Craig Fuller is the founder and CEO of FreightWaves which is a data and content forum that provides market participants with near-time analytics. The company has raised over $75 million from investors such as Revolution, Pritzker Group Venture Capital, 8VC, Hearst Ventures, Story Ventures, and Ascend Venture Capital to name a few.
In this episode you will learn:
- Working with family
- The unforeseen challenges of taking money from family and friends
- The one key focus that took his business from one customer to 400
- How to get in touch with Craig fuller
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About Craig Fuller:
Craig Fuller is the Managing Director of Blockchain in Transport Alliance (BiTA), the freight industry’s first advocacy organization devoted to the development of blockchain standards and education.
Since its inception in August 2017, BiTA has over 130 active members and 700 applicants; membership is comprised of a consortium of technology enterprises, manufacturers, carriers, and logistics technology organizations committed to implementing blockchain technology in transportation. Craig Fuller is a serial entrepreneur with extensive experience in the freight industry.
Craig Fuller is the CEO and Founder of TransRisk, a data intelligence and financial products company serving the freight industry. Founded in 2016, the company’s products include: FreightWaves, the number one independent media website in freight with over 3 million impressions per month; a robust data platform capable of providing unique and predictive insights into the trucking industry; and trucking futures contracts that will soon be listed on a major commodities exchange.
Prior to founding TransRisk, Craig Fuller was the founder and CEO of TransCard, a fleet payment processor that was sold to US Bank.
Craig Fuller also has been deep in the industry, having founded and managed the largest provider of on-demand trucking services in North America the Xpress Direct division of US Xpress Enterprises.
Connect with Craig Fuller:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today, we’re going to be talking with a great dealmaker, one that definitely has done it a few times, and I think that today, we’re going to learn a few things. So, without further ado, let me welcome our guest today, Craig Fuller. Welcome to the show.
Craig Fuller: Alejandro, how are you today? It’s great to be here.
Alejandro: Yeah, so Craig, originally born in Tennessee. How was life growing up there?
Craig Fuller: You know, it’s great. Chattanooga is a big, outdoors town. Two things that Chattanooga is known for outside of a city are: one is being a big outdoors community, and the second is having the fastest internet in North America. If you think about COVID, in a COVID world, it’s actually ideal. Those things are serendipitous in terms of the environment. So, we benefit from having high-quality internet, and you can work from home anywhere, and being an outdoors city gives people the opportunity to get outdoors and not be clustered in close quarters.
Alejandro: How did you get into all this entrepreneurial and business-type of drive? Did you have anyone in the family, or how did this come about?
Craig Fuller: Yeah, I follow a long line of entrepreneurs and founders. My great grandfather owned a farm and did some transportation trucking. My grandfather was a pioneer of the long-haul trucking industry in the 1960s and built a patriarch of long-haul trucking. Then, he had two sons. One was his biological son, my father, and one was a stepson, my uncle, and they went on to start two very large trucking companies. My dad started a company by the name of US Xpress, which has about 12,000 employees today, and my uncle started a company called Covenant Transport, which has about 5,000 employees. They both had built these very large freight businesses, and I wanted to be like my dad and wanted to be an entrepreneur like my father. He taught me a lot about running a business and also taught me a lot about transportation.
Alejandro: It’s funny now. You actually went to University, studied business, entrepreneurship, also did your Master’s Degree, and you also worked for the family business. So, how was that experience?
Craig Fuller: Yeah. I was in the family business and worked for my father. There are great things about being in a family business, and there are a lot of things that make it harder to be in a family business. I wouldn’t change it for the world. I think anyone that’s fortunate enough to be born into a family business if you’re going to be an entrepreneur, it’s the best training ground. It’s far more valuable being in a family business and having a family entrepreneur as a father and mother, for that matter, because they teach you how business works. It’s far more valuable than an MBA program or any type of degree program because you actually are seeing them scope their business in real-time. They bring it home, and they talk about stuff at the table. If you’re like me, and you adore your father and idolize him, you find that the most effective way to learn is to spend time with him and learn what makes him tick is to learn the business, and that’s what I did. I soaked up all the knowledge that I could from my dad. He taught me two things. One was about how to run a business, and the other was how to run a trucking company.
