Craig Fuller on Building The Bloomberg for Trucking

Jacob: You came to media later in your career, what’s your background, and then why did you decide to launch FreightWaves?

Craig: My background is, I grew up in trucking which is an industry that not a lot of people that aren’t in the space think about, but it’s a massive industry. Trucking alone is an $800 billion industry, but my father started a trucking company in 1985 that became the 5th largest trucking company. There’s 200,000 trucking companies in the United States. I saw him take a family business, a bootstrap business into a publicly traded business. In ’94 he took that company public. I was 15 years old. I always idolized my dad.

There was two things that if you really want to– if you have an entrepreneur for a father, the way to get close to him is to learn about what really makes him ticks. The two things that at the time in my formative ages was his trucking business and him taking his company public. I’ve always been interested in financial markets, data, CNBC and Bloomberg, et cetera, Wall Street Journal. That always left an impression on me. Then I started working in the family business, started a business that did on-demand trucking, grew it. It was really successful as part of my dad’s company.

It was obvious to me my brother was going to run my dad’s company and I wanted to do something different, so I started a payments company, we sold it to US Bank in 2012 and then I left in ’14. I was trying to figure out what to do and there was this emerging freight tech scene where venture capital investors are really enamored with the freight and logistics space. What inspired me, I was doing some consulting and stuff and realized that there was this opportunity to create a data business and then a media business inside the space.

The journey for that was we actually– The original idea was I was watching CNBC, I was doing some day trading, trading some stocks. This was during the commodity crash in 2015-’16 and they kept talking about the Baltic Exchange, the Baltic Dry Index, freights futures. Which were a reflection of ocean freight builk shipments on the ocean and how you could take the bulk shipping rates and it would reflect global economic activity. I thought that was interesting because there was nothing for trucking like that. The original thesis for FreightWaves was to go out and start a futures market based on trucking. That’s really how the original idea started.

As we looked at successful future markets, we realized that successful future markets to build liquidity need news and data services to really serve that industry.

Jacob: That’s where the idea for FreightWaves came in, is that you first looked at it as a futures opportunity and then recognized that there were no really great sources of news and data out there, so you just decided to build it yourself. Is that right?

Craig: I think that if you compressed the time in a two-year period, that’s correct. Went out, didn’t know anything about how you launched futures products. I went to Chicago, spent a week going to all the major futures exchanges up in Chicago, met with executives. Then I ended up going to London where Baltic futures are, the FFAs are traded and spent about a month in London learning from a lot of the trading houses in London on how futures markets are built.

We decided to launch this futures product and as we went to market and talked to customers as well as media that were in trucking. We realized that the traditional media athletes that were in our space just didn’t understand financial markets or business news. There was no equivalent to CNBC or Bloomberg for freight which didn’t exist. There was other commodity markets. Oil has a really large ecosystem around oil data and new services. There’s lots of B2B publications, large tier one outlets like Bloomberg and Argus and Opus that focus specifically on the energy markets. Agriculture has a pretty big commodities market news bureaus.

There was nothing really built around trucking freight and freight. What’s shocking about this is energy production in the United States is about a $400 billion market and trucking is $700, $800 billion. It’s a much bigger market than agriculture, farming, oil, et cetera and there’s nothing built for it. When we were thinking about starting FreightWaves, we actually went to the traditional trucking media outlets and we got turned down. In fact, we tortured six or seven of them and they couldn’t grasp the product. What was strange about that is I never had a problem getting media. I think all journalists are looking for good stories and we thought this or I thought was a good story, but they just wouldn’t write about it because they didn’t really comprehend it. It’s a difficult story to combine trucking and futures markets.

We went out and started talking to PR agencies and publicists. You know this being in media, is that publicists pretty much will take on anybody or PR agencies will take on anyone. We got turned down for the same reasons, they couldn’t conceptualize it. We came across one publicist that said they’ll take us on for $40,000 a month. Now, we were a bootstrap startup, had not raised much capital and that just seemed insane. I bulked at the guy who told us this and he said, “You know what? I recommend is you do it yourself. You should write about your market.” It’s a very difficult task.

We ended up posting this job thinking we were going to write about social media blogging about futures. A editor at one of the traditional trucking publications reached out and said he was interested in the role. When we brought him on, we didn’t think it would be a big– It was never ambitions to be a big media outlet. We brought him on and he started writing about trucking. We realized if you only wrote about futures that nobody would read it. What he started writing about was Amazon, that Tesla was rolling up their semi. Amazon was moving towards becoming a logistics company, chartering aircraft and boats and trucks.

It was this interesting time in transportation. A lot of venture capital was pouring into freight transportation. Uber was starting. There was all this stuff happening. Because I had raised venture capital in my past currently, and was tied into a lot of traditional VC media or Tech media. It was very easy for us to give account on why this technology influx and investor influx was interesting for freight. That’s really what powered the business. It wasn’t the futures market, writing about futures market. It was this understanding of how technology is going to really impact our industry and how this new venture capital stream of money that was coming in and new entrance was going to change the paradigm for the whole space. That’s really how we got started. All of a sudden we built up all this traffic.

We were getting 40,000 to 50,000 page views a month. It’s not huge. We were probably at that point in the top 10 of trucking B2B media outlets. Then the editor went on vacation for a week and it was during the hurricane, the Harvey hurricane that hit Houston, and completely decimated it. I didn’t want to bother him, but I had ran FEMA’s disaster logistics as part of my dad’s company and I knew exactly what was going to happen in a hurricane from a logistics standpoint. I started writing under his name, which he was really upset about by the way. He didn’t like the fact that I was using his name to write, but the traffic exploded.

