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Cargomatic: When Disruption Goes Wrong

The ‘Uber for truckers’ has all but run out of steam

5Sep

The word ‘disruption’ is thrown around so much in the tech space that it’s becoming a little tiring. So many companies are setting out to recreate the overwhelming successes of the likes of Uber, Airbnb, and Netflix that it’s almost becoming impossible to overturn an industry by definition - there’s too much competition almost immediately.

Even so, the workforce is erring towards the smaller, more agile company, with less and less talent being funnelled directly into existing incumbents. The prospect of being a part of the next great tech game changer is an appealing one, and inflated investments allow startups to pay competitive wages. But with agility can often come instability, and the failings of ‘Uber for trucks’ startup Cargomatic stand as a cautionary tale to any would-be disruptive company.

The idea behind Cargomatic is as simple as it is good - one of those ‘why didn’t I think of that’ strokes of genius that has investors hot under the collar. Essentially, Cargomatic connects companies who need products moved with truckers with empty vehicles. In Uber style, the truck driver can accept jobs based on their distance and location and, in theory, never have an unnecessarily empty load. Cargomatic only occupies the short-haul space, but with vast trucking networks spread across the US, the space for expansion is exceptional.

Cargomatic’s investment reflected its potential, but the success of the core product didn’t. According to Business Insider, the startup moved away from the Uber model when adoption of the app was underwhelming - ‘in the less-than-truckload space… you need to have density in order to succeed.’ Cargomatic in a sense became more of a traditional brokerage business, which betrayed the very detail that made it such a popular concept to begin with. Its founder, Jonathan Kessler, remained bombastic as the company ran at a loss, claiming it was ‘a couple years ahead of where [the competitors] are.’ With nearly $15 million of investment and bank loans burned through, though, Cargomatic is currently dependent on one sole customer to keep the company going.

The startup, which now relies on the manual inputting of information from its staff - a significant step away from the automated, pick up and play ease of an Uber system - has struggled to raise funding since early 2016. It’s digital-first simplicity made the company not just attractive to staff members and users but investors, too, and since the diversion investment has dried up. As a result, 50% of the workforce was laid off (more than 50 people) in April, as its CEO, CFO, and COO jumped from what they clearly saw as a sinking ship. When a disruptive company kills off its established yet archaic competition, it’s celebrated as a paragon of innovation; when it falls off a cliff after an incredibly promising start, it does so with a dull thud, never to be heard from again.

Cargomatic is by no means dead, but it’s certainly on life support. According to Business Insider, ’as the company continues to spiral down, one of its cofounders is jetting around the world on vacation and employees use a private Slack channel to look for new jobs.’ Clearly, the writing’s on the wall at the once promising company, but the business model is still a good one. Someone will pick up where Cargomatic left off, though the race to the top will be a slow one given the number of copycat companies that have sprung up since its conception.

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