Alejandro: At what point did you decide it was your time to shine because you spent almost a decade there? So, why did you say, “I’m going to go at it on my own?”
Craig Fuller: You’ve got to remember that the decade I was there was when I was a teenager. I was learning. My dad started his business in 1985, and it was a family business, a bootstrapped family business in those days. He grew it really fast, and in 1994, he took it public, so I would have been 15, 16 years old when he took it public, and I became the business’s first help-desk technician. I was running wires and loading, and in those days, it was MS-DOS. I became a local help-desk for the company and did all sorts of odd-end jobs. Then I learned how to dispatch trucks, wash trucks, and maintain trucks, and all the things you need to do as a truck company executive. I really got a lot of pertinent knowledge even though I was a teenager. But I had been going to the office with my dad since the day he started the business when I was six years old and spent a lot of time with my dad. So I had a decade-worth of experience, and I was 24 years old when I left the family business. I had gotten this idea in college. They had started an airfreight business when I was in college, and I started selling airfreight, and I would call on all the major airfreight porters. My territory was Dallas-Forth Worth. It wasn’t because I was the best salesperson. It was a big market, and the salesperson who had it quit, and I, by default, took that role and built this nice sales territory up. But around the Dallas-Ft. Worth airport, people would call me and say, “I don’t care what it costs, but I need a truck.” I realized it was a lot of money and providing last-minute trucking capacity to these airfreight porters. It was a different product than what I was supposed to be selling, which was airfreight; it was trucking services. I became known as the trucking guy around the airport. After about two years of that, I decided I could go start my own business. I went to my dad and my dad’s company when it was public, and I said, “I want to start a business based on on-demand transportation.” He sort of patted me on the head and said, “Well, I’m a CEO of a large corporation, and you can’t go start this business that competes with mine. If you do, I can’t help you, but I’m willing to let you intrapreneurship-side this business inside of my company.” I think my dad thought I would fall on my face. I don’t know that he had a ton of confidence in me. You know the good and bad of your kids, so you can observe their faults as much as you do their strengths. But my dad thought it would be an experiment and a lesson for me. I would get a lot of education running this small division’s company, sort of an upstart. We started this, and within two years of operation, we were doing 140 million revenue and a 68 million margin. It was immensely successful. It was actually the most profitable part of the company. I think it exceeded a lot of expectations in both the internal folks and external. Having built this business that was driving a lot of value of the stock, I was getting paid – the business generated 68 million in margin, and I was getting – I think my salary in those days was $110,000 without any bonus or commissions. What was upsetting for me was, when we first started this division, the executive team has given me this compensation package that was based on – I had to take 25% of the margins and divide it up among my team. As soon as we launched this within the first month, they ended up changing it to 5%. They kept whittling away at the margin percentages to the point where the compensation level that the team was at was great than even the directors, VPs, and C-level executives. I would have been seven figures two years into this business, myself, but I was getting basically a salary. What upset me about that was, I went to this chief operating officer of the company and said, “You know, Craig, obviously you can’t have this kind of compensation, but what I will do is put you into the executive suite,” the executive bonus plan, which was equivalent to his bonus, and, “If the company does well, at the end of the year, you’ll get it.” That came around for all the executives to get bonuses, and being a public company, you know how much everybody gets paid. He got a bonus, but I didn’t get one. They basically reneged on it. His comment to me was, “Your family is doing really well, and you’ll do well.” The assumption or the comment he was making was because my dad and I – I didn’t own a lot of stock in the company. I had some, but because my dad was doing well or the family, and that stock was doing well, that I should be willing to self-sacrifice for the company and not expect something in return. That really opened my eyes to the reality that if I wanted to chart my own destiny, even when you have a family business, it’s actually easy for executives around my dad or other executives to assume that you’re taking one for the team. Even when they’re doing well, it doesn’t mean that you do well. It came as a realization that if I wanted to effectively build my own company, and I wanted to do well financially, then I had to actually leave my dad’s company. That was what led me out of US Xpress to go start a payments business that we ended up selling to US Bank in 2012.