We got a 100,000 page views on these hurricane articles telling drivers and carriers what to expect in the hurricane. The traffic just blew up. That was a realization that there was this desire in the industry to have news and information that was written from a firsthand, someone who has experienced, who’d been an operator writing about, in this case was a hurricane. That firsthand knowledge we realized gave us a really powerful voice to describe this industry in a way that no other media outlet had ever done.

Jacob: Now, FreightWaves it’s a multifaceted business. When I was obviously researching for this episode, I was spending some time on the site and there’s news, there’s podcasts, there’s video, there’s research, data, there’s a job board. There’s the futures markets that started the whole idea. Can you walk through the various components of the business and how they complement each other? Let’s just dig into each of those.

Craig: I always tell people that are confused by our business plan or our model to go read Bloomberg on Bloomberg. Someone gave me that book when I first started this business. In many ways a lot of the inspiration we’ve taken to build FreightWaves has been based on Michael Bloomberg’s biography. Essentially what we’ve done is we’ve modernized it if you will, because he wrote that years ago. In addition to put it more specific to our industry. We have a term called truckify it.

Essentially, there way we think of our business is, we have a media business which includes, as you mentioned podcast, video, streaming video, print, we don’t print magazines, but text media. That’s one component of our business, and that all rolls up to media. We developed a product called Passport, which I’ll get into in a second, which is a research product. Essentially it’s taken, what we traditionally would print or put into our tech space media, we’ve now created a subscription product out of it, and I’ll describe that in a second.

Then the last part of our business is our data product. It’s a recurring revenue SaaS product that provides fundamental data near real time data on what’s happening in the US economy, and more specific what’s happening in freight. That data is sold to companies to make pricing decisions, to make routing decisions, to mitigate risk. All of the components of their business. In the data product also we’ve listed futures contracts against the data sets that are inside of our SaaS business, and that’s how that futures business looks at it.

If you broke down our data product it’s very similar to what S&P does or Platts does when they list futures contracts against their data. That’s how we built that data product.

If you looked at our media business, were publishing about 45 to 50 articles a day. We have about 30 journalists that cover everything from air freight to ocean freight, to warehouse, and to trucking, technology and venture capital, human work issues, public policy, safety, sales. Rally they’re publishing all of these different articles. One of the things that I get asked often is, can you really write up– Can you build a media business based on this one industry and make it dynamic? The challenge is we simply can’t keep up. This is a massive industry with hundred of thousand of participants.

40% of the US economy is tied to what we call logistics dependent, these are industries. In other words, if they didn’t have logistics, if they didn’t have freight movement, they would effectively go out of business. It’s massive industry that’s constantly playing a critical role in the economic viability. Our reporters are writing articles about the subjects that our industry cares about. Everything from M&A transactions, to venture capital stuff, to public policy. Then we inform it with our data, the data that comes from our SaaS product, our journalists are referencing our data inside of the articles that they produce.

If you think of what happened during COVID, the logistics and supply chain industry played a front row seat and was on the front lines of ensuring that we had groceries and had, our PPE equipment and medical supplies. All the stuff that you need to ensure that the economy can run and people are safe, logistics companies are on the front line delivering these products. Because it’s an unprecedented event, the industry itself needs information, needs data to know what’s happening. They’re responding to this massive influx of demand for logistic services, and before we came along wouldn’t have had information about what’s happening in real time.

Our competitors that predated us, our predecessors often were writing articles that were weeks old and you’re dealing with an environment where things are changing literally by the minute. You need to know what’s happening that’s the role we play. Our journalists are writing articles and then we have about a dozen podcasts that we bring together. It’s all about having this cohesive brand of putting content in text, which is more on a– when something breaks, you write about it. Then you have scheduled podcasts and video casts that you produce based on the content that’s the news stories, and those podcasts range and there videos.

One thing we had was we had a podcast platform and then we added video, and so we actually film our podcast, if you will. What that enables us to do is add some visual layers to it. If we’re talking about this hurricane that’s happened that’s hit Louisiana, Hurricane Laura. You can visualize it with maps of the hurricane or data. It brings that Bloomberg-esque component to it. That’s essentially our podcast and our videos cast, a dozen of these, but they’ll talk about different subjects. One of them talks about public listed stocks and they break into — pull up Kroger’s P&L or earnings or Kraft, and they’re talking about their transportation, logistics and supply chain spending, or Amazon’s $70 billion in logistics.

They take a main street Wall Street version of the business, but talk specifically about the freight stuff. That’s going to an audience of salespeople and executives in the space that do business with the Amazons and Walmarts. They want to understand how they’re thinking about logistics in a financial format. We have a sales podcast that talks about sales effectiveness and marketing effectiveness, and it’s built for the transportation sales people. There’s 300,000 people in logistics that are selling services to shippers. It’s a huge audience and they built a podcast and in a community around that.

We have one called Drilling Deep, he’s a energy economist, but he talks about the price of diesel and goes into this whole energy concept. What we’ve tried to do is take this audience and this community we built with FreightWaves and really dive into very specific topics that we’re able to peel the layer on these things our community cares about. It’s a very, very deep dive into these topical elements of our industry that is very important. Everything from price movement, because spot rates are traded– not traded on exchange, but they move rapidly. A lot of volatility. In a given week you can have 30 to 40% volatility in a given market because of demand, and we have people that break that down.

