How Rose Rocket Raised $ 25 Million Through Addition and Shine Capital
- Trucking software startup Rose Rocket has raised $ 25 million in Series A funding.
- This is CEO Justin Sky’s second round at a trucking software startup. His first attempt failed.
- Investors Lee Fixel and Mo Koyfman helped him spot a great opportunity in the industry, Sky said.
Justin Sky first learned how the trucking business worked around a beer crawl.
An account manager at a freight company – who also called himself Justin – briefed Sky, then a product manager at a telecommunications company, on what appeared to be a lucrative start-up opportunity hidden in plain sight: creating software for logistics and trucking companies, whose operating processes were often woefully outdated.
American trucking associations believe that the the industry as a whole generates some $ 800 billion in revenue per year in the United States only. Modernizing this market was only a “fruit at hand,” agreed the two Justin.
“It is obviously one of the most important sectors of the economy,” Sky said. “But transportation has long been the forgotten sector of VCs.”
It ended up taking years of work and a failed iteration of the business to spark investor interest. But now Sky has their attention, alongside co-founders Justin Bailie and Alexander Luksidadi. Their Toronto-based firm, Rose Rocket, said on Wednesday it had raised $ 25 million in a Series A round led by investors Lee Fixel of Addition and Mo Koyfman of Shine Capital.
Sky’s first foray into logistics technology, a startup called FR8nex, focused on the shippers who sent goods. But the company, where he served as technical director, struggled to grow, he said, and closed in 2015.
Afterwards, Sky and its co-founders decided to try a different approach. With their new business, they turned their attention to motor carriers and brokerage houses rather than shippers. In 2016, they went through the Y Combinator startup accelerator program, which also has giants like Dropbox and Airbnb among its graduates.
One of the first challenges for the co-founders of Rose Rocket was the fragmented nature of the trucking industry. The startup would end up creating different software for specific categories – for example, a partial load carrier and a full load brokerage company – depending on the types of customers who signed up.
But Fixel and Koyfman helped them turn that seemingly piecemeal approach into a force, said Sky, CEO of Rose Rocket. The two investors suggested that the founders of the company had developed a service that could serve the trucking industry as a whole, rather than specific silos.
This discovery also coincided with a new spotlight on logistics technology. The category has spawned a slew of unicorns this year, including Sennder, Forto, Bringg, and Shippo.
Sky now thinks Rose Rocket has a chance of becoming the sales force in his industry, something he might not have imagined a few years ago. He gives much of the credit to Fixel and Koyfman.
“It’s the best version of venture capital, where they’ve seen the landscape and can bring that knowledge back to the portfolio,” Sky said. “They realized we were sitting on something that we hadn’t seen yet.”