Alejandro: Got it, and that was Transfund$. Correct?
Craig Fuller: It was TransCard. Transfund$ is part of US Xpress, so it was a field card business that had been incubated as a part of US Xpress, part of the family business. It was this small – a couple of million in revenue field card business that I took over in 2005 and then created this prepaid field card business that we ended up doing field card processing, broader than just US Xpress. We also did prepaid cards for large community banks. From the time I left that business, there were about 400 Community Banks that used our platform for banking services.
Alejandro: And, obviously, this was a nice segue that led you into what you’re doing today, FreightWaves. Why don’t we talk about FreightWaves? How did you get started with FreightWaves?
Craig Fuller: In 2014, I left TransCard, and it wasn’t on my own accord. As part of that transaction with US Bank, we had sold the field business, and we kept the prepaid business. My family, my dad, was the primary investor as part of TransCard, even though I had some equity in it. Effectively, I got ousted or fired if you will. That was pretty demoralizing to get fired by your own dad. It’s not fun, especially in a town as big as Chattanooga. I left Chattanooga in ’14. I left the industry, and I basically just disappeared. It’s actually interesting – when you talk to a lot of founders that have gone through a bankruptcy – the company wasn’t bankrupt, but it had some structural issues that I had never addressed in the business or couldn’t figure out how to address. I just became burned out, and my dad took me out of my misery if you will. But, still, it was very personal. So, I left the city and moved to Dallas. I didn’t know what I wanted to do, and I, obviously, didn’t want to work for the family business anymore. I ended up doing some consulting around logistics and transportation, freight tech, and I was also day trading commodities on the side. This was during the commodity crash in ’15 and ’16. CNBC kept popping with something called the Baltic Index, the Baltic Exchange, which is a futures market based on global freight. They kept talking about global freight, an indication or a benchmark for economic activity. I thought, “That’s really interesting.” They were talking about global ocean shipping. I thought, “Why isn’t there one on trucking? So, I started to learn about how financial markets work and came up with this idea to start what’s now known as FreightWaves. The original idea was to create a futures market based on trucking. What we realized when we did that was, there was this whole ecosystem around commodities markets that included financial data services and media services, etc. That’s essentially how FreightWaves came about.
Alejandro: Tell us about how you went, because, obviously, this was not your first rodeo. Now, you had a clear understanding of what you wanted to do and what you did not want to do with this business based on experience. So what would you say were the three biggest things that you learned with TransCard that you knew for sure you were really going to do with FreightWaves?