Jacob: What is the revenue breakdown of the business between media research data and the futures products?

Craig: It’s a great question. Our media business is a little bit over a run rate of about $11 million today. We signed a contract overnight or yesterday that was about a $1 million dollars. It’s about an $11 million run rate business. The data business is about an $8 million ARR, so the total business is about $19 million. If you componentize that, about half a million of our media business is in research. It’s a research product we launched earlier this year. Basically what that is, is we’re targeting the C level executives. We looked at our audience, we said, we have a million uniques that come to our site a month, but there’s this, 5,00 to 10,000 of a very small percent of that audience would be willing to pay for proprietary research that’s very similar to what you would expect with a sell side bank on Wall Street.

We hired some analysts that came from Wall Street and said, “Why don’t you create this subscription product that publishes research based on the data, but editorializes it for context.” We created a recurring revenue subscription product, and that launched in January. We’re really pleased with it, but more importantly, what’s interesting about that is these were already customers paying for the data services, many of them. Now they’re paying for this research product that contextualizes it.

The reason we did that was we felt that ultimately you can repackage up data, you can repackage up context, and you have an audience that’s willing to pay. I think a lot of media outlets go with the $100 model or a couple hundred model a year, and we know our audience, the people willing to pay, are willing to pay a much higher price. In fact, we think the $2,500 a year is probably low, but we did that to test the product out and we think there’s a lot of opportunity for growth there.

If you looked at our media business broken down, when COVID happened, we had an events business last year. Our events business was half our revenue. We did about $11 million last year, half of the revenue came from events and obviously it’s zero this year. I remember in March we had this TV product that we were incubating and it wasn’t immensely successful, we hadn’t generated a lot of revenue, but we built some infrastructure for streaming media. We realized that we were going to have to cancel our event in Atlanta, we were expecting about 2,500 people, two and a half million dollars in revenue.

When we decided to do that, we didn’t go with an off the shelf virtual events platform. What we did was we took our video infrastructure and turned it into our virtual event. We started the year with a couple $100,000 in revenue and video. It’s now the largest component of our revenue from advertising of all of our media business. It’s about a $6 million ran rate today versus our, text media is about five. That’s a product that we literally launched in March due to COVID.

What we’ve done is we’ve been able to take the audience that would come to our events and even broader, and created this virtual event experience. We expected to have 2,500 in Atlanta in May, 92,000 people that tuned in for our virtual event. Just astounding success. What we realized is that we live in an industry where companies are used to acquiring their clients through a personal relationship, and when that’s gone, they still have to find ways to acquire new clients or engage them. The virtual platform, the virtual TV platform that we’ve built is a great way to do that.

There’s about 25,000 people a day, uniques that actually tune into our streaming TV product that covers everything from weather, full-time meteorologists, to news about the industry, to stock rates. To topical things that are happening. Maybe Elon Musk has talked about their new truck, the new Tesla semi they’re rolling out, or Nikola, a fuel cell vendor, a fuel cell OEM that has recently gone public for a start, gets this $30 billion valuation with zero revenue. Those are things that people are interested in ours space and even broader and our correspondence will dive into that and talk about that.

What we’re doing is we’ve effectively taken– We only have two full-time hosts in the video that are specifically focused on video or audio products. The rest of it is pulling through the rest of our journalists. If we have a public policy discussion, we’ll bring in our Washington correspondent to talk about what’s happening with some new law or rule. If we’re talking about the Tesla semi, we have a journalist that does the OEMs in Detroit that we’ll call in and talk about what’s happening with it. What we tried to do is take this ecosystem, this community that we built, and bring our journalists without having to hire outside talent to become subject matter experts. Then we bring in the community to also contribute content and that’s effectively the way we think of it.

Jacob: I want to dig into the events component, because a lot of media companies were finding a lot of success over the past couple of years building up robust event offerings. It was one of the actual profitable lines of business for many niche companies and then COVID hits and the business is gutted. One of the reasons events have been so good is biz dev people believe that they’re benefiting because there’s a one-to-one conversation. I go up to your booth, I talk to you, you believe there’s something there. With virtual events, that doesn’t exist. How have you helped your clients measure ROI with your virtual events? Because it’s your largest business, and obviously, they’re seeing something from an ROI perspective.

Craig: I’ve talked to a lot of event producers since COVID took place, and they’re struggling to figure out how to retain their audience or even revenue. We’ve had very little refunds from what we had sold prior to COVID. Very little of having to get back or cancel contracts if we’re done, and we offered it. We also said, look, trust to — we’re happy. Going into our May event we had over a million dollars, we were expecting three and this was in early March. Because most of your sales and events happen within that last 45 days and typically within that 30 to 15-day window is when the bulk of your revenue happens.

What we did was we went to the companies and said, look, we’re going to do a virtual event, we know that virtual events suck. We get it. We know how bad most virtual events are, but trust us to do a better job than that. If you don’t like the results, we’re happy to refund your money. If you do like the results, then let’s talk about a strategy to make these things effective. Most of the community, I think we only had three or four companies that decided to pull out. They were small companies. We had very few ticket refunds. We took the tickets that we had, a couple of hundred thousand revenue in tickets, and converted them into a research product we offered. Said, Hey, you’re already [unintelligible 00:25:50], we’ll credit you for a future event and we’ll give you a membership into our passport product. If you like it, then great, you can keep it. That worked out well.

