But it turns out, the quiet town in southeastern Tennessee is becoming a destination for companies in the logistics technology market to innovate. And that’s exactly what the founders of the technology accelerator Dynamo had in mind when they created the entity earlier this year.
Dynamo was founded by a group that cut its teeth in logistics and venture capital. Managing directors Ted Alling, Barry Large and Allan Davis founded the freight brokerage Access America in 2002 and sold it in 2014 for an undisclosed sum to fellow brokerage Coyote Logistics (which itself was bought a year later by UPS for $1.8 billion).
The three decided to use part of the cash they pocketed from the Coyote deal to create a place where logistics technology concepts could be curated, incubated and brought to market. The goal for Dynamo, as with other technology developmental programs, is to help fledging businesses shape their architecture, business model, go-to-market strategy, or all of the above.
A big component of that mentoring is helping the startups secure outside capital, or alternatively, helping them determine whether they even need outside capital from venture capital groups.
In July, after sorting through more than 130 applications from logistics startups around the world, Dynamo picked the first 10 to go through its three-month program, called a cohort.
Dynamo is what’s known as an early-stage accelerator. The accelerator generally takes a small stake (generally a single digit percentage) in the startup in exchange for focused mentoring and office space. Participating startups are often so early in their evolution, they don’t even have customers (though many come to the accelerator with customers or a company conducting a pilot).
“We go after seed and pre-Series A companies,” said Dynamo Director Santosh Sankar.
The program typically culminates in what’s known as a “demo day,” where they pitch their ideas to a group of potential investors. Dynamo’s Demo Day is Tuesday.
In August, American Shipper traveled to Chattanooga to talk with Sankar and three of the 10 startups participating in the inaugural program.
The accelerator occupies a large part of a spacious, light-filled upper floor in the heart of Chattanooga’s vibrant downtown district, framed to the west and north by the Tennessee River.
On the day we visited, several of the startups were in the office, taking advantage of a relatively quiet time to hone some aspect of their business more than halfway through the three-month program. Other days, the space pulses with activity as the companies gather to meet with mentors (of which Dynamo has nearly 90).
Sankar, who worked on Wall Street for five years before being lured to Chattanooga to head Dynamo, said a big part of the program is holding the participants accountable, whether that means thinking about the weaknesses in their model or tech, or preaching to them to stash some rainy day funds away.
“We set goals with each team, and understand where we can help,” Sankar said. “The advice becomes very personalized.”
That’s because each founder or set of founders comes into the program at a different stage, and with different strengths. Their product is similarly at different development stages, and in some cases, the product needs to be changed to accomplish the overarching business concept.
“All these founders walked in with functional products,” he said. “Some have pivoted, but they’re all five to 10 times better off from the structure and mentorship they receive here. They have business pipelines now.”
The concept of accelerators has gained in popularity over the last decade, as “technology seeps into every aspect of our lives,” as Sankar put it. Most of the more well-known accelerators are based in Silicon Valley, Southern California or New York, but they are literally popping up everywhere.
The idea behind Dynamo was to create the first logistics-focused accelerator, to bring in like-minded startups that would benefit not just from cross-pollination on the tech architecture side, but also on the industry side.
Sankar feels Dynamo has a huge role to play in linking the logistics industry past to its millennial future.
“In order for incumbents in the logistics business to stay relevant, it’s about tying it to the ideals of millenials,” he said. “Millenials are impacting people’s perception of technology.”
He also discussed the pace of innovation in the market today, and warned that companies choosing to ignore that innovativeness risk being overtaken by competitors they don’t even realize exist today.
“The pace of transformation and innovation will outpace the rate at which established companies can accept it,” Sankar said.
Sankar, who does podcasts with each of the Dynamo participants and tweets regularly about the venture capital world, said VC money is relatively easy to come by these days, but that those funds want to see proof points and paying customers.
Dynamo’s first cohort includes a range of companies that are tied to the idea of logistics, but not all are directly relevant to the world of freight logistics or transportation. Of the 10 in the first program, three have some direct applicability:
• Locatible, which is building a predictive analytics and visibility system based on using polar geo-location tools;
• Shipamax, which is trying to digitize the dry bulk ship brokering market;
• And Workhound, which provides truck drivers an anonymous platform to rate their companies.
Jenna Brown co-founded Shipamax with Fabian Blaicher as a way to more efficiently connect shippers of bulk goods with available ships.
“Ship data is notoriously hidden,” Brown said. “And there’s a lack of technology in the brokerage houses.”
Brown said this lack of transparency plays into brokers' hands in that shippers need to turn to them to find ships, but it also significantly hampers the process because there are just too many ad hoc requests for them and ship owners to attend to in an efficient manner.
“At the moment, they have to go through multiple shipbrokers,” she said. “Shipbrokers use phone and email, and their processes are so manual so they can't cover everyone. It's horribly manual and can take up to two weeks to book a ship. Some ship owners are receiving 800 emails an hour. We use tech to cover the whole market. Our algorithms can find the right ship in seconds. Our shipbrokers then help to conclude the deal.”
