Convoy’s collapse

CONVOY’S COLLAPSE

CEO DAN LEWIS CITES “MASSIVE FREIGHT RECESSION”

Digital freight broker Convoy told employees Thursday that it’s shutting down operations due to a “massive freight recession.” The move comes just one week after supply chain software startup Flexport said it will lay off about 20% of its own workforce.

Seattle-based Convoy was founded to disrupt the fragmented, low-tech freight brokerage business, in which truckers and customers connected by phone and fax. Before this week, the company had around 500 employees.

Convoy is a five-time CNBC Disruptor 50 company that ranked No. 47 on this year’s list.

Since the peak of supply chain issues and demand spikes during the pandemic, which led to soaring prices in the logistics space, trucking rates have come back down, removing what was thought to have been a tailwind for Convoy’s on-demand technology. The company, similar to other startups both inside and beyond the freight sector, conducted multiple rounds of layoffs over the past year and cut an Atlanta office.

During a tough 2022 for the sector, Convoy secured a $260 million round of new capital from investors, led by U.K.-based Baillie Gifford and Hercules Capital, while JPMorgan extended a $150 million line of credit to Convoy, valuing it at $3.8 billion just 18 months ago.

Convoy is run by co-founder and CEO Dan Lewis, who formerly led new shopping experiences at Amazon and before that worked at Microsoft. According to a memo sent to employees Thursday morning, Lewis said the company faced both an “unprecedented freight market collapse” and “dramatic monetary tightening.”

“This combination ultimately crushed our progress at the same time that it was crushing our logical strategic acquirer — it was the perfect storm.”

REVENUE RESET

DISCORD TRIES TO JUSTIFY $15B VALUATION

Two years ago, during the height of tech market froth, Discord was valued at $15 billion, more than doubling in a matter of months.

The following year, tech stocks suffered their steepest slump since the 2008 financial crisis, leading high-valued private companies to slash their valuations alongside capital raises. But Discord has stood pat, avoiding a return to the capital markets, even as public funds have reduced the value of their shares.

Discord, which ranked No. 18 on this year’s CNBC’s Disruptor 50 list, is now pushing into a new business as it seeks to justify that lofty valuation. The company, which provides a popular messaging service used by gamers, said this week that its marketplace of virtual goods and digital customization tools will soon be available to all users, not just subscribers.

THE REST OF THIS WEEK’S HEADLINES

X, formerly Twitter, tests charging new users $1 to tweet, retweet

MADE THE INAUGURAL, UNRANKED DISRUPTOR 50 LIST

X, formerly Twitter, will begin a test that charges new users $1 annually in order to “post & interact with other posts.” The social media platform said Tuesday evening the move is part of its efforts to combat spam and bot activity. The annual subscription is part of a program the company is calling “Not A Bot,” and will be first tested in New Zealand and the Philippines. Elon Musk previously said the company planned to move to a subscription fee model in September. X said the changes are not a profit driver.

Coinbase picks Ireland as its main EU regulatory hub as U.S. authorities go on the offensive

THREE-TIME DISRUPTOR 50 COMPANY BEFORE GOING PUBLIC

Cryptocurrency exchange Coinbase has chosen Ireland as its main operational and regulatory hub in the European Union, the company told CNBC in an exclusive interview. Coinbase submitted its application for a license under the EU’s new Markets in Crypto-Assets (MiCA) regulation, which is set to come into force by December 2024, with the Central Bank of Ireland. Coinbase has had an office in Dublin since 2018. The company employs about 100 people in Ireland.

OpenAI’s ChatGPT can now respond with images and search the web

TOPPED THIS YEAR’S DISRUPTOR 50 LIST

OpenAI, the company behind the viral chatbot, has officially launched real-time internet browsing for ChatGPT. For the majority of ChatGPT’s existence, it has been limited to data sets that end in September 2021. When users asked it about more current events, it would respond to the tune of, “I don’t have the ability to browse the internet in real time.” But one of OpenAI’s goals has been to expand ChatGPT’s data — and search engine capabilities — into the here and now.

CNBC recently announced the launch a new annual list,  Changemakers: Women transforming business. The list will highlight 40 trailblazing women who have accomplished meaningful achievements in the past year, women from companies and organizations across all sectors of the economy, including philanthropic organizations.

The types of women that will be featured on the list are setting a new pattern of what it takes to innovate and thrive in a volatile business landscape. Whether it’s igniting their startup’s meteoric rise, driving exponential growth for an incumbent organization, or spearheading a new business model or management approach that has gained unprecedented traction, the women included will have broken new ground and set the stage for others to follow.

We are accepting nominations now through Nov. 3, and the unranked list will be published in January.

We are inviting nominees who are female leaders at private companies and organizations (including philanthropies) with at least $25 million in revenue in at least one of the past three years or an enterprise value of at least $100 million. The list will be selected using a combination of quantitative and qualitative metrics determined by the CNBC Changemakers Advisory Board, employing a data-driven approach to analyze the impact and significance of each nominee’s contribution to business and philanthropy in the year ending Nov. 1, 2023.

ONE MORE THING…

AI VALUATIONS KEEP RISING

As tech giants pour more money into top AI startups, the valuations are getting up there.

The latest headline this week, courtesy of Bloomberg: OpenAI is potentially selling existing employee shares in a tender offer that would value the company at $86 billion. The next leg up in value for this year’s top Disruptor 50 company didn’t come out of nowhere. Less than a month ago, the Wall Street Journal reported an OpenAI share sale was likely to take place at up to a $90 billion firm value. In any event, a $4 billion difference is starting to seem like “chump change” in the grander scheme of AI valuations. In fact, consider this: Amazon recently agreed to invest up to $4 billion in Anthropic, a leading AI startup. As recently as May, Anthropic’s total value from investors was pegged at $5 billion.

Earlier this year, OpenAI raised money at a $30 billion valuation. With a tripling of its valuation to as much as $90 billion, it would be worth more than former No. 1 CNBC Disruptor company Stripe, though still short of another former No. 1: Elon Musk’s SpaceX.

This rapid valuation rise for AI is also being reflected in the public market. U.S. tech giants have added $2.4 trillion to their market capitalizations over the past year, according to a new report from venture capital firm Accel. The share price values of big technology firms such as Apple, Microsoft, Alphabet, Amazon and Nvidia rose by an average of 36% year over year.

“We are in a very different time than 2000,” Philippe Botteri of Accel told CNBC about the valuation gains after the recent tech downturn. “If you look back at 2000, it really took a long time … for the Nasdaq to get back to 80% of its peak. And now, after the 2021 reset, it only took 18 months to get there.”

A primary reason:

“Any software company is leveraging generative AI, whether they’re just a startup or a new company or an existing company … You should really think about this as something that is pervasive.”

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