What we told the community was, trust us. Let us do something that you have not seen before. Effectively the way we treated our events was like you would a broadcast TV network. We had built this infrastructure and at the point going into March, we had about $300,000 in CapEx. Had a small team of about four people that were in production doing pre and post-production video and we had a little bit of talent. Total team of about eight that were involved in the entire production. For the three days that we had the audience, we treated it like a broadcast TV network.

We said this is going to be a high cadence really fast. We’ll do 120 different talks throughout the schedule in a day. So 120 different videos include commercials. We ran commercials in between breaks, we ran talks, so some sponsored content. Some of it was sponsored, some of it wasn’t. Effectively what we did was we tried to drive this mass distribution and we told them that a virtual event is not going to be like an in-person event. If you go in with those rules and you realize that you’re not going to replicate exactly what you get with an in-person event, then I think it opens up what you can do with it.

We said, look, you’re going to reach a much larger audience than you ever would reach through an in-person event. Going from 2,500 people to 92,000 is a completely different experience. You’ll never get that in an in-person event. You’re going to get executives that don’t have time to fly into Atlanta for two or three days to actually tune into the content and you’ll have this evergreen element. That worked out really well.

Then what we did was we created a lot of meeting experiences. The ability for people to register those kinds of meetings, we worked with the sponsors and the demo companies that did these seven-minute commercials. We took the booths, if you will, the people that are in our exhibit hall. The requirement to come to our event is you have to demo. Even in person, the requirement we have for our community is that if you’re coming to our event, you should demo your technology on the stage. It’s all tech-centric.

We said, look, for our virtual event, you’ll have a seven-minute commercial that you can talk about your technology and demo it. Then we created a Slack channel and then we created an app that helps create that engagement. What we found was, the thing about virtual that you have to remember is unlike an in-person event where there’s this osmosis or this organic networking that takes place. Somebody is walking across the exhibit hall or going to the bar and they run into somebody they know or see something that catches their eye in the exhibit hall. That doesn’t exist.

You can’t replicate that no matter how hard you try, if the person that’s your guest doesn’t want to be involved, the attendee has to make an effort. The attendee has to want to network. He has to want to be a part of the experience. You can’t just expect it to happen without their effort. We did a lot of things around incenting them to be a part of the experience. We gave away prizes. We gave away a Peloton bike and said, look, if you sign up, we’re going to give this [unintelligible 00:29:25].

What we do with our live virtual events is we have a studio in Chattanooga, Tennessee which is our headquarters, and we have live correspondence that are between breaks. What they do is they pull up the Slack channel which we use for communicating and they’re commenting on the Slack channel. When somebody puts something in, they’ll talk about it. That engagement element, you feel like you’re a part of an experience. We found a lot of success with that and while we can’t exactly replicate what you can get at an in-person event, we can create something that’s actually quite different than they would’ve expected otherwise.

Jacob: I want to talk about the organization a little bit, because, with so many products and so many different choices for a user, it can get pretty tricky managing everything. What is the organizational breakdown of the company and how do you as the CEO manage priorities to ensure the right projects are getting the correct resources?

Craig: It’s a great question. Effectively the thing that our venture does, we’ve raised 75 million to date. It’s very difficult to raise that kind of capital on a media company or at least the scale that we’re at as a traditional media company or even a digital media company. Because investors venture capitalists are typically cynical about media companies, because they’re always convinced that Facebook or LinkedIn or Google is going to eat your lunch and I think there’s a lot of reason for that. It’s just difficult to compete as a media company. A lot of VCs shy away from it.

I think the ones that are successful have really strong communities. You see it in The Athletic, you see it in Barstool Sports, Morning Brew, they didn’t raise a lot of venture capital but they’ve built a very successful community. For us, it’s the same thing, but it’s still difficult to get VCs and investors. What our VCs are most concerned about is a recurrent revenue or a subscription-based revenue, particularly around data. Because the data businesses that sell fundamental market data are immensely valuable. The S&Ps, what was Reuters or Refinitiv is very valuable. Bloomberg is obviously a very valuable, Argus, Opus, et cetera.

These companies trade at very high multiples because they’re data-driven businesses. They provide fundamental data to traders or businesses to make better decisions. Those businesses become immensely valuable, and that’s what our VCs are focused on. What I’ve tried to do is professionalize the management team on our data business. We brought in professional management that manages the sales organization and runs it like a traditional SaaS process. You hire salespeople, business development executives, customer success executives. You build the metrics around SaaS, and that business is run as almost a separate unit.

Even as founder, while I get involved in some of the product discussions, I don’t spend a lot of time managing the day-to-day of our data product, not because I don’t want to, because I’m not good at it. The team that’s involved in managing it is very good at organizational processes and organizing the sales motion that we need around our data product. That’s where a lot of the management infrastructure has gone.

What I spend most of my time on is around our media business, because our media business serves two functions. One is it generates a lot of cash and cash flow, but it also provides a top-of-the-funnel for our recurring revenue SaaS business. What it’s enabled us to do is take all of the margins from our media business and basically fund the customer acquisition of our SaaS community, of our data product. What it actually has done is enabled us, because we have this massive audience where 55% or 60% of the logistics traffic comes to our site in terms of total traffic on all sites around the world.

We have this massive community, we’re able to reach the community. Because the media business generates margin and is evangelizing our data and is communicating about our data and is using that as part of its content, if you will. That creates a lot of top-of-the-funnel customers that would be interested in data find out about our product through our media business, and they enter the funnel that way and then go onto our SaaS business. We don’t have to pay anybody to access those customers.

