Convoy promised to revolutionize freight — then it collapsed. What does this mean for Seattle’s startup scene?

Convoy, a digital freight-and-shipping marketplace with an all-star list of investors, was once a darling of the Pacific Northwest startup scene. But following what insiders and analysts have described as a "freight recession," CEO Dan Lewis told employees on Oct. 19 that the company would cease operations.

Now a buyer has reportedly emerged, but it’s unclear what that means to the more than 500 people who got layoff notices last week.

In the meantime, Convoy's unexpected collapse could mean companies in Seattle's startup scene take a more conservative approach.

Started by two former Amazon employees in 2015, Convoy told the public and investors that their goal was to disrupt trucking by replacing traditional freight brokers to match shippers and carriers directly.

"A lot of people compare their app to Uber. So much like the way that Uber connected drivers, with people needing a ride, Convoy connected shippers with freight that they needed to move with truckers and truck companies that can move that freight using technology in machine learning,” said Geekwire Managing Editor Taylor Soper.

Convoy was able to raise more than $900 million dollars from its who's-who list of investors, including Bill Gates and Jeff Bezos, which Soper said allowed the company to take on a "growth at all costs" mindset.

"They had a lot of money to work with, they could take losses that didn't need to turn a profit immediately," Soper said.

At its peak, Convoy employed around 1,500 people, mostly based in the Seattle area.

But along the way, Convoy struggled to figure out its identity: was it a tech company or a logistics company? This identity crisis collided with waning demand for freight services and an oversupply of drivers, Soper said.

The so-called freight recession has forced venture capitalists — many of which made big investments in Convoy — to tighten their belts. It’s also made raising money for late-stage, unprofitable startups like Convoy that much harder.

"I do think companies, CEOs, and founders are seeing this and saying, 'OK — let's just double check and make sure we've got enough cash in the bank to get us through whatever might happen over the next six months to a year,' Soper said. "But Convoy itself is such a unique story and a unique industry that I personally don't think it's the canary in the coal mine, but I think it's got founders on edge a little bit for sure."

Listen to the full interview by clicking "play" on the audio button above.