Craig Fuller: I would say the first thing is, I didn’t take money from my family. My dad, in the early days, had nothing to do with the company, and he did not invest. I didn’t even reach out to him. I kept him up-to-date. My dad and I – when I got fired from TransCard, there was a period of time where I didn’t want to talk to my dad. But my dad always loved me, and I always knew that. I gave him updates, but I never went to him for money. Even if I had gone to him for money, he would have invested in me, and that didn’t seem right anyway. So, I went out to find outside investments. I think having the freedom of not taken family money or friending money – the original investment came from a credit card that had – I didn’t have a lot of liquidity or cash, but I did have really good credit. So, I opened up a credit card, one of these 0 APR credit cards. Because I had good credit, Bank of America extended me $50,000 of credit line for zero. If I opened up a credit card, I got 0 APR credit card. I used that $50,000 credit line to fund the starting of this business. Then we found an angel investor that ended up putting money in. But the first thing is, I didn’t take money from my dad. The reason that was important – I had seen it both at US Xpress and at TransCard was that when your family is invested in it, in this case, my dad – one was his own company, and one was a company that he had invested in. The problem is, you get far more emotion inside the business. As he’s thinking more – in some ways, he’s thinking like a founder because in some ways, you’re the proxy of him as a father-figure because you’re executing, oftentimes, what he wants of you. Whether or not it’s subconscious or conscious, it’s still an element. Then, you get this emotion tied into it, both on his side and on my side, where there’s a lot of pent-up emotion. That can destroy not only your business decisioning but can also destroy your relationship. One of the things my dad would do when we needed funding, he wouldn’t fund it upfront, but he would fund it on-call. If we needed $100,000 to make payroll that month, I’d have to call and ask for it. He didn’t put the money into a bank account, unlike an investor does, where the founder decides how that money is spent. He dribbled it. The problem was, I had to ask him every single time we needed money. So, if he didn’t agree with the decision, he would hold that decision over my head, and in order to get funding for payroll, he would play these mind games of, “Well, I may not fund this anymore. I’m tired of this business. I’m tired of the way you’re handling it” versus directly handling it. There was no board structure. That was difficult because you’re dealing with this emotion of your dad doing the things that dads do when you’re a kid when you have to ask for privileges or ask for an allowance. But he’s doing it to a business where you have 80 to 100 people working for you. The thing about this business is, we have raised outside capital, we have outside investors, we have a board. It’s very formal. You have a board that’s very rational. They’re not emotionally tied into your business. It doesn’t mean they don’t love the business or they’re not invested, but they’re not that personal emotion. They want the business to be successful and can make rational decisions about what’s best. I think that has enabled me to become a much more effective founder and entrepreneur because I know what I’m working for. I know the rules of engagement. I know what they want from me, which is to maximize their return, unlike dealing with a family member like my dad, where the goals are somewhat fluid or inconsistent. I think it’s simply because he’s my dad. When you’re a father, at times, and I have kids myself, you’re trying to deal with the moment, and you’re trying to teach your kids lessons and develop their character, and also just deal with financial decisions you make with the family. Sometimes, you use a little bit of that. That’s the natural thing to do with my kids – using a little bit of that mind game if you will. If you do this, I’ll do that, or if you want this, you’ll have to do that. It’s just the way parents operate. I think when you have outside rational investors, you know what the expectations are, and they’re treating it as a business the same way I’m treating it as a business.
Alejandro: Absolutely. So, more structure. For the people listening, Craig, what ended up being the business model of FreightWaves?
Craig Fuller: FrieghtWaves is a media data business. We’re often called the Bloomberg of freight. We don’t move freight; we don’t match freight; we don’t have trucks; we don’t have a brokerage business. But we help companies that are in logistics deal with issues, monitor the market, and manage any of the issues that take place in the industries. We help them mitigate risk. We help companies determine pricing and all the things that a freight company needs to be successful in optimizing aggregated data. We help and give them data to do that to be successful. Then, we have a media business, which has about 50 contributors. These are full-time journalists or analysts that diagnose the freight market and publish articles and podcasts and videocasts of what’s happening around logistics. That’s what FreightWave is.
Alejandro: You were eluding to investors earlier and their structure, as well. How much capital have you guys raised to date?
Craig Fuller: We’ve raised 75 million dollars.
Alejandro: Nice. I know that you’ve done some VC and some private equity, so what is the difference between VC and private equity.