In fact, because we’re running advertising against a lot of the content through non-competitive businesses, it oftentimes helps subsidize what would be the marketing cost. Effectively we have two metrics we look at is CAC, which is a term in SaaS. It means customer acquisition costs. Our investors get two numbers, they get the CAC number, which is what gross customer acquisition costs in a traditional metric, and then they get what we call NetCAC, which is a term that we invented. Which is if you took all of the margins in media, which are quite large, and you put it against the traditional customer acquisition costs, what is your NetCAC? And that’s actually negative now.

What it means is we’re able to grow our business without basically having to use capital to acquire new customers. It’s created this immensely valuable flywheel. To describe what I do as I spend most of my time driving the evangelism of the business through our media outlet. Making sure that the media business is focused on evangelizing the core components of our SaaS business, that maybe we have a new product or new data set we’re trying talk about. Making sure it’s embedded into the communication stream of our media business.

Jacob: In July, you announced that FreightWaves had raised two minority investments, totaling about $37 million. You touched on before that it’s hard to get media investors excited– Oh, sorry, it’s hard to get investors excited about media investments but SaaS, it’s very easy to raise money if you’re a SaaS product. What was your pitch to these newer investors? How do they look at the fact that still over 50% of your business is media, but they’re investing tens of millions of dollars at high valuations, I’m sure. How did you get them excited about the business when so much is media?

Craig: It’s interesting. We had raised before this round about $38 million, and we went out in January. We got an unsolicited term sheet in October that did not close, and we went out in January to Silicon Valley. My CFO had come from traditional SaaS, worked at a New York based SaaS company and so he had spent most of his time working with the big tier-one venture capital firms. The names that everybody would think of if they thought about VC if there know anything about it out in San Francisco and in Silicon Valley, and so we went out there. Because we’d had a lot of inbound interest for our business we thought, “Well, we’ll run a competitive process and we’ll have these really aggressive bids.”

What happened was really strange for us. Now, we were dealing with a post WeWork, so this is mid-January, a post WeWork challenges that were still present. Venture investors became much more discerning about business models and needed economics than they ever had been before, or at least had been in this last cycle. We we’re also dealing a little bit of COVID because it was starting to hit China and some of the VCs we’re worried about it. There was just this cautious risk-off environment in Silicon Valley.

There wasn’t a lot of VCs that were falling over themselves, traditional VCs. When we went to what I would call growth capital private equity, the big tier-one names that your neighbor that knows nothing about private equity could probably name one of these firms, big, big names. We found that there was a lot of interest in this ecosystem model. Traditional SaaS investors could not get excited about a media driven business. In fact, a lot of the questions came, “Why don’t you spin these off? Why don’t you split these businesses?”

They were really concerned about whether the media business could survive against Google and Facebook and LinkedIn. Not realizing that B2B is all about, A, community, and B, about content. Something that is not easy for a Facebook or Google, in a frankly niche market, their perspective to disintermediate. They just didn’t comprehend it or didn’t appreciate that, but the big tier-one growth equity firms did. What we found is really more success than what I would call New York based investors. The investor we closed in July was an investor out of Los Angeles, King Capital, which is a $40 billion private equity firm.

What we found is that those investors that had done later stage understood the ecosystem, had seen this model work out time and again, particularly in financial markets. Where companies that had built strong communities could launch new products basically very efficiently, because the community itself would support those product iterations. The community itself wanted the company to succeed because they had some affinity to it. Media is what’s that glue for us, and I think media is the glue for a lot of communities. You see it with some of the bigger name brands like Barstool Sports where people are buying swag off because they want to wear the brand.

You see it also in companies that are in financial markets where there’s a strong brand affinity for Bloomberg. There’s a strong brand affinity for the New York Times. You see when you have that community, it creates this very efficient sales channel to bring new product iterations and launch new products, and your community is going to be supportive. What we’ve found, and I think this would be true of really anyone that’s launched a community-based media brand. Is that your product doesn’t have to be perfect the day it’s launched. Is that if your community has such high brand affinity with you, what they will do is they will let you launch a product in beta and work with you to refine it.

They have so much confidence and excitement over being a part of this experience because they love the brand, but they will support a product that isn’t exactly perfect the day it launches. That’s been the truth for us, and that’s why we found that we were able to get this bump, if you will, in the growth capital firms for what I would call a SaaS multiple on a media business. Very different deal so long as the investor believes that that community is going to enable you to build a recurrent revenue stream if they can get that bumped.

What’s happened with us is investors have looked at our revenue and have underwritten the entire business on the belief that we can turn this community into this ongoing subscription revenue stream because it’s proven out, knowing that we have very compelling unit economics because the media business not only helps us acquire customers and advertise essentially for free, but it also creates a lot of cash flow that you can use to invest in customer R&D and other things that you would do in a traditional SaaS business.

Jacob: Effectively, your investors, if FreightWaves had only been a media company, the multiple that these investors would’ve invested in, if they would’ve invested at all, would’ve been far lower, but because you had the SaaS component, they effectively looked at the entire business and went, “We’re just going to treat this all like SaaS.” Is that basically it?

Craig: I think that’s fair. You have to remember both these businesses, and I don’t know that I’ve said this, are effectively two– Our media business is three years old in terms of publishing, but two years old in commercialization. We’ve been commercial for two years. Our data business was launched in May of 2018, so a little bit over two years. These are very young businesses growing at 250% year-over-year with margins– Our media business operates effectively the same margins as our SaaS business today. They look very similar.

