted a networked approach that allowed customers to let their partners peer into their system to track deliveries in progress. “What they’re building digitally integrates trucking and supply chains beyond anything we’ve seen to date,” said Matt Cohen, managing partner with Toronto-based Ripple.
That helped the company rapidly expand and gain Mr. Fixel’s attention. “Having software that can work in the head office and across head offices is quite novel and unique [in the industry] and is our greatest competitive advantage,” Mr. Sky said.
Michael Melwicks, president of Moto Transportation Services Corp., a 25-vehicle trucking company based in Vancouver, has been a Rose Rocket customer since 2017. He said its software is “unparalleled” in the way it brings different players onto the platform, enables data sharing between partners and provides real-time visibility into deliveries in progress. “If you’re a shipper or carrier it instantly adds value to your business.” He added “our customers absolutely love the product, probably more than we do,” because they can use it to track orders. “It’s like a backstage pass into our business.”
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