Craig Fuller: Effectively, what every investor is looking for, whether you’re in the venture capital world or the private equity world is, you want a return. All of these investors are looking for a return on their money. Venture capitalists are looking for that 100x return. For them, the returns are exponential. You’ve got to think about what VCs do. For them, they’re almost like a description of a wildcat that’s drilling for oil. One of our early angel investors is also a venture-type investor. He’s not institutional money, but he’s sort of a personal investor. He writes big checks. He wrote us a two-million-dollar check very early on as a super angel. What’s interesting about that is, I asked him once about tech investing. Tech investing is very similar to oil speculation, wildcatting. In the oil business, you drill a lot of holes. You may drill ten holes, and none of them come up with oil. You may drill 100 holes, and none of them come up with oil. Obviously, in today’s technology, they’re far better than they used to be. The same thing exists in investing in venture startups. If you think about that oil example, you may go through 100 holes and not come up with anything. But if you happen to strike oil, then all of a sudden, that oil well may generate millions or hundreds of millions of dollars for you, and it offsets all the losses or zeros that you got in every other well you drilled. That’s the same thing that happens in venture investing. Venture investors will make ten investments a year or ten investments in a portfolio, and they only need one of them to get that 100x return. For them, they’re writing a lot of checks, and they’re doing really small investments for ultimately, their fund, hoping that one of those investments does well. They have a system for validating their investment thesis, and they do it a lot, but a lot of it is gambling, and it’s a lottery ticket if they’re successful. Some of them are much better gamblers, or they’re much better at achieving success than others, and they get to go on to the big leagues if you will. But that’s how venture investors think. Now, private equity/growth equity, for them, with a 3x, 4x, 5x return, they try to minimize their losses. They don’t want to be in a game of losing money. They don’t want an investment going to zero, whereas a VC says, “Fine. Go to zero. I’ll walk away, and I want you to go quickly because I want to know if this business is going to ever go anywhere or not.” Whereas, a private equity fund wants to get a couple of turns in their money; 3x to 5x is okay for them. As long as they’re doing well as a private equity fund, then they’re going to leave you alone. I think private equity funds, unlike venture capitalists – VCs don’t go in and rescue companies. A lot of founders get this thought that the moment they take venture capital money, all the sudden, this team of professional managers is going to show up at your door and take over your company, and you’re going to sit on the sidelines. That’s not how venture capitals work. With private equity, that’s usually how it works if you’re not doing well. If you’re not hitting your numbers, and they feel like the business isn’t going in the direction they want, then they may replace management. I think you know that going into it that your goal in a private equity fund is a) protect the business from any significant downturn, and b) grow the business and help them achieve their 3x to 5x return. As long as you know that going into it, I think you’ll be safe.
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Alejandro: Absolutely. For the folks that are listening, to give them an idea of the operation, is there anything that you can share so that it gives them an idea on how big FreightWaves is today?
Craig Fuller: In revenue, I talked about this. As of September 2020, we’re a 19-million-dollar company. We’re growing 200% year-over-year, and we’re scaling quickly. We have about 130 employees.
Alejandro: Wow. Very cool. One of the questions that I typically ask on the show is if you were to have the opportunity to go back in time and have a chat with your younger self, with that younger Craig that is thinking about putting a gap in the future, that problem where you’re seeing a solution. What would be that one piece of business advice that you would give to yourself knowing what you know now and why?
Craig Fuller: I would say the successes of these businesses are all about distribution. If I look at the lack of success, I had a TransCard. The problem was that it took me too long to figure out that you needed distribution or you needed community. The thing that I’ve learned in this business – we built TransCard, and it took us about five years. We had one bank as a customer from 2005 to 2010. Then all the sudden, we had 400. We figured out in 2010 that we needed distribution; we needed a channel. That’s what led the business to be successful. But we had burned so much cash not selling or not distributing into a channel that we were always playing catchup. In this business, the first thing I wanted to solve was distribution. So the very first thing we did a FreightWave was – I didn’t know what the product was going to be necessarily. I didn’t know how we were going to get there, but we solved the distribution problem first and built a community first. Once we built the community, which we have inside of FreightWaves, then it’s much easier to add product to that channel.
Alejandro: Very cool. For the folks that are listening, Craig, what is the best way for them to reach out and say hi?
Craig Fuller: LinkedIn is usually the best or Twitter. You can find me @FreightAlley on Twitter, or on LinkedIn at Craig Fuller.
Alejandro: Amazing. Well, Craig, thank you so much for being on the DealMakers show today.
Craig Fuller: Take care. Thank you.
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