If you didn’t know anything about them, from a financial profile, they look very similar, similar margin profile, and frankly similar growth. It’s easy to underwrite it financially, but, yes, the underwriting criteria is all based on recurring revenue. That’s what they have to get comfortable with, is that the SaaS business can grow. If we were a media business only, the valuation would be less than the money we’ve written or that we’ve raised. The best media businesses in the world trade at four times revenue.

You’re looking at mid-digit EBITDA, the upper end of the range. On an advertising basis, these businesses are trading at, for small media businesses, four to six times EBITDA, if they’re advertising-driven. It’s very difficult for investors to– There is a huge arbitrage between the media valuation and the SaaS valuation. What we’ve tried to do is rightfully describe our business as this community that enables us to build this SaaS business along with it and use very efficient capital to get there.

Jacob: Is FreightWaves profitable today?

Craig: No, we’re not. That’s by design because we’ve chosen to grow versus achieving profitability. It’s relatively cheap for us to raise capital, and so our focus has been in capital raise, to use capital to grow, to build up product to continue to enhance what we’re doing. Now, having said that, we went from a $2 million burn in January to, in July was, a $250,000 burn. That’s per month. You just think about that.

If we had maintained that level in January, you’re talking about a burn of $24 million this year. We’re way, way, way below that. We believe that you’ve got what I would call an infinite balance sheet in terms of the burn rate. Our burn rate’s going down a couple hundred thousand a month. We’re way above our proforma. We beat our July numbers by over $500,000 in burn. Our official expectation is that we break even sometime mid-next year, but I’m more bullish in that. I think we’ll end up beating that sometime this year.

Jacob: Now, one of the things, in some of our emails back and forth, is you’ve talked a little bit about FreightWave’s acquisition strategy because you have bought other media companies and then integrated them into the business. Can you walk us through how you look at those acquisitions? Also, talk a little bit, in one of our conversations, you referred to it as a valuation arbitrage, from how FreightWaves is valued versus these small companies.

Craig: Yes. The challenge of a lot of bootstrap family-run publishers or founder-run publishers in B2B is that they tend to be subscale. That’s why you see private equity firms or buyout shops that have 30 brands. They’re these really targeted, niche brands. It’s very difficult for publishers in this environment to get advertising-driven publishers or publishers that are print magazine publishers and have that legacy in print to (a) make the investments they need to go into digital. They may not even have the DNA or the muscle to do that. (b) It’s difficult because they’re subscale, so it’s hard for them to find buyers that are interested in their properties.

There’s a significant arbitrage or significant gap between a company like ourself, which is able to raise capital under tech multiples and these bootstrapped, magazine traditional publishers or legacy publishers and what they get valued at. If you look at multiple, you’re talking four to five EBITDA on a traditional publisher and you’re talking about us on a revenue multiple, which is mid-double digits, if you will, in terms of revenue. It’s a completely different game. For us, we can acquire these accretive EBITDA-positive businesses that have what I would say tangentially connected communities but not overlapping communities.

When we look at acquisitions, we bought a company last year called American Shipper which was the second-largest global trade publication and logistics focused on ocean shipping and trade. A traditional publisher that hadn’t made a successful leap into a digital age, but it tried. It’s a family-owned businesses that started in 1952 and had printed these publications. Had a good brand, good content, good writers, but just could not make that leap, for whatever reason, to a digital age.

We were able to acquire it and acquire it for the numbers I’ve described in the even range of four to six. Essentially, when we bought it, what we were able to do was convert the community over to our content management system, convert it over to– We have high domain ranking with Google and Facebook and LinkedIn. All of a sudden, there’s this organic SEO boost that immediately happens because of the brand of FreightWaves, and you leave this as a sub-brand under your core domain. You get the benefit of, all of a sudden, Google saying, “Oh, here’s FreightWave’s new content,” even though it’s content that we acquired.

We immediately saw a traffic increase. Basically, doubled the traffic within days of when we converted it. What we also saw was that we could go back to those advertisers that had been with the publication for many years and describe how we do content advertising, custom content studios, et cetera, in a digital world. We’ve already effectively paid for itself. We’ve owned that asset for about 14, 16 months. It was actually last July. It’s already paid for itself in the first year.

That’s because we’ve been able to make it highly accretive to us. That is the type of transactions we like. Now, we didn’t buy an overlapping trucking publication because that’s really what we were predominantly known for before this acquisition. We bought an ocean publication. What we found is they had 30,000 email subscribers in their email list. Only 2,000 of those, and we had 130,000, only 2,000 of those actually overlap with our community. Still focused on freight, still focused on logistics, but not an identical community to ours.

Jacob: Thinking about your data play, how do you see, or how should other media companies think about expanding into this sort of strategy that you’ve executed so far?

Craig: Well, the thing about data is you have to have a data DNA to do it. It’s not impossible to do research. I think there’s two ways to play the data play or subscription data businesses. One is you can launch, take some of your better journalists, and this is what we did for our research product, that were actually publishing stuff. The stuff that’s in our now what we call Passport, which is our subscription research product, was basically, we took reporters that were already writing content on the free site. Some of them had worked in sell-side Wall Street and were already publishing stuff that was effectively free.

We moved them into a paywall environment, subscription, but then they were narrowly focused on writing content specific to this research product. That was a low-cost way of creating a data play or a subscription play because you’re already taking something that’s in your DNA, that your reporters already know how to write content, and change the format a little bit, and you put some more data, which was pulled from our data, but you can acquire data that you have, and you don’t have to have a huge data DNA to pull this off, and you can effectively create a recurring revenue product out of that.