Brown and Blaicher figured that the market was crying out for a digital solution that showed shippers where capacity was in real-time. The Shipamax platform provides instant information around vessel location, primarily using automatic identification system (AIS) data, and allows the shipper to book the capacity. In essence, Shipamax is a tech-enabled broker looking to displace entrenched processes, which includes endless strings of emails and inaccurate data being passed back and forth.
Brown’s background is in economics, consultancy work, and data analysis, while Blaicher worked in derivatives and energy trading.
The London-based team said Chattanooga has actually been a great place to base the business, while Dynamo has helped refine Shipamax’s approach.
Another participant in the program, Locatible, also comes from Europe. Locatible CEO Rónán O'Cóigligh's idea was to take a geological phenomenon and translate it into a product that would increase location tracking technology to within five centimeters.
By reading the way metals are affected by the earth’s magnetic field, Locatible uses an algorithm tied to inexpensive magnetic hardware to track objects to a more finite degree than what exists with current tracking. In the logistics realm, the company has built a warehousing application to help companies understand exactly where an item tucked away in a pallet might be located. The technology can track items to a single serial number.
“Reading the magnetic waves is not the trick,” O'Cóigligh said. “It’s the algorithm that accounts for all the variables.”
The idea actually came from watching a David Attenborough nature special that focused on how animals use a similar, though instinctive ability to turn magnetic fields into a way to know their position.
“If birds can figure out over thousands of miles where they are, I thought we could harness that in another way,” O'Cóigligh said.
Locatible’s play is to reduce the inefficiency and costs tied to not knowing exactly where assets are, including more effectively utilizing labor and reducing trailer detention costs. The startup has been piloting its product with Chattanooga-based contract logistics provider Kenco.
Initial results have shown a 20 percent decline in workforce and vehicle usage, but O'Cóigligh is already aiming for the next evolution: complete automation (i.e. no human intervention in the system) using analytics to detect patterns and predict future performance.
O'Cóigligh and his co-founder Peter Korvel (who handles marketing, while O'Cóigligh handles the tech side) were introduced to Dynamo via Kenco, which is also based in Chattanooga. Dynamo has been so valuable, Locatible is moving its offices from Ireland to Chattanooga.
One lesson learned has been to focus on specific applications of the technology at the outset, to avoid being stretched too thin on too many projects.
“You can’t beat this and the people here who have a ton of experience,” he said.
Max Farrell, meanwhile, is attempting to use technology to empower an often overlooked resource in the logistics industry: the truck driver.
Farrell and co-founder Andrew Kirpalani built the Workhound app to allow drivers to anonymously provide feedback on work satisfaction issues. The goal is to give a voice to drivers who feel they would be unable to comment directly to the companies they work for, while giving trucking companies a sense of how drivers view them as an employer.
Ultimately, the target of the app is to help lower the high driver turnover rate in the industry, especially if regulations that constrict existing capacity ever come into force. Any reduction in capacity would place an even bigger premium on driver retention given Workhound estimates its costs $8,000 to recruit, hire and train a new driver.
“It’s an employee engagement platform focused on the trucking industry,” Farrell said. “Drivers just don’t feel respected.”
The app isn’t just a place for drivers to air grievances, Farrell said. It’s designed to allow the employers to act upon information to make the driver feel as if their concerns are being heard. In one instance, a driver used the app to say that a certain load plan caused him two to three days of unnecessary wait time at a specific stop on a multi-stop load, so the trucking company changed the load plan for the next route.
“It’s a tool to close the feedback loop,” he said. “Sometimes there’s not a resolution, but it’s about communication.”
At the time of American Shipper’s visit, Workhound had 3,000 drivers (a mix of employees and owner-operators) using its platform, and a number of trucking companies using it to determine driver satisfaction.
Farrell said one carrier using Workhound had reduced its turnover from 150 percent annually to 120 percent. Carriers pay a monthly subscription for the information, based on the size of their fleet and the level of data filtering they require.
Ultimately, Farrell sees his app as a tool to help the entire industry cope with the trend of declining interest in the vocation of driving.
“You can’t expect a bucket of new talent to stay full if the bucket has a hole in it,” he said. “Our vision is to fix the leaky bucket. It’s not all about cents per mile, it’s about job satisfaction. They’re spending 10 to 14 hours a day doing something, so it has to be enjoyable.”
Farrell said mentors at Dynamo urged him and his team to tackle “an urgent issue, and to focus on one vision.”
Of course, Dynamo’s work isn’t finished when Shipamax, Locatible, Workhound, and the seven other startups finish the program on Tuesday. It’ll be time to bring in the next batch of logistics dreamers. Ultimately, the goal is to be the pipeline for logistics technology talent year after year.
“It’s about strategic thinking linking product to the business model to investment needs,” said Sankar.