New Freightos funding propels indices and associated futures

New Freightos funding propels indices and associated futures


Logistics providers.

A new breed of commercial solutions, mostly developed by startups, aiming to reshape price discovery and ease of quoting, has engendered new possibilities when it comes to freight derivatives. Photo credit:

Freightos has received a $44.4 million round of funding, led by the Singapore Exchange (SGX), to scale its online international freight marketplace, launched in 2016, signaling how new technology has rekindled the concept of rate indices as an associated derivatives market.

A new breed of commercial solutions, mostly developed by startups, aiming to reshape price discovery and ease of quoting, has engendered new possibilities when it comes to freight derivatives. If these new solutions — specifically freight rate marketplaces or crowd-sourced rate benchmarking tools — get enough traction with shippers, they could eventually underlie a move toward the use of derivatives by forwarders, carriers, and beneficial cargo owners (BCOs) to hedge underlying contracts or spot market purchases.

The investment could be seen, on the surface, as yet another bet by investors on the power of emerging logistics technology solutions. It brings the amount that Freightos alone has raised to nearly $100 million, putting it only behind the freight forwarder Flexport in the amount of funding raised by startups in the international logistics space. But this particular round of funding is significant in a different way, because it is directly tying Freightos’ ability to create freight rate data in both ocean and air cargo with the idea that it could lead to the creation of a securities market based on that information.

Freightos, one of the most prominent names to emerge in the current wave of technology startups addressing the international freight industry, has evolved into a multifaceted company with different products for different parts of the industry.

It provides software-as-a-service (SaaS) systems to help forwarders manage freight rates and automate quotes, in competition with providers such as Catapult, CargoSphere, Info-X Software, and Freightgate. Its marketplace is an online tool to match buyers and sellers of freight. But Freightos founder and CEO Zvi Schreiber told he sees his company as a “platform for digital interactions between all players in international freight.”

That includes what he called a “data hub and data standards to allow communication between the players. We do see industry data, indexes, and derivatives as an important future aspect of the platform allowing the industry to move to dynamic pricing instead of fixed-price tenders that really don't work."

Reliable indices are required to provide a baseline for derivative products, but also for instant quoting, proponents argue.

Schreiber said that most of Freightos’ revenue currently still comes from SaaS products (rate and sales management for service providers and a little bit for enterprise shippers). “Our marketplace is bigger in terms of bookings but from an accounting perspective we only book our actual fees as revenue. So actual marketplace revenue is still a minority of revenue but growing very fast — at least 20 percent per quarter or 100 percent per year.”

It has long been Schreiber’s contention that the long-term contract rate culture in liner shipping doesn’t serve small and medium-sized shippers or large BCOs well. On the small and medium enterprise side, a lack of leverage pushes them into spot markets that have traditionally been opaque. On the large BCO side, annual contracts don’t reflect the realities of more dynamic consumer patterns that demand more flexibility with regard to weekly freight allocations. He’s made the comparison to electricity consumption, with large BCOs having a “base load” that’s automatic every week, but a variable component that doesn’t jive well with annual procurement.

Another startup, Xeneta, uses crowdsourced contract freight rate information to provide its customers with benchmarking. It launched an index of its own over the summer based on its data. 

Freightos handles more than 1 million instant freight quote requests every month, based on over 1 billion rate data points and routing and pricing engines, the company said. The company’s global rate database also underpins the Freightos Baltic Index (FBX), a container freight index the company started in April with the Baltic Exchange, which is part of the SGX group.

“Xeneta has more market intelligence for negotiating annual fixed tendered rates while Freightos has by far the biggest data set for short-term rates,” Schreiber said. “I would point out though that in line with all other industries, freight is starting slowly to transition to floating index-linked rates rather than fixed rates and that's where FBX with the backing of SGX is a key resource for the industry.”

Freightos — at the forefront

Michael Syn, head of derivatives at SGX, said, “Freightos is at the forefront of a new wave of solutions for price discovery and digital marketplaces in global freight — an industry at the heart of the global economy. SGX is excited by the potential to develop risk management tools and services, and build on Singapore’s unique position in the trade ecosystem, to bridge the physical and financial markets.”

But is that hopefulness realistic? Even with a new generation of tools that could empower dynamic pricing and quoting, the ocean freight industry has been slow to warm to any significant change to procurement processes. That’s especially true for large BCOs that see their leverage tied to annual offline contracting, where they can negotiate out surcharges and get preferential base rates. Large BCOs generally want their rates to be competitive relative to their peers but need to lock in capacity to ensure goods hit store shelf or e-commerce time windows. Due to this underlying need, they have shown little interest in participating in the freight market as they would in the foreign exchange market, for example.

That said, there has always been a school of thought that the container market, indeed freight markets generally, is really a financial market, just one that has yet to take shape. Freightwaves, for example, is planning to release a trucking futures contract. But most big BCOs reject that point of view, arguing they aren’t financial players in relation to freight transportation; rather they are retailers or suppliers that source goods in one location and need to get them into stores.

In the aftermath of the financial crisis, a group of well-regarded organizations in the financial and shipping industries including Morgan Stanley, Clarksons, and ICAP set out to create a market for containerized freight rate derivatives. The idea seemed sound on its face, but despite intensive marketing, it never was able to gain the necessary liquidity to become a viable marketplace and eventually went dormant. With few buyers (shippers, freight forwarders, and BCOs) and especially sellers (carriers) willing to use the market to hedge actual underlying buy or sell positions, it eventually faded away — another concept intended to improve a volatile market that never took hold.

Attitudes can change, though, and the amount of money flooding into logistics technology empowering new pricing and quoting mechanics could eventually be the catalyst for that change.

“Startups don’t want to create a business that does something,” Kurt Cavano, president of GT Nexus said Thursday at project44’s Transform 2018 Executive Tech Summit in Chicago. “They want to disrupt an entire business.”

Cavano said the amount of available capital, computer processing power, and the sheer number of entrepreneurs addressing supply chain as a whole suggest that industries will be irrevocably altered.

“All these companies have access to more capital than we can even think of,” he said. “It’s going to disrupt almost every business out there. There’s so much cash around that’s not been here before.”

Cavano suggested there is more than $1 trillion of “dry powder” from venture capital and private equity entities across all industries. “That’s money committed to be invested that’s looking for a home. You could give 10,000 startups $100 million each with that. We have this transition taking place. It’s a recipe for something amazing or a disaster.”

The latest funding round for Freightos includes new and existing Freightos investors, including General Electric Ventures, ICV, Aleph, and others.

Contact Eric Johnson at and follow him on Twitter: @LogTechEric.