That’s what we were able to do with Passport. The data business, as it relates to SONAR, is something that I believe you have to have a data DNA and a tech infrastructure to actually execute. I don’t think you can go into the market and have the cloud-based API infrastructure and create a lot of– In our engineering and data science teams, we’ve got 40 people. 27 of those are on data science either cleansing or building algorithms. That is not something that a lot of companies in publishing probably have data scientists. That is something, if you’re going to really pursue a data business, you have to have true data scientists which are building algorithms around the data methodologies.

It’s a quite different DNA than what most media publishers have. For us, we built that infrastructure, and then we built all of the dashboard components that people wanted and asked for. We built in a cloud, and then we built a really rich set of APIs that companies could then link up to and ingest our data into their data systems to make better decisions. I don’t think that that’s something that– If you don’t have a data DNA, I think that’s probably a little bit outside of what most media companies would be able to lead to. You really have to have some of that built into your infrastructure, if you have data scientists.

Our data that we are providing is quite unique. It’s data that’s never been seen before. We went out to the market. Transportation and trucking, and ocean freight and air freight, rail, et cetera, you have all of these vendors, software companies that had built lots of infrastructure in their business, but are basically good at providing workflow intelligence inside their companies for their customers. They’re not good at building anonymized and aggregated data. They don’t know how to aggregate it, anonymize it, sell it.

What we’ve done is we’ve gone out to those companies and IOT vendors in the space, technology vendors, and said, “Hey, let’s work with you and help cleanse your data, and build methodologies around the data, all anonymized, and protect your customer’s interest, and we’re going to build a map of the market essentially.” That’s what we’ve done. We partner with a lot of IOT companies. We’ve published it and then we’ve gone to our customers and said, “Now you can feed your data to benchmark your performance against these data sets.”

Jacob: Before we jump into the final part of the show, I do want to give a couple minutes to talk about the futures product in a little bit more detail because you’re a media company that has launched a financial product, which is– There are very few that have done that. Can you walk through what the business model is for the futures product and how FreightWaves specifically generates revenue from that?

Craig: Yes. I think Platts, Argus, Opus, companies that are in financial or publishers, essentially, original publishers that focused on specific industries. Opus and Argus and Platts, to a degree, are oil and energy publishers. They built reporters that provide information to folks in that ecosystem. Then it figured out that they could take that same product and create indexes out of it. S&P is probably a name that most of your listeners would know, if not everybody, and we all know the S&P 500. S&P has got this massive commodities data business that they bought with a company called Platts.

They basically list bespoke commodities, or not bespoke commodities, but really focused commodities. They built indexes around it. They create some type of assessment product. What an assessment is, is a measurement of price through a consistent methodology. If I want to know the price of steel, as an example, Platts goes out and gets 30 or 50 or 100 steel producers to send in their daily quotes and stock prices. If I want to know the price of coffee, it’s the same thing. Oil, same thing. Effectively, these publishers have built these methodologies to create indexes.

What they do with those indexes is they take that and this methodology is published and they create basically a contract on it. That contract is nothing more than a piece of paper that’s listed on an exchange and regulated, and the methodology’s published. The contract, effectively a futures contract, says you have a buyer and a seller on both sides of the transaction. Basically, the buyer is long– You have one side that’s long and one side that’s short, and effectively they’re wiping the transactions out effectively. This futures thing gets very complicated for a lot of people, so I’ll try to keep it as simple as I can. Effectively, what we did was we said we want to create a futures contract based on trucking.

We’ve created an assessment or worked to create an assessment. We’ve created a methodology. Now that methodology and assessment’s published, and then the contracts are settled against an index. It means whatever that index that you reference, whatever price it’s at is what the contract settles at on a given date. Then those contracts are listed and are traded in financial markets. How you get paid on that is basically every single time someone trades it, there is a very small, minute piece that goes to the exchange, and a very small, minute piece that goes to a clearing house, and in our case, a small piece that goes to the publisher.

If you’re the publisher of an index, you get paid. Every single time someone trades the S&P 500, S&P gets paid, or every single time someone trades the WTI, which is the big oil contract, the publisher, I believe it’s S&P or Platts, gets paid, and so forth and so on. What happens is, effectively, it’s like a royalty on a music, on a CD. If Taylor Swift publishes a song, every single time that song gets played on the radio, she gets a really tiny piece of that. It takes a lot of scale to get there, but at scale, these businesses become immensely valuable because they generate revenue from two things.

One is they generate it from the transactions themselves, the small, minute fees that are traded, and they generate it usually through the backtesting of the data. One of the things that you end up doing as a benchmark of an industry, is you publish the index, and then you provide a lot of analysis and tools that help people break down that index to basically help model and forecast or build decisioning based on that index. That’s probably the most valuable part of a benchmark, is that second piece, once it’s scaled, is selling to companies that want to know what’s actually happened. That’s why, frankly, S&P trades at such a high valuation.

Jacob: Over the next three years, where do you see FreightWaves going?

Craig: I think, in the next three years, we believe this is a platform business that can do a number of acquisitions and really expand our community, and then become the benchmark business in the industry as well as the data business, the leading provider of data analytics inside the transportation logistics space, supply chain space. You think about the fact that this is a $9.6 trillion industry. That’s 12% of global GDP. It’s massive. In fact, when you compare the size of the logistics industry in the United States, it’s roughly the same size as the software industry in the US. It’s a huge space, and logistics is becoming far more important today than it’s ever been.

You don’t have to go far in history to realize that– During COVID, if a local restaurant or a retailer did not have a logistics expertise in-house or that DNA built in to understand how to get product to your house, they probably did not or are not going to survive. What it means is that logistics and supply chains have become so much more important to society than they’ve ever been before. Companies have to know how to do that and have built that expertise in-house. What we believe is that that momentum will continue to grow, and we believe that we will become the single, dominant provider of information services in the logistics and supply chain space globally.

We think, as a business executive having institutional capital, we think this gives us two opportunities for a liquidity event. One is, we think it’s a business that could be big enough to IPO in a couple years, or alternatively, we think it’s a really interesting business for some of the fundamental data providers in financial markets that are looking for a high growth space that, if we’re talking supply chain and logistics, that perhaps they haven’t spent time or investment building it.

For them to go build organic infrastructure around data and information in logistics and supply chain would be very expensive and very difficult for them. It’s much easier for them to buy and acquire. We think those are two natural exit opportunities for us at some point. My preference is the first, is we’re able to do a public offering, because obviously, I enjoy what I do and want to stay on as CEO and love it, but I also understand that this is a business that could very well be owned by a large financial data business. That’s where I see us headed.

Jacob: You’re not a traditional media person. You’re a trucking guy and then came into media, which I find with a lot of these interesting, niche publications, and especially with the whole creator economy, that some of the ones that are best built to succeed are operator-driven media companies. Obviously, starting a media company when you don’t really have much experience with it, you’re bound to make some mistakes or just not do things that you wish you had. Looking back over the past few years, what do you wish you had known when you first started?

Craig: That’s an interesting question because I think a lot of times, lessons that I learn become more– We try and error. A lot of trial and error has given us the ability to continue to incubate and innovate. I think one of the things that we’ve found is we have an ability to launch products into the community. Oftentimes, those products are unsuccessful and quickly, quickly pivot. One of the things we did that was probably a big mistake because we went international really quick. We opened up offices in Singapore, we opened offices in Australia, we opened offices in the UK, and burned a lot of capital doing it, as well as we brought on journalists.

Then we ended up having to pull back and cut those offices or shut those offices down. I think what was regretful about that is that we did that because we thought that we could take what we built here in the US and expand it globally without realizing that those markets are different, those audiences are different, and we didn’t have a data product to go along with it. We didn’t have some reason to stay in the market and we didn’t have a sales team to get some advertising in. We hired journalists in those markets, but we didn’t actually support it with any type of economic and financial interest, and we didn’t build business teams to go and do that.

That was a huge mistake we made. I think we commonly do a lot of iterations. We launch things and we find we’re marginally successful. I think about our TV product as that example. Earlier this year, when we were doing budgetary planning going into this year, TV was actually– We talked about cutting it and saying maybe we shouldn’t be in TV. You’ve talked about it on your podcast that a lot of publishers have gone into video and it’s blown up or it hasn’t achieved success. I started questioning had we made the right decision? We got a couple hundred thousand dollars investment in video. Is this the right decision?

One of the things that we kept was we kept our TV product because instinctually I thought it was a great way to display our data product. When COVID hit it, all of a sudden, gave us the ability to pivot into virtual conferences. I think that’s an example where we’ve had success building something. Whereas on the international expansion, it was the opposite. We experimented, we tried, and we failed. We didn’t just try once. We tried on a couple of different iterations.

We didn’t open the Australian office at the same time we opened the UK office. We opened the Singapore office first and then we opened Australia. We should have not done that. We should have not gone global. I think we thought we were better and more effective than we were. That was one of the biggest lessons that we had from our learnings. We burned a lot of capital in some of those decisions and frankly, they were regretful because we had to pull back and pivot in a different way.

Jacob: For a prospective or current operator that’s listening to this episode, what is some advice that you’d give them to be most successful in B2B media specifically?

Craig: You got to get stuff. I always tell people in any industry, whether it’s B2B media, software, whatever, is I think a lot of businesses, a lot of entrepreneurs had this thought or this great idea and they stayed so focused on it. I think one of the things, thinking about both good and bad of stuff that we’ve done, is we initially started to be a futures business, and it took two years to get that launched. In the meantime, we ended up launching the media business simply because we had nothing else to do and we found that there was a demand for that.

The same thing with our data product. We found that there was a demand for data, and we had all these resources sitting around waiting for this futures market to launch, and we had the opportunity to do that. I think the thing that I would say that’s made us successful as a business, and I would think this translates to anyone, is we didn’t have hard and fast rules of how to get there. We didn’t have hard and fast rules of this is the exact product that we’re going to launch and we’re going to stay narrowly focused. I think a lot of VCs talk a lot about focus being important.

I believe that focus is important, but I also think that entrepreneurs at times, I’ve been accused of this at times, is they become so bullheaded that they want to launch something, and this is the only way to get there, and this is the only idea, that they ended up missing the opportunities that were available to them. I didn’t set out four years ago to build a news publication. I didn’t set out three years ago to build a TV network. These things iterated and happened. I think what’s made us successful is our ability to pivot really quickly and move into these offerings and whitespace because we had that desire and DNA, and we never moved away from our community.

What we always wanted to do is ensure that we protected our community above everything else. By doing that, it enabled us to launch these products that we never actually initially thought about and never actually initially whiteboarded or even conceptualized. I think the ability to pivot gave us a lot of opportunity to seize the opportunities before others, but also create new product experiences that now can